<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 23, 1997
REGISTRATION NO. 333-33011
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TOWER REALTY TRUST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN GOVERNING INSTRUMENTS)
120 WEST 45TH STREET, 24TH FLOOR
NEW YORK, NEW YORK 10036
(212) 768-9010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
LAWRENCE H. FELDMAN
CHAIRMAN, CHIEF EXECUTIVE OFFICER, AND PRESIDENT
120 WEST 45TH STREET, 24TH FLOOR
NEW YORK, NEW YORK 10036
(212) 768-9010
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copies to:
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<S> <C>
PETER M. FASS, ESQ. J. WARREN GORRELL, JR., ESQ.
STEVEN L. LICHTENFELD, ESQ. STEVEN A. MUSELES, ESQ.
BATTLE FOWLER LLP HOGAN & HARTSON L.L.P.
75 EAST 55TH STREET 555 THIRTEENTH STREET, N.W.
NEW YORK, NEW YORK 10022 WASHINGTON, D.C. 20004-1109
(212) 856-7000 (202) 637-5600
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM
TITLE OF SECURITIES AGGREGATE OFFERING
BEING REGISTERED PRICE(1) AMOUNT OF
REGISTRATION FEE
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
Common Stock, par value $0.01 per share........... $344,298,500 $104,333(2)
==============================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) A registration fee of $87,993 was previously paid by the registrant in
connection with the initial filing of this registration statement on August
6, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains a Prospectus relating to a public
offering in the United States and Canada (the "U.S. Offering") of an aggregate
of 9,212,000 shares of common stock (the "Common Stock") of Tower Realty Trust,
Inc., a Maryland corporation, together with separate Prospectus pages relating
to a concurrent offering outside the United States and Canada of an aggregate of
2,303,000 shares of Common Stock (the "International Offering"). The complete
Prospectus for the U.S. Offering follows immediately. After such Prospectus are
the following alternate pages for the Prospectus for the International Offering:
a front cover page; an "Underwriting" section; and a back cover page. All other
pages of the Prospectus for the U.S. Offering are to be used for both the U.S.
Offering and the International Offering.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL,
OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 23, 1997
P R O S P E C T U S
11,515,000 SHARES
TOWER REALTY TRUST, INC.
COMMON STOCK
------------------------
[TOWER REALTY TRUST, INC. LOGO]
Tower Realty Trust, Inc. (collectively with its subsidiaries, the "Company")
has been formed to continue and expand the commercial real estate business of
Tower Equities & Realty Corp. and its affiliates (collectively, "Tower
Equities"), which since 1985 has been engaged in developing, acquiring, owning,
renovating, managing, and leasing office properties in the Manhattan,
Phoenix/Tucson and Orlando markets. Upon completion of this offering (the
"Offering") and related transactions, the Company will own interests in a
portfolio of 21 office buildings (collectively, the "Properties") encompassing
approximately 3.4 million rentable square feet. The Company will operate as a
fully integrated, self-administered, and self-managed real estate company and
expects to qualify as a real estate investment trust ("REIT") for federal income
tax purposes.
All of the shares of common stock, par value $.01 per share (the "Common
Stock"), of the Company offered hereby are being sold by the Company. Of the
11,515,000 shares of Common Stock offered hereby, 9,212,000 shares are being
offered initially in the United States and Canada by the U.S. Underwriters and
2,303,000 shares are being offered initially outside the United States and
Canada by the International Managers. See "Underwriting." Upon completion of the
Offering, management and directors of the Company will beneficially own
approximately 9.3% of the equity in the Company. Concurrent with the Offering,
and subject to certain conditions, the Company is directly placing with (i)
certain private investment funds and separate accounts advised by Morgan Stanley
Asset Management Inc. $20 million of Common Stock and (ii) certain private
investment funds sponsored by The Carlyle Group $10 million of Common Stock, in
each case, at the price per share sold in the Offering (the "Concurrent Private
Placements"). The Underwriters will not receive a discount or commission on the
sale of Common Stock in the Concurrent Private Placements. See "The Company --
Concurrent Private Placements."
Prior to the Offering, there has been no public market for the Common Stock.
It is currently anticipated that the initial public offering price per share
will be between $24.00 and $26.00. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price. The
Common Stock has been approved for listing on the New York Stock Exchange,
subject to official notice of issuance, under the symbol "TOW." The Company
intends to make regular quarterly distributions to its stockholders, commencing
with a pro rata distribution with respect to the quarter ending December 31,
1997.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK, INCLUDING:
- the valuation of the Properties and the other assets to be contributed to
the Company in its formation was generally based on the value of the
Company as a going concern, and not on third-party appraisals, thereby
increasing the possibility that the consideration to be paid by the Company
for the Properties and such other assets will exceed their fair market
value;
- conflicts of interest relating to the formation of the Company, including
the receipt by officers, directors and affiliates of the Company of equity
interests in the Company;
- conflicts of interest relating to the operation of the Company, including
conflicts of interest associated with the potential adverse tax
consequences to certain executive officers and directors of the Company of
sales and refinancings of certain Properties;
- real estate investment and property management risks, such as the need to
renew leases or relet space upon expirations, the instability of cash flows
and changes in the value of office properties owned by the Company due to
economic and other conditions;
- limitations on the stockholders' ability to change control of the Company,
including restrictions on the ownership of the Common Stock by any single
person in excess of 9.8% of the number or value of the shares of
outstanding Common Stock of the Company, subject to an exception that
permits mutual funds and certain other entities to own or purchase up to
15% of any class of the Company's stock in appropriate circumstances;
- taxation of the Company as a corporation if it fails to qualify as a REIT
and the resulting decrease in cash available for distribution in such
event; and
- the possibility that the Company may not be able to refinance outstanding
indebtedness (initially expected to be approximately $131.7 million,
including its pro rata share of indebtedness of unconsolidated investments)
upon maturity, indebtedness might be refinanced on less favorable terms,
and interest rates might increase on variable rate indebtedness and the
lack of limitations in the Company's organizational documents on the amount
of indebtedness that the Company may incur.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................................. $ $ $
- ------------------------------------------------------------------------------------------------------------------------------
Total(3).............................................. $ $ $
==============================================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company has granted the U.S. Underwriters a 30-day option to purchase up
to 1,381,800 additional shares of Common Stock and has granted the
International Managers a 30-day option to purchase up to 345,450 additional
shares of Common Stock, solely to cover over-allotments, if any. If such
options are exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as, and if issued to and accepted by them, subject
to approval of certain legal matters by counsel to the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock offered hereby will be made in New
York, New York on or about , 1997.
------------------------
MERRILL LYNCH & CO.
LEGG MASON WOOD WALKER
INCORPORATED
MORGAN STANLEY DEAN WITTER
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
------------------------
The date of this Prospectus is , 1997.
<PAGE> 4
[LOGO]
[Color photograph of the Tower 45 office building]
Tower 45, Manhattan
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 5
For a summary property, operating and ownership data regarding the properties,
see the property tables contained under the caption "The Properties" herein.
[Color photograph of the 100 Wall Street office building]
100 Wall Street, Manhattan
[Color photograph of the 5750 Major Boulevard office building before
redevelopment]
[Color photograph of the 5750 Major Boulevard office building after
redevelopment.]*
5750 Major Boulevard, Orlando, Florida
*Artist's rendering of the property upon completion of the Company's
redevelopment program.
<PAGE> 6
[Color photograph of the 2800 North Central Avenue office building]
2800 North Central Avenue, Phoenix, Arizona
[Color photograph of the Century Plaza office building]
Century Plaza, Phoenix, Arizona
[Color photograph of the 5151 East Broadway office building]
Before redevelopment by the Company
[Color photograph of the 5151 East Broadway office building]
After redevelopment by the Company
5151 East Broadway, Tucson, Arizona
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
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PROSPECTUS SUMMARY....................... 1
The Company............................ 1
Risk Factors........................... 2
Growth Strategies...................... 4
Market Information..................... 6
The Properties......................... 7
Formation and Structure of the
Company............................. 9
Formation Transactions.............. 9
Benefits to Related Parties......... 11
Conflicts of Interest............... 12
Structure of the Company............ 12
The Offering........................... 14
Distributions.......................... 14
Tax Status of the Company.............. 15
Summary Selected Financial
Information......................... 16
RISK FACTORS............................. 20
There is No Assurance that the Company
Has Paid Fair Market Value for the
Properties.......................... 20
Conflicts of Interest in the Formation
Transactions; Substantial Benefits
to Related Parties.................. 20
Conflicts of Interest in the Business
of the Company...................... 21
Leasing Services Provided to Other
Properties..................... 21
Possible Less Vigorous Enforcement
of Terms of Contribution and
Other Agreements by the
Company........................ 21
For a Period of Time, Sales of
Properties and Repayment of
Indebtedness May Have Different
Effects on Holders of OP Units
than on Stockholders........... 21
Outside Interests of Officers and
Directors...................... 21
The Company's Performance and Value are
Subject to Risks Associated with the
Real Estate Industry................ 22
General Real Estate Industry Risks
Could Adversely Affect the
Company........................ 22
Tenant Defaults and Bankruptcy
Could Adversely Affect the
Company's Financial
Condition...................... 22
Increased Operating Expenses Could
Adversely Affect the Company's
Cash Flow...................... 22
The Failure to Renew or Relet
Space Under Expiring Leases
Could Adversely Affect the
Company's Cash Flow............ 23
Loss of Major Tenants Could
Adversely Affect the Company's
Cash Flow...................... 23
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<S> <C>
Impact of Competition on Occupancy
Levels, Rent Charged,
Acquisitions and Management
Services....................... 23
Liability for Environmental
Matters Could Adversely Affect
the Company's Financial
Condition...................... 23
The Cost of Complying with the
Americans with Disabilities Act
Could Adversely Affect the
Company's Cash Flow............ 24
Changes in Tax and Environmental
Laws Could Affect the Company's
Financial Condition............ 24
Uninsured Losses Could Adversely
Affect the Company's Cash
Flow........................... 25
Lack of Control Over Property
Owned through Partnerships and
Joint Ventures Could Result in
Decisions Inconsistent with the
Company's Objectives........... 25
Illiquidity of Real Estate
Investments Could Adversely
Affect the Company's Financial
Condition...................... 25
Acquisition, Redevelopment, and
Development Risks Could
Adversely Affect the Company... 25
Managed Property Business and Non-REIT
Services............................ 26
Termination of Management and
Leasing Contracts................. 26
Adverse Consequences of Lack of
Control Over the Business of the
Management Company................ 26
Limits on Changes in Control........... 26
Stock Ownership Limit in Charter
Could Inhibit Acquisitions and
Changes in Control................ 26
Staggered Board Could Prevent
Acquisitions and Changes in
Control........................... 27
The Issuance of Additional Shares
Could Prevent Acquisitions and
Changes in Control................ 27
Limitations on Acquisition of and
Changes in Control Pursuant to
Maryland Law...................... 27
Failure to Qualify as a REIT Would
Cause the Company to be Taxed as a
Corporation......................... 28
The Company Will Be Taxed as a
Corporation if it Fails to Qualify
as a REIT......................... 28
</TABLE>
<PAGE> 8
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<S> <C>
To Qualify As a REIT the Company
Will Need to Maintain a Certain
Level of Distributions............ 28
Other Tax Liabilities............... 29
The Company's Use of Debt to Finance
Acquisitions and Developments Could
Adversely Affect the Company........ 29
Rising Interest Rates Could
Adversely Affect the Company's
Cash Flow......................... 29
Debt Financing and Potential Adverse
Effects on Cash Flows and
Distributions..................... 29
The Inability to Obtain Permanent
Financing of Construction Loans
Could Result in a Loss of Income
and Asset Value of the Company.... 30
High Distribution Payout Ratio......... 30
Uncontrollable Market Factors Affecting
the Properties' Performance and
Value Could Produce Lower Returns... 30
Lack of Operating History and Risks of
Acquisitions Could Adversely Affect
the Company......................... 31
Changes in Policies, Such as the
Company's Debt Policy, Without
Stockholder Approval Could Adversely
Affect the Company.................. 31
The Company Relies on Key Personnel
Whose Continued Service is Not
Guaranteed.......................... 31
Control of Management.................. 31
Absence of Prior Public Market for
Common Stock and Market Conditions
Could Adversely Impact the Trading
Price of the Common Stock........... 32
Purchasers of Common Stock in the
Offering Will Experience Immediate
and Substantial Book Value
Dilution............................ 32
Possible Adverse Effect on Common Stock
Price of Shares Available for Future
Sale................................ 32
THE COMPANY.............................. 34
General................................ 34
Operations of the Company.............. 35
Concurrent Private Placements.......... 36
OPERATING AND GROWTH STRATEGIES.......... 36
Operating Strategies................... 36
Growth Strategies...................... 37
USE OF PROCEEDS.......................... 40
DISTRIBUTIONS............................ 41
CAPITALIZATION........................... 45
DILUTION................................. 46
SELECTED COMBINED FINANCIAL AND OPERATING
DATA................................... 47
PAGE
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................. 52
Results of Operations.................. 52
Pro Forma Operating Results............ 55
Recently Issued Accounting Standards... 56
Liquidity and Capital Resources........ 56
Cash Flows............................. 58
Funds from Operations and EBITDA....... 59
Inflation.............................. 60
PROPERTY OFFICE MARKETS AND MARKET
ECONOMIES.............................. 61
Manhattan Market and Economy........... 61
Metropolitan Orlando Market and
Economy............................. 65
Metropolitan Phoenix Market and
Economy............................. 68
Metropolitan Tucson Market and
Economy............................. 71
THE PROPERTIES........................... 75
General................................ 75
Properties............................. 75
Development Parcels.................... 77
Tenants................................ 77
Lease Distributions.................... 79
Lease Expirations -- Portfolio Total... 79
Lease Expirations -- Property by
Property............................ 80
Tenant Retention and Expansion......... 85
Historical Lease Renewals.............. 85
Historical Tenant Improvements and
Leasing Commissions................. 86
Historical Capital Expenditures........ 87
Submarket and Property Information..... 88
Development Parcels.................... 96
Land Parcel Options.................... 96
Air Rights and Ground Lease
Agreements.......................... 97
Depreciation of Significant
Properties.......................... 97
Real Estate Taxes on Significant
Properties.......................... 97
Occupancy, Effective Rent and Other
Data at Significant Properties...... 98
Excluded Properties.................... 98
Mortgage Indebtedness Remaining
Following the Offering.............. 98
Assumed Deferred Tax Liability......... 99
Line of Credit......................... 100
Insurance.............................. 100
Possible Environmental Liabilities..... 100
Competition............................ 101
Employees.............................. 101
Legal Proceedings...................... 101
MANAGEMENT............................... 102
Directors and Executive Officers....... 102
Managing Directors and Other Key
Employees........................... 104
Committees of the Board of Directors... 105
Compensation of Directors.............. 105
Board Observation Rights............... 105
Executive Compensation................. 105
</TABLE>
ii
<PAGE> 9
<TABLE>
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Employment Agreements.................. 107
Incentive Compensation................. 107
Stock Option and Restricted Stock
Plans............................... 108
Limitation of Liability and
Indemnification..................... 110
Indemnification Agreements............. 111
FORMATION AND STRUCTURE OF THE COMPANY... 111
Effects of the Formation
Transactions........................ 113
Determination and Valuation of
Ownership Interests................. 113
Certain Estimate of Value.............. 114
Benefits to Related Parties............ 114
Transfer of Properties................. 115
CERTAIN RELATIONSHIPS AND TRANSACTIONS... 115
Formation Transactions................. 115
Exchange Rights........................ 116
Registration Rights.................... 116
Employment Agreements; Award of
Options............................. 116
Excluded Property Management
Agreements.......................... 116
Executive Officer and Director
Distributions and Fees.............. 116
Miscellaneous.......................... 116
PRINCIPAL STOCKHOLDERS................... 117
DESCRIPTION OF CAPITAL STOCK............. 119
General................................ 119
Common Stock........................... 119
Preferred Stock........................ 119
Power to Issue Additional Shares of
Common Stock and Preferred Stock.... 120
Restrictions on Transfer............... 120
Transfer Agent and Registrar........... 123
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S CHARTER AND BYLAWS....... 124
Number of Directors; Classification of
the Board of Directors.............. 124
Removal; Filling Vacancies............. 124
Business Combinations.................. 125
Control Share Acquisition Statute...... 125
Amendment to the Charter............... 126
Dissolution of the Company............. 126
Advance Notice of Director Nominations
and New Business.................... 126
Meetings of Stockholders............... 126
Operations............................. 126
Anti-Takeover Effect of Certain
Provisions of Maryland Law and of
the Charter and Bylaws.............. 127
PAGE
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POLICIES WITH RESPECT TO CERTAIN
ACTIVITIES............................. 127
Investment Policies.................... 127
Disposition Policies................... 128
Financing Policies..................... 128
Conflict of Interest Policies.......... 129
Policies with Respect to Other
Activities.......................... 130
Working Capital Reserves............... 130
SHARES AVAILABLE FOR FUTURE SALE......... 131
General................................ 131
Registration Rights.................... 132
PARTNERSHIP AGREEMENT.................... 133
Management............................. 133
Transferability of Interests........... 133
Capital Contribution................... 134
Exchange Rights........................ 134
Registration Rights.................... 135
Operations............................. 135
Distributions and Allocations.......... 135
Term................................... 136
Tax Matters............................ 136
FEDERAL INCOME TAX CONSIDERATIONS........ 136
Requirements for Qualification as a
REIT................................ 137
Failure to Qualify as a REIT........... 142
Taxation of the Company................ 143
Taxation of Stockholders............... 144
Statement of Stock Ownership........... 148
Tax Aspects of the Operating
Partnership......................... 148
Income Taxation of the Operating
Partnership and Its Partners........ 150
Other Tax Considerations............... 151
ERISA CONSIDERATIONS..................... 153
Employee Benefit Plans, Tax-Qualified
Retirement Plans, and IRAs.......... 153
Status of the Company and the Operating
Partnership (and the Subsidiary
Partnerships) under ERISA........... 154
UNDERWRITING............................. 156
EXPERTS.................................. 159
LEGAL MATTERS............................ 160
ADDITIONAL INFORMATION................... 160
GLOSSARY................................. 161
INDEX TO FINANCIAL STATEMENTS............ F-1
</TABLE>
iii
<PAGE> 10
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus. Unless otherwise indicated,
the information in this Prospectus assumes that (i) the transactions relating to
the formation of the Company (the "Formation Transactions") are consummated,
(ii) the initial public offering price (the "Offering Price") is $25.00 per
share (the mid-point of the range of public offering prices set forth on the
cover page of this Prospectus), and (iii) the Underwriters' over-allotment
option is not exercised. Unless the context otherwise requires, as used herein
the term (i) "Company" includes Tower Realty Trust, Inc., a Maryland
corporation, and its subsidiaries, including (a) Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"),
(b) the consolidated subsidiary partnerships or limited liability companies (the
"Subsidiary Partnerships") through which the Operating Partnership will own
interests in certain of the Properties, and (c) Tower Equities Management, Inc.,
a Delaware corporation (the "Management Company"), and (ii) "Tower Equities"
includes Tower Equities & Realty Corp., a Delaware corporation ("Tower"), the
companies and partnerships affiliated with Tower, including Feldman Equities,
and the predecessor entities and affiliates of Tower. Unless otherwise required
by the context, all square footage and occupancy data are approximate. See
"Glossary" for the definitions of certain terms used in this Prospectus.
THE COMPANY
The Company has been formed to continue and expand the commercial real
estate business of Tower Equities, which since 1985 has been engaged in
developing, acquiring, owning, renovating, managing, and leasing office
properties in the Manhattan, Phoenix/Tucson and Orlando markets. Upon completion
of the Offering, the Company will own interests in a portfolio of 21 office
buildings (collectively, the "Properties") encompassing approximately 3.4
million rentable square feet. The Company will also own two parcels of land
which can support approximately 370,000 square feet of development and will hold
options to acquire two other parcels of land which can support approximately 1.8
million square feet of development. As of August 31, 1997, the Properties were
approximately 92.4% leased and approximately 80% of the Escalated Rent from the
Company's portfolio was derived from Properties located in central business
district locations, including 54% from Properties located in the Manhattan
office market. Substantially all of the Properties are located in Manhattan,
Phoenix, Tucson, and Orlando. See "The Properties." The Company will operate as
a fully integrated, self-administered, and self-managed real estate company and
expects to qualify as a real estate investment trust ("REIT") for federal income
tax purposes.
The Company will continue its turnaround strategy of acquiring office
properties at a significant discount to replacement cost that are attractively
priced due to physical, leasing, and/or operational deficiencies. Consistent
with this strategy, the Company will seek to acquire office properties that
present an attractive opportunity to create value and enhance cash flow through
the Company's hands-on approach to property repositioning, including the
implementation of property specific renovation programs for underperforming
assets. The Company believes that the significant experience of its management
in property development, redevelopment, construction, management, and leasing
provides it with the expertise necessary to identify, acquire, upgrade,
renovate, and reposition underperforming office properties.
The Company initially intends to focus its turnaround strategy in Manhattan
because the Company believes that the current supply/demand fundamentals in that
office market provide an attractive environment for owning and operating office
properties. As a result of increasing demand for office space in Manhattan and
limited new supply, vacancy rates in Manhattan have declined during the last
five years and rental rates for office properties in Manhattan have increased.
See "Property Office Markets and Market Economies." The Company believes that
demand for office space in Manhattan has increased recently because of
consistent new job growth, a strengthening New York City metropolitan economy,
and an improving business environment and quality of life offered by New York
City. At the same time, the supply of Manhattan office space has remained
virtually unchanged since 1992, and the Company believes that supply is unlikely
to increase substantially over the near term primarily because there are
relatively few sites available for new construction,
1
<PAGE> 11
the lead time required for new construction typically exceeds three years, and
new construction generally is not economically feasible given current market
rental rates.
The Company believes that opportunities exist to acquire office properties
in Manhattan on attractive terms, including at prices significantly below
replacement cost. Notwithstanding the current favorable supply/demand
fundamentals in the Manhattan office market, the Company believes that, in order
to justify new construction in this market, asking rents generally would have to
increase at least 40% over current asking rents for Class A office space in
Manhattan, as estimated by Landauer Associates, Inc. ("Landauer"), not taking
into account any tax subsidies that may apply.
The Company will also pursue the strategic acquisition of office properties
located in the Phoenix and Orlando markets that are consistent with its
turnaround strategy, as well as the development of the Company's development
parcels in those markets. The Company believes these office markets generally
have significant rental growth potential due to employment growth, declining
vacancies, and limited new construction activity. According to the 1997 Landauer
Market Forecast, Phoenix and Orlando ranked first and second, respectively,
based on a supply/demand projection for 60 office markets in the United States.
The improved economic fundamentals in these markets have resulted in a decline
in direct vacancy rates from December 31, 1992 to June 30, 1997 from 16.8% to
7.2% in the Metropolitan Orlando office market and 25.1% to 8.3% in the
Metropolitan Phoenix office market.
Tower Equities was formed in 1985 by Lawrence H. Feldman, the Company's
Chairman, Chief Executive Officer and President, and Edward Feldman, his father
(who has since retired), and traces its origins to a predecessor family-owned
general contracting business that was founded at the beginning of the twentieth
century by Lawrence H. Feldman's grandfather, the late H.J. Feldman. Tower
Equities has acquired and/or developed many of the Properties owned by the
Company with several institutional joint venture partners which will continue as
stockholders in the Company following the Offering; these joint venture partners
include affiliates of General Electric Capital Corp., DRA Advisors, Inc., and
The Carlyle Group ("Carlyle").
The Company operates from its midtown Manhattan headquarters and its two
full service regional offices (Orlando and Phoenix), and is a fully integrated
real estate company with in-house expertise in acquisition, development,
construction, property management, and leasing. The five executive officers of
the Company and the two managing directors of the Company's Orlando and Phoenix
regional offices have an average of 17 years' experience in the real estate
industry (including an average of over eight years with the Company). Upon
completion of the Offering, the Company's management and directors will, in the
aggregate, own approximately 9.3% of the Company's equity. See
"Management -- Directors and Executive Officers."
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK INVOLVES VARIOUS RISKS, AND
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" PRIOR TO MAKING AN INVESTMENT IN THE COMPANY. SUCH RISKS INCLUDE:
- the valuation of the Properties and the other assets to be contributed to
the Company in the Formation Transactions was generally based on the
value of the Company as a going concern, and not third-party appraisals
(except with respect to the valuation of the Maitland Forum Property as
described in "Formation and Structure of the Company -- Certain Estimate
of Value"), thereby increasing the possibility that the consideration to
be paid by the Company for the Properties and such other assets will
exceed their fair market value;
- conflicts of interest in connection with the Formation Transactions,
including conflicts related to material benefits to officers, directors,
and other affiliates of the Company that will result in, among other
benefits, receipt of equity interests in the Company with an aggregate
value of approximately $37.7 million based on the Offering Price;
2
<PAGE> 12
- conflicts of interest relating to the operation of the Company, including
conflicts of interest associated with the potential adverse tax
consequences to certain executive officers and directors of the Company
of sales and refinancings of certain Properties;
- risks associated with real estate investments, such as the need to renew
leases or relet space upon lease expirations and to pay renovation and
re-leasing costs in connection therewith, the effect of economic and
other conditions on office property cash flows and values, the ability of
tenants to make lease payments, the ability of a property to generate
revenue sufficient to meet operating expenses (including future debt
service), potential liability for costs of removal or remediation of
hazardous or toxic substances on a property, the illiquidity of real
estate investments, and the possibility that acquired properties fail to
perform as expected;
- limitations on the stockholders' ability to change control of the
Company, including restrictions on the ownership of the Common Stock by
any single person in excess of 9.8% of the number or value of the shares
of outstanding Common Stock of the Company, subject to an exception that
permits mutual funds and certain other entities to own or purchase up to
15% of any class of the Company's stock in appropriate circumstances, and
certain other provisions contained in the organizational documents of the
Company and the Operating Partnership, which could have the effect of
delaying, deferring or preventing a transaction or change in control of
the Company that might involve a premium price for shares of Common Stock
or otherwise would be in the best interests of the Company's
stockholders;
- taxation of the Company as a regular corporation if it fails to qualify
as a REIT and the resulting Company liability for Federal, state and
local income taxes and the related decrease in Cash Available for
Distribution in such event;
- the possibility that the Company may not be able to refinance outstanding
indebtedness (initially expected to be approximately $131.7 million,
including its pro rata share of indebtedness of unconsolidated
investments) upon maturity, that indebtedness might be refinanced on less
favorable terms, interest rates might increase on variable rate
indebtedness and the lack of limitations in the Company's organizational
documents on the amount of indebtedness which the Company may incur;
- the lack of control over the Management Company, the Company's property
management and leasing business, and the risk that the board of directors
and management of the Management Company may implement business policies
or decisions that would not have been implemented by persons controlled
by the Company and that are adverse to the interests of the Company or
that lead to adverse financial results, which would adversely affect the
Company's ability to pay distributions to stockholders;
- the Company's estimated initial distribution rate represents 93.4% of its
estimated Cash Available for Distribution resulting in the risk that
actual Cash Available for Distribution will be insufficient to permit the
Company to maintain its proposed initial distribution rate;
- the ownership of the 2800 North Central Property through a partnership in
which the Company does not have the ability to control decisions with
respect to this Property (such as decisions regarding sale, refinancing,
and the timing and amount of distributions), and risks not otherwise
present in property ownership, including (i) buy/sell rights that exist
with respect to such Property, (ii) the risk that the Company will be
exposed to liability as a general partner of such venture even though the
Company will not have sole control over the property, and (iii) the risk
that Company's partner might at any time have economic or other business
interests or goals that are inconsistent with the business interests or
goals of the Company, and that such partner may be in a position to veto
actions which may be consistent with the Company's objectives or
policies;
- given the Company's recent acquisition of many of the Properties and the
lack of operating history of such Properties under the Company's
management (two years or less for 14 of the Properties), newly acquired
properties may have characteristics or deficiencies unknown to the
Company affecting value or revenue potential thereof, may fail to perform
as expected or may be difficult to integrate into the Company's existing
management operations;
3
<PAGE> 13
- the ability of the Company's Board of Directors to change the Company's
investment, financing, borrowing, distribution, and other policies at any
time without stockholder approval;
- concentration, based on rentable square feet, of approximately 39% of the
Company's portfolio in the Metropolitan New York City office market, 38%
of the Company's portfolio in the Phoenix/Tucson office market, and 23%
of the Company's portfolio in the Orlando office market.
- the possibility of abandonment of office property development and
unexpected construction costs or delays, that newly developed or acquired
properties may fail to perform as expected, and the possible failure to
obtain, or experience of delays in obtaining, governmental permits and
authorizations and termination of management contracts;
- absence of a prior public market for the shares of Common Stock, lack of
assurances that an active trading market will develop or that shares of
Common Stock will trade at or above the Offering Price, and potential
negative effect of rising market interest rates on the market price of
the Common Stock;
- effect of shares available for future sale on the price of the Common
Stock; and
- immediate and substantial dilution of $5.33 per share in the net tangible
book value of the shares of Common Stock.
GROWTH STRATEGIES
The Company's primary business objective is to maximize stockholder value
through increases in Cash Available for Distribution and appreciation in the
value of the Common Stock. The Company plans to achieve this objective by
implementing the internal and external growth strategies described below.
Internal Growth
The Company believes that opportunities to increase cash flow from its
existing portfolio will be realized as the Company begins to achieve the
benefits of its property repositioning strategy. The Company intends to increase
Cash Available for Distribution per share and the value of the Common Stock from
the following sources:
- Contractual Rental Rate Increases: As of August 31, 1997, 48% of the
rentable square feet at the Properties, included built-in contractual
rate increases over the remainder of the lease term. Between September 1,
1997 and August 31, 1998 the contractual base rents received by the
Company under such leases are expected to increase by an aggregate of
$1.06 million (exclusive of increases attributable to the transition from
free or partial rent to full rent or rent increases tied to indices such
as the consumer price index (the "CPI")).
- Leasing of Vacant Space: The Company expects to realize additional cash
flow through the leasing or occupancy of approximately 257,000 rentable
square feet of vacant space at the Properties as of August 31, 1997
(approximately 7.6% of the Company's total rentable square feet).
External Growth
The Company intends to pursue an external growth strategy to enable
stockholders to benefit from potential value to be realized from acquisitions,
property repositioning, development, and opportunities generated by the
Company's property management operations. The Company's external growth
strategy, which initially will focus in the Manhattan office market, includes
(i) acquiring at a significant discount to replacement cost office properties
that are attractively priced due to physical, leasing, and/or operational
deficiencies, and redeveloping those assets; (ii) property repositioning through
renovation and refurbishment programs for underperforming assets; and (iii)
exploring the development of office properties on the Company's owned and
optioned development land within the Phoenix/Tucson and Orlando markets, as well
as the development of other office properties in these markets where such
development will result in a favorable risk-adjusted return.
4
<PAGE> 14
Acquisition and Repositioning Strategies. The Company intends to initially
target the acquisition of office properties located in Manhattan that have
purchase prices of less than $100 million and that are attractively priced due
to physical, leasing or operational deficiencies. The Company believes that its
turnaround strategy will allow it to capitalize on Manhattan acquisition
opportunities that are not typically sought by many institutional buyers. In
addition, the Company expects to use its renovation and repositioning expertise
to acquire underperforming Manhattan office properties that have the potential
to be converted into fully leased Class A Manhattan office towers.
The Company believes it has certain competitive advantages which enhance
its ability to identify and capitalize on acquisition opportunities, including:
(i) management's strong local market expertise and experience and knowledge of
properties, submarkets and potential tenants within its primary markets; (ii)
management's long-standing relationships with tenants, real estate brokers, and
institutional and other owners of commercial real estate; (iii) its fully
integrated real estate operations which allow the Company to respond quickly to
acquisition opportunities; (iv) its access to capital as a public company
following the Offering, including the Company's proposed $200 million unsecured
line of credit (the "Line of Credit"); and (v) its ability to acquire properties
in exchange for units of limited partnership interest ("OP Units") in the
Operating Partnership or Common Stock if the sellers so desire (which ability
may not be possessed by competitors who are not structured like the Company or
who cannot otherwise exchange securities for property).
As evidence of the Company's ability to grow its portfolio, the Company
successfully acquired in excess of 2.0 million square feet of office properties
between January 1, 1994 and December 31, 1996.
An example which best illustrates how the Company executes its turnaround
acquisition strategy is its purchase through a joint venture with an affiliate
of Carlyle of the 2800 North Central Property. The Property was acquired in May
1996 for $30.7 million, which the Company believes represented a 47% discount to
replacement cost, with 32% of the rentable square feet under leases scheduled to
expire within seven months. The Company implemented an aggressive leasing
program that resulted in an occupancy rate of 91% by August 31, 1997. There can
be no assurance that the Company will be able to achieve similar results with
respect to the Properties or other office properties acquired in the future.
An example which best illustrates the Company's repositioning strategy is
the acquisition of the 5151 East Broadway Property that the Company made in a
joint venture with an institutional investor in November 1994. The joint venture
acquired this Property for approximately $10 million or approximately $40 per
square foot, which the Company believes represented a 75% discount to
replacement cost. At the time the Company acquired the Property, it was only 40%
leased and in need of capital improvements. Shortly after the acquisition, the
Company implemented a major renovation program of the common areas coupled with
an aggressive marketing and leasing effort. The Company's repositioning program
resulted in an increase in Escalated Rent from approximately $1.7 million as of
November 30, 1994 to approximately $3.3 million as of August 31, 1997 (a 92%
increase), and an increase in Annualized Net Operating Income from $353,000 at
acquisition to approximately $2.0 million as of August 31, 1997, which generated
an Adjusted Investment Yield of 13.3% (calculated by dividing net operating
income by the Investment Cost). There can be no assurance that the Company will
be able to achieve similar results with respect to the Properties or other
office properties acquired in the future.
Development and Redevelopment. The Company intends to explore the
development of its land within the Phoenix/Tucson and Orlando markets when
market fundamentals support a favorable risk-adjusted return on such
development. The Company's executive officers average approximately 17 years of
experience in the development of office properties. Since 1985, the Company's
executive officers have been integrally involved in the development of more than
1.0 million square feet of office properties (including the 40-story midtown
Manhattan Tower 45 Property).
Management's development expertise provides the Company with the capability
to purchase properties that are in need of significant capital improvements and
to redevelop and reposition such properties to make them competitive in their
respective markets. An example which best illustrates this strategy includes the
Company's redevelopment of a 93,000 rentable square foot office building at 5750
Major Boulevard in
5
<PAGE> 15
Orlando, Florida. The Company acquired the Property in a joint venture with an
affiliate of General Electric Capital Corp. in October 1996 for a purchase price
of $3.8 million, or approximately $45 per square foot (a 50% discount to the
Company's estimate of replacement cost). The Company is currently redeveloping
the Property through a $1.8 million capital improvement program designed to
reposition this Property into a Class A property, attracting higher quality
tenants and corresponding market rental rates. The Property was only 33% leased
as of December 31, 1996 and, after the Company implemented an aggressive
marketing and leasing program, the Property will be 74.5% leased as of December
31, 1997 (based on leases signed as of August 31, 1997). The Company expects to
implement this type of property repositioning strategy for the future
redevelopment of the Company's Madison Avenue Properties. See "The
Properties -- Submarket and Property Information -- Madison Avenue Property
Redevelopment Strategy."
Financing Strategy
The Company has obtained a commitment from Merrill Lynch Capital
Corporation for a $200 million unsecured Line of Credit. See "The
Properties -- Line of Credit." The Line of Credit is expected to be used
primarily to finance the Company's acquisition and development activities and
for working capital purposes. The Company believes that its access to capital
through the Line of Credit and other sources of private financing, as well as
its access to the public capital markets, will provide it with a competitive
advantage in acquisitions and developments over certain competitive bidders
which may have to qualify their bids with financing contingencies or which have
less access to capital. At the closing of the Offering, the Company will have
outstanding consolidated indebtedness (including its pro rata share of
indebtedness of unconsolidated investments) of approximately $131.7 million or
24.5% of its Total Market Capitalization.
MARKET INFORMATION
All market information not specifically attributed to the Company is based
on information supplied by Landauer and unless otherwise noted historical data
are presented as of December 31 of the specified year.
Manhattan
The Company initially intends to focus its turnaround acquisition strategy
in Manhattan. Manhattan represents the core of the Metropolitan New York City
office market, which is the largest office market in the United States,
containing more rentable square feet than the next six largest United States
office markets combined. In addition, Manhattan is headquarters to many of the
major corporations and service firms in the United States, including more
Fortune 500 companies than any other city in the United States and 18 of the 25
largest United States securities firms. Led by significant growth in the
services sector of the economy, particularly the entertainment and business
services subsectors, New York City has experienced employment growth during each
of the past three years.
Metropolitan Orlando, Florida
Metropolitan Orlando has been rated by Landauer at the top of its annual
United States Office Market Quality ratings during four of the past five years.
Economic growth during the 1990s was fueled by Metropolitan Orlando's tourism
service-based economy. Orlando's status as a world class tourist destination has
created significant demand for businesses that provide support services to the
tourism industry. In addition, recent growth in the Metropolitan Orlando market
has been driven by an expanding film production industry led by the Walt Disney
Company and Universal Studios, a thriving high technology industry, and the
nation's largest military and aerospace simulation and training industry. Total
non-agricultural employment in Metropolitan Orlando was estimated at
approximately 750,000 persons in 1996, following five years of growth at an
annual compounded rate of 3.5%. Metropolitan Orlando's employment growth rate
during that period was one of the highest among all metropolitan areas in the
United States.
6
<PAGE> 16
Metropolitan Phoenix and Tucson, Arizona
The city of Phoenix has grown to become the sixth largest city in the
United States. Total non-agricultural employment in Metropolitan Phoenix was
estimated at approximately 1.24 million persons in 1996, which represents a
compounded annual increase of 5.2% since 1992. Landauer reports that in
measuring non-agricultural employment gains since 1994, Metropolitan Phoenix
ranked third among the 100 largest metropolitan areas in the United States. In
addition, the underlying fundamentals of supply and demand in the Tucson office
market have improved significantly over the past four years. Since 1992, the
growth in the Tucson economy and the favorable relationship between supply and
demand have resulted in declining vacancy rates and positive net absorption in
this market.
For additional information regarding the Company's markets, see "Property
Office Markets and Market Economies" and "The Properties -- Submarket and
Property Information."
THE PROPERTIES
Upon completion of the Offering, the Company will own interests in the 21
Properties, which contain 3.4 million rentable square feet and were
approximately 92.4% leased as of August 31, 1997. The Company will also own two
parcels of land which can support an aggregate of approximately 370,000 square
feet of development and will have options to acquire two other parcels of land
which can support 1.8 million square feet of development. Substantially all of
the Properties are located in the Manhattan, Phoenix/Tucson, and Orlando office
markets and individually range from approximately 10,300 to 459,000 rentable
square feet. All of the Properties are wholly owned by the Company, except for
the 2800 North Central Property which is owned in a joint venture with an
affiliate of Carlyle in which the Company owns a 10% general and limited partner
interest (which economic interest increases to up to 27.5% if certain
performance criteria are achieved). See "The Properties -- Submarket and
Property Information -- Description of Uptown Phoenix Submarket Property." As of
August 31, 1997, approximately 80% of the Escalated Rent from the Company's
portfolio was derived from Properties located in central business district
locations, including approximately 54% from Properties located in the Manhattan
office market.
7
<PAGE> 17
The following table sets forth certain information, as of August 31, 1997,
with respect to the Properties:
<TABLE>
<CAPTION>
PERCENT
ESCALATED OF ANNUALIZED NET
RENT PER PORTFOLIO EFFECTIVE RENT
PERCENT YEAR BUILT/ RENTABLE PERCENT ESCALATED LEASED ESCALATED PER LEASED
MARKET/PROPERTY OWNED RENOVATED(1) SQUARE FEET LEASED RENT(2) SQUARE FOOT RENT SQUARE FOOT(3)
- ----------------------- ------- ------------ ----------- ------- ------------ ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
METROPOLITAN NEW YORK
CITY MARKETS
MANHATTAN MARKET
Tower 45........... 100% 1989 443,114 100.0% $ 20,890,000 $ 47.14 27.8% $31.48
286 Madison
Avenue........... 100% 1918(4) 111,999 94.8 2,451,000 23.08 3.3 20.42
290 Madison
Avenue........... 100% 1950(4) 38,512 100.0 1,057,000 27.44 1.4 24.98
292 Madison
Avenue........... 100% 1920/86 186,901 98.9 5,212,000 28.20 6.9 25.33
100 Wall Street.... 100% 1969/94 458,848 88.7 11,222,000 27.57 14.9 24.95
LONG ISLAND MARKET
120 Mineola
Boulevard........ 100% 1984/92 100,810 91.2 2,458,000 26.74 3.3 19.18
--------- ----- ----------- ----- -----
Market
Subtotal/Weighted
Average........ 1,340,184 94.9% $ 43,290,000 $ 34.04 57.6% $26.35
--------- ----- ----------- ----- -----
METROPOLITAN ARIZONA
MARKETS
METROPOLITAN PHOENIX
MARKET
Corporate Center
Building
10010-30......... 100% 1976/86 188,614 100.0% $ 2,947,000 $ 15.62 3.9 $14.39
Corporate Center
Building 10040... 100% 1976/86 23,155 100.0 380,000 16.41 0.5 15.07
Corporate Center
Building 10050... 100% 1976/86 42,398 100.0 708,000 16.70 0.9 15.15
Corporate Center
Building 10210... 100% 1976/86 45,100 100.0 706,000 15.65 0.9 14.50
Corporate Center
Building 10220... 100% 1976/86 24,128 100.0 422,000 17.49 0.6 15.14
Corporate Center
Building
9630(5).......... 100% 1976/86 130,164 100.0 2,386,000 18.33 3.2 15.95
2800 North
Central(6)....... 10% 1987 357,923 91.0 5,291,000 16.24 7.0 14.11
Century Plaza...... 100% 1974/90 219,769 84.2 2,408,000 13.01 3.2 10.82
--------- ----- ----------- ----- -----
METROPOLITAN TUCSON
MARKET
5151 E. Broadway... 100% 1975/89/96 246,486 82.1% $ 3,269,000 $ 16.15 4.3 $11.19
--------- ----- ----------- ----- -----
Market
Subtotal/Weighted
Average........ 1,277,737 91.3% $ 18,517,000 $ 15.87 24.6 $13.30
--------- ----- ----------- ----- -----
METROPOLITAN ORLANDO
MARKET
One Orlando
Center........... 100% 1989 357,184 99.5% $ 8,154,000 $ 22.94 10.8% $21.46
5750 Major
Boulevard........ 100% 1973/97 92,828 21.0(7) 298,000 15.29 0.4 5.99
Maitland Forum..... 100% 1985/96 266,060 99.9 4,140,000 15.58 5.5 13.69
2601 Maitland
Center Parkway... 100% 1982 10,342 100.0 158,000 15.28 0.2 13.43
2603 Maitland
Center Parkway... 100% 1982 10,704 81.7 114,000 13.04 0.2 8.80
2605 Maitland
Center Parkway... 100% 1982 38,564 100.0 538,000 13.95 0.7 12.10
--------- ----- ----------- ----- -----
Market
Subtotal/Weighted
Average........ 775,682 90.0% $ 13,402,000 $ 19.20 17.8% $16.20
--------- ----- ----------- ----- -----
Consolidated
Total/Weighted
Average.............. 3,393,603 92.4% $ 75,209,000 $ 23.98 100.0% $19.11
========= ===== =========== =====
</TABLE>
- ---------------
(1) Data do not include years in which tenant improvements were made to the
Properties.
(2) Escalated Rent represents the annualized monthly Base Rent in effect (after
giving effect to any contractual increases in monthly Base Rent that have
occurred up to August 31, 1997) plus estimated annualized monthly tenant
pass-throughs of increases in operating and other expenses (but excluding
electricity costs paid by tenants) under each lease executed as of August
31, 1997, or, if such monthly rent has been reduced by a rent concession,
the monthly rent that would have been in effect at such date in the absence
of such concession. Base Rent represents the fixed base rental amount paid
by a tenant under the terms of the related lease agreement, which amount
generally does not include payments on account of real estate taxes,
operating expense escalations and utility charges.
(3) Annualized Net Effective Rent per Leased Square Foot represents the Base
Rent for the month of August 1997 under each lease executed as of August
31, 1997, presented on a straight-line basis in accordance with GAAP,
taking into account the amortization of tenant improvement costs and
leasing commissions, if any paid or payable by the Company during such
period, annualized.
(4) In 1996 the Company completed certain mechanical upgrades with respect to
this Property.
(5) Includes two free-standing restaurants adjacent to the Property which
account for, in the aggregate, 17,000 rentable square feet (100% of which
is leased).
(6) Data are presented without proration on account of the Company's partial
ownership interest. The Company's interest in the cash flow from this
Property increases to up to 27.5% if certain performance criteria are
achieved. See "The Properties -- Submarket and Property
Information -- Description of Uptown Phoenix Submarket Property."
(7) Such percentage would have been 74.5% if all space that was leased as of
August 31, 1997, but was not yet occupied, had been included in that
percentage.
8
<PAGE> 18
DEVELOPMENT PARCELS
At the completion of the Offering, the Company will own or have an option
to acquire four parcels of land which can support an aggregate of approximately
2.2 million square feet of development. Some of this land requires zoning or
other regulatory approvals prior to development. The following chart provides
additional information with respect to undeveloped land parcels.
<TABLE>
<CAPTION>
DEVELOPABLE
LAND/LOCATION ACREAGE OWNERSHIP STATUS SQUARE FEET
- --------------------------------------------------------- ------- ---------------- ------------
<S> <C> <C> <C>
One Orlando Center Land Parcel
Orlando, Florida....................................... 3.6 optioned(1) 800,000(2)
5151 East Broadway Land Parcel
Tucson, Arizona........................................ (3) owned 220,000
Corporate Center Land Parcel
Phoenix, Arizona....................................... (3) owned 150,000
Phoenix Land Parcel
Phoenix, Arizona....................................... 43.2 optioned(4) 1,000,000
---- ---------
Total.................................................... 46.8 2,170,000
==== =========
</TABLE>
- ---------------
(1) Certain Primary Contributors have granted to the Company an option (at no
cost) to acquire from such Primary Contributors this development parcel for
approximately $3.8 million (75% of the appraised value of the land as of
May 9, 1997), which equates to approximately $4.75 per buildable square
foot. Pursuant to the Company's Bylaws, the Company is authorized to
exercise this option only if (a) a majority of Independent Directors
approve the exercise of such option and (b) the individual building(s) to
be built on the property is at least 50% preleased prior to commencement of
construction, or in the event the individual building(s) to be built on the
property is less than 50% preleased, the Board of Directors unanimously
approves the exercise of such option.
(2) Includes 395,000 square feet currently zoned and approved for retail and
hotel development.
(3) These parcels are currently part of the parking lot relating to this
Property. In the event these parcels are developed by the Company,
additional parking spaces would need to be constructed.
(4) The Company will acquire this option from certain Primary Contributors at
no cost. Pursuant to the option, the Company will acquire the right to
purchase this land for approximately $10.3 million from an unaffiliated
third party. Pursuant to the Company's Bylaws, the Company is authorized to
exercise this option only if the Independent Directors unanimously approve
the exercise thereof. The right to acquire the land expires on September
30, 1997, subject to two one-month extensions that each require the payment
of a $100,000 extension fee. See "The Properties -- Land Parcel Options."
FORMATION AND STRUCTURE OF THE COMPANY
FORMATION TRANSACTIONS
The Company was formed to continue and expand the commercial real estate
business of Tower Equities and to acquire the interests in the 21 Properties.
Prior to or simultaneously with the closing of the Offering, the Company will
engage in the Formation Transactions described below which are designed to
consolidate the ownership of the Properties, Tower Equities' property management
and leasing business, and Properties Atlantic Inc.'s ("Properties Atlantic")
tenant/landlord representation business (which, prior to the Offering, was
controlled and operated by Clifford L. Stein, Managing Director-Southeast
Region, of the Company) in the Company, to facilitate the Offering and the
Concurrent Private Placements, and to enable the Company to qualify as a REIT
commencing with the taxable year ending December 31, 1997. The Formation
Transactions are as follows:
- The Company will sell 11,515,000 shares of Common Stock in the Offering
and 1,200,000 shares of Common Stock in the Concurrent Private Placements
(800,000 to certain private investment funds (for whom an affiliate of
Morgan Stanley Asset Management Inc. ("MSAM") acts as the general
partner), separate accounts for which MSAM acts as an investment advisor
and an affiliate of MSAM (collectively, the "Morgan Stanley Investors"),
and 400,000 to certain private investment funds sponsored by Carlyle (the
"Carlyle Funds"). All the net proceeds to the Company from the Offering
and the Concurrent Private Placements will be contributed to the
Operating Partnership. Following such contributions and the other
contributions set forth below, the Company's interest in the Operating
Partnership will be approximately 90.3%. The Company is the sole general
partner of the Operating
9
<PAGE> 19
Partnership and will own a 1% general partner interest in the Operating
Partnership and an approximate 89.3% limited partnership interest in the
Operating Partnership.
- The Company has acquired or will acquire, directly or indirectly, a 100%
interest in each of the Properties (other than the 2800 North Central
Property) and the ground lease encumbering the Maitland Forum Property
for an aggregate of 1,128,160 shares of restricted Common Stock,
1,583,640 OP Units, approximately $118.7 million in cash, the assumption
of approximately $244.6 million in mortgage and Property Partnership
indebtedness and approximately $13 million of non-interest bearing
deferred tax liabilities payable over 10 years, as follows:
- The Operating Partnership has acquired or will acquire directly or
indirectly from the Primary Contributors (as defined below under
"Benefits to Related Parties") interests in each of the Properties
(including an interest in the Maitland Forum ground lease), two
parcels of land adjacent to two of the Properties which can support
370,000 square feet of development, and substantially all the assets
of the Tower Equities and Properties Atlantic management and leasing
companies in exchange for 1,509,490 OP Units (valued at approximately
$37.7 million based on the Offering Price); and
- The Company will acquire from persons other than the Primary
Contributors, directly or indirectly, debt, equity and fee interests
in the Properties (including an interest in the Maitland Forum ground
lease) in exchange for 1,128,160 shares of restricted Common Stock
(valued at approximately $48.7 million based on the Offering Price),
74,150 OP Units (valued at approximately $1.9 million based on the
Offering Price) and $118.7 million in cash.
- The Operating Partnership is expected to enter into a $107 million
seven-year term loan facility with Merrill Lynch Credit Corporation (the
"Term Loan") and will borrow approximately $72 million under such
facility at the closing of the Offering.
- The Operating Partnership will utilize $246.5 million of the net proceeds
of the Offering, the Concurrent Private Placements and the Term Loan to
repay indebtedness (including $1.9 million of prepayment penalties)
encumbering the Properties and the Property Partnerships concurrent with
the closing of the Offering. See "The Properties -- Mortgage Indebtedness
Remaining Following the Offering."
- The Tower Equities and Properties Atlantic management and leasing
companies (that are owned entirely by the Primary Contributors) have
contributed or will contribute substantially all of the assets of such
companies to the Operating Partnership and the Operating Partnership
will, in turn, recontribute such assets to the Management Company in
exchange for 100% of the non-voting common stock and 5% of the voting
common stock in the Management Company (which collectively is entitled to
receive approximately 95% of the dividends). This structure is designed
to assist the Company in maintaining its status as a REIT. Lawrence H.
Feldman will own the remaining 95% of the voting common stock of the
Management Company and will be the sole director.
- The Company will issue $886,200 shares of restricted Common Stock in
exchange for the cancellation of indebtedness outstanding under certain
convertible notes held by the Morgan Stanley Investors.
- The Management Company and certain Primary Contributors that hold
interests in seven retail properties after the consummation of the
Formation Transactions (the "Excluded Properties") will enter into
management agreements with respect to each of the Excluded Properties.
Four of the Excluded Properties are controlled by certain Primary
Contributors and have non-cancellable management contracts (except upon a
sale of such property). The remaining three properties are under
management contracts which may be terminated upon payment of two years of
management fees or upon a sale of such property. In consideration for the
services to be provided under the management agreements, the Management
Company will receive market rate property and construction management
fees, as well as applicable leasing commissions.
10
<PAGE> 20
- The Operating Partnership will acquire, at no cost, an option held by
certain Primary Contributors that will provide the Operating Partnership
with the right to acquire from an unaffiliated third party for
approximately $10.3 million approximately 43 acres of undeveloped land in
Phoenix that can support 1.0 million square feet of development (the
"Phoenix Land Parcel"). In addition, the Operating Partnership will
acquire from certain Primary Contributors for no additional consideration
an option to acquire for approximately $3.8 million (approximately $4.75
per buildable square foot) (75% of the appraised value of the land as of
May 9, 1997) approximately 3.8 acres of undeveloped land adjacent to the
One Orlando Center Property that can support approximately 800,000 square
feet of development (the "One Orlando Center Land Parcel"). See "The
Properties -- Land Parcel Options."
- The Company will establish the three-year $200 million unsecured
revolving Line of Credit at or shortly after the closing of the Offering,
which will be used primarily to finance the acquisition of, and
investment in, office properties, to refinance existing indebtedness, and
for general working capital needs.
- The Company will pay to an affiliate of Carlyle $925,000 in consideration
of obtaining the consent to the transfer of an interest in the 2800 North
Central Avenue Property to the Company.
- As part of the Formation Transactions, the Company acquired certain
interests in the Property Partnerships from the Primary Contributors and
certain third parties. Certain of the interests in three of the Property
Partnerships were acquired from Edward Feldman pursuant to a bankruptcy
proceeding under Chapter 7 of United States Bankruptcy Code. In
conjunction with the transfer of those interests to the Company, the
Company entered into a court-approved settlement agreement whereby the
Company has obtained a release of all potential claims of the bankruptcy
trustee and any creditor of the bankruptcy estate relating directly or
indirectly to the Company in exchange for a cash payment of $2.0 million.
Accordingly, the Company believes that this bankruptcy proceeding will
have no impact on Company operations. Edward Feldman, the father of
Lawrence H. Feldman, served as President of Tower Equities until December
1990, at which time he retired at age 70. Edward Feldman served as a
consultant to Tower Equities from the date of his retirement until March
1997.
Additional information regarding the Formation Transactions is set forth
under "Formation and Structure of the Company."
BENEFITS TO RELATED PARTIES
Certain affiliates of the Company, including the Primary Contributors, will
realize certain material benefits as a result of the Offering and the Formation
Transactions. The Primary Contributors consist of Lawrence H. Feldman (Chairman,
Chief Executive Officer and President of the Company), Robert L. Cox (Executive
Vice President and Chief Operating Officer of the Company), Joseph D. Kasman
(Senior Vice President and Chief Financial Officer of the Company), Clifford L.
Stein (Managing Director of the Company's Southeast Region), Robert M. Adams (a
nominee for director of the Company), Richard M. Wisely (a nominee for director
of the Company), Eric S. Reimer (Vice President -- Leasing of the Company),
Reuben Friedberg (Vice President -- Finance of the Company), and Reid Berman
(Southeast Regional Director of Leasing for the Company).
- The Primary Contributors will receive a total of 1,509,490 OP Units
(including their pro rata share of the OP Units that will be issued to
certain Property Partnerships) in consideration for their interests in
the Properties, certain development parcels, and the Tower Equities and
Properties Atlantic management and leasing businesses, in connection with
the Formation Transactions. These OP Units (representing approximately
9.3% of the equity interests in the Company on a consolidated basis) will
have a total value of approximately $37.7 million based on the Offering
Price, compared to a deficiency in net tangible book value of the assets
contributed to the Operating Partnership by the Primary Contributors of
approximately $75.5 million) and will be exchangeable, commencing one
year following completion of the Offering, for cash or, at the Company's
option, shares of Common Stock on a one-for-one basis. These OP Units
will be subject to certain restrictions on transfer for a two-year period
following the consummation of the Offering without the consent of the
Representatives. See
11
<PAGE> 21
"Underwriting." The Company believes that the net tangible book value of
the individual assets contributed to the Operating Partnership by the
Primary Contributors (which reflects the historical cost of such assets
less accumulated depreciation) is less than the aggregate current market
value of such assets.
- Messrs. Feldman and Cox will each serve as a director and officer of the
Company, Messrs. Adams and Wisely will serve as directors of the Company,
and Messrs. Feldman, Cox, and Kasman will enter into employment
agreements with the Company. See "Management -- Employment Agreements."
- The Company will grant to Messrs. Feldman, Cox, Kasman, Reimer, Friedberg
and the five members of the Board of Directors of the Company who are not
employees or affiliates of the Company, options to purchase an aggregate
of 711,000 shares of Common Stock under the Company's 1997 Plan and
Directors' Plan at the Offering Price, subject to certain vesting
requirements. See "Management -- Stock Option and Restricted Stock
Plans -- 1997 Plan."
- The Formation Transactions may provide the Primary Contributors with
increased liquidity and, until the disposition of certain assets (or the
repayment of liabilities with respect thereto) contributed to the
Company, with continued deferral of the taxable gain associated with
those assets.
Additional information concerning benefits to executive officers, directors
and significant stockholders of the Company is set forth under "Formation and
Structure of the Company" and "Certain Relationships and Transactions."
CONFLICTS OF INTEREST
Following the completion of the Offering and the Formation Transactions,
conflicts of interest may arise with respect to certain transactions between the
holders of OP Units (including Lawrence H. Feldman and other executive officers
of the Company) and the stockholders of the Company. In particular, the sale of
any Properties or a reduction of indebtedness, could have adverse tax
consequences to holders of OP Units which would make such transactions less
desirable to such holders. The Company has adopted certain policies that are
designed to eliminate or minimize certain potential conflicts. See "Policies
with Respect to Certain Activities -- Conflict of Interest Policies" and "Risk
Factors -- Conflicts of Interest in the Business of the Company."
STRUCTURE OF THE COMPANY
The Company will be the sole general partner of the Operating Partnership.
The Company will conduct substantially all of its business, and will hold all of
its interests in the Properties, through the Operating Partnership. As the sole
general partner of, and 90.3% partner in, the Operating Partnership, the Company
will have exclusive power to manage and conduct the business of the Operating
Partnership, subject to certain limited exceptions. See "Partnership Agreement."
12
<PAGE> 22
The following diagram depicts the ownership structure of the Company, the
Operating Partnership and the Management Company upon completion of the Offering
and the Formation Transactions:
Ownership Structure Chart
- ---------------
(1) The Operating Partnership holds 99.99% of the interests in each of the
Subsidiary Partnerships; the remaining .01% is held directly or indirectly
by the Company.
(2) The Operating Partnership owns 100% of the non-voting common stock and 5% of
the voting common stock of the Management Company and is entitled to receive
approximately 95% of the dividends payable by the Management Company on its
capital stock. Lawrence H. Feldman will own the remaining 95% of the voting
common stock of the Management Company and will be the sole director.
Ownership of the Management Company was structured in a manner intended to
assist the Company in maintaining its status as a REIT.
13
<PAGE> 23
THE OFFERING
All of the shares of Common Stock offered hereby are being offered by the
Company. None of the Company's stockholders are selling any shares of Common
Stock in the Offering or the Concurrent Private Placements.
Common Stock offered by the
Company.................. 11,515,000 shares
U.S. Offering.............. 9,212,000 shares
International Offering..... 2,303,000 shares
Common Stock and OP Units
Outstanding after the
Offering and the
Concurrent Private
Placements............... 16,248,000 shares and OP Units(1)
Use of Proceeds............ Prepayment of mortgage indebtedness and certain
expenses related thereto; acquisition of interests
in the Properties; payment of certain expenses
incurred in connection with the Offering and the
Formation Transactions; and initial working capital
needs. See "Use of Proceeds."
NYSE Symbol................ TOW
- ---------------
(1) Includes (i) 1,583,640 OP Units expected to be issued in connection with the
Formation Transactions that may be exchanged for cash or, at the option of
the Company, shares of Common Stock on a one-for-one basis commencing one
year after completion of the Offering, (ii) 1,949,360 shares of Common Stock
to be issued in the Formation Transactions in connection with the
acquisition of interests in certain of the Properties and the cancellation
of certain indebtedness, and (iii) 1,200,000 shares of Common Stock to be
issued in the Concurrent Private Placements. Excludes 975,000 shares of
Common Stock reserved for issuance upon the exercise of options to be
granted pursuant to the Company's option plans concurrent with the Offering.
See "Management -- Stock Option and Restricted Stock Plans," "Formation and
Structure of the Company" and "Partnership Agreement -- Exchange Rights."
DISTRIBUTIONS
The Company and the Operating Partnership intend to make regular quarterly
distributions to holders of Common Stock and OP Units. The initial distribution,
covering a partial quarter commencing on the date of the closing of the Offering
and ending on December 31, 1997, is expected to be approximately $ per
share, which represents a pro rata distribution based upon a full quarterly
distribution of $.4225 per share and an annual distribution of $1.69 per share
(or an annual distribution rate of approximately 6.75%, based upon the Offering
Price). See "Distributions."
The Company intends initially to distribute annually approximately 93.4% of
estimated Cash Available for Distribution. The Company's estimate of the Cash
Available for Distribution after the Offering is based upon estimated pro forma
Funds from Operations (as defined below) for the 12 months ending August 31,
1998, with certain adjustments as described in "Distributions." The actual
distributions made by the Company will be affected by a number of factors,
including the gross revenues received from its Properties, the operating
expenses of the Company, the interest expense incurred in borrowing, and
unanticipated capital expenditures. No assurance can be given that the Company's
estimates will prove accurate or that any level of distributions will be made or
sustained. The Company anticipates that distributions will exceed net income
determined in accordance with generally accepted accounting principles ("GAAP")
due to non-cash expenses, primarily depreciation and amortization.
Distributions by the Company to the extent of its current and accumulated
earnings and profits for Federal income tax purposes generally will be taxable
to stockholders as ordinary dividend income (except to
14
<PAGE> 24
the extent designated as "capital gain" dividends). Distributions in excess of
such earnings and profits generally will be treated as first a non-taxable
reduction of the stockholder's basis in the Common Stock to the extent thereof
(which may have the effect of increasing the gain or decreasing the loss
recognized on such stockholder's sale of the Common Stock), and thereafter as
taxable gain. The Company anticipates that approximately 48% (or $0.81 per
share) of the distributions intended to be paid by the Company for the
twelve-month period following the Offering will represent a return of capital
for federal income tax purposes.
For a discussion of the annual distribution requirements applicable to
REITs, see "Federal Income Tax Considerations -- Requirements for Qualification
as a REIT -- Annual Distribution Requirements." For a discussion of the tax
treatment of distributions to the holders of Common Stock, see "Federal Income
Tax Considerations -- Taxation of Stockholders."
TAX STATUS OF THE COMPANY
The Company will elect to be taxed as a REIT under Sections 856 through 860
of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with
its taxable year ending December 31, 1997. In order to maintain REIT status, an
entity must meet a number of organizational and operational requirements. The
Company believes its organization and proposed method of operation will enable
it to meet the requirements for qualification as a REIT. In addition, in order
to maintain its qualification as a REIT under the Code, the Company generally
will be required each year to distribute at least 95% of its REIT taxable
income. See "Federal Income Tax Considerations -- Requirements for Qualification
as a REIT -- Annual Distribution Requirements." As a REIT, the Company generally
will not be subject to Federal income tax on any net income it distributes
currently to its stockholders. If the Company fails to qualify as a REIT in any
taxable year, it will be subject to Federal income tax at regular corporate
rates. See "Federal Income Tax Considerations -- Failure to Qualify as a REIT"
and "Risk Factors -- Failure to Qualify as a REIT Would Cause the Company to be
Taxed as a Corporation." Even if the Company qualifies for taxation as a REIT,
the Company may be subject to certain Federal, state and local taxes on its
income and property.
15
<PAGE> 25
SUMMARY SELECTED FINANCIAL INFORMATION
The following tables set forth summary selected combined operating, balance
sheet and other data for the Tower Predecessor (as defined below) on a
historical basis and the Company on a pro forma basis. The following data have
been derived from and should be read in conjunction with the combined financial
statements and notes thereto of the Tower Predecessor, DRA Joint Ventures, the
pro forma financial statements and notes thereto of the Company, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
The combined historical balance sheet data as of December 31, 1996 and 1995
and the combined historical operating data for the years ended December 31,
1996, 1995 and 1994 of the Tower Predecessor have been derived from the
historical combined financial statements audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report with respect thereto is included elsewhere
in this Prospectus.
The selected financial data at June 30, 1997 and for the six months ended
June 30, 1996 are derived from unaudited financial statements. The unaudited
financial information includes all adjustments (consisting of normal recurring
adjustments) that management considers necessary for a fair presentation of the
combined financial position and results of operations for these periods.
Combined operating results for the six months ended June 30, 1997 are not
necessarily indicative of the results to be expected for the entire year ended
December 31, 1997.
The Tower Predecessor is comprised of the following entities controlled or
managed by Tower Equities: Tower 45 Associates Limited Partnership (the Tower 45
Property), CXX Mineola Limited Partnership (the 120 Mineola Boulevard Property),
Maitland Property Investors, Ltd. (the Maitland Forum Property), Maitland
Associates Ltd. (the Maitland Forum ground lessor), Maitland West Associates
Limited Partnership (the three Maitland Center Parkway Properties), 5750
Associates Limited Partnership (the 5750 Major Boulevard Property), and the
predecessor management companies, including Tower Equities and Realty Corp., CXX
Mineola Management Corp., Forum Realty and Management Corp., and Tower Equities
of Arizona L.L.C. The Tower Predecessor includes 100% of the assets, liabilities
and operations of such entities and the respective Properties owned by them. In
addition, the Primary Contributors, including Lawrence H. Feldman, hold
non-controlling interests in the partnership controlling the 2800 North Central
Property and the partnerships that own the following Properties (collectively,
the "DRA Joint Ventures"): 286 Madison Avenue, 290 Madison Avenue, 292 Madison
Avenue, the six Corporate Center Properties, 5151 East Broadway, and One Orlando
Center. The Tower Predecessor includes these investments in the 2800 North
Central Property and the DRA Joint Ventures using the equity method of
accounting.
Pro forma information is presented as if (i) the transfer of the
Properties, certain development parcels, and other assets of Tower Equities and
Properties Atlantic to be contributed to the Company, (ii) the completion of the
Offering, the Concurrent Private Placements, the issuance of convertible notes
by the Company to the Morgan Stanley Investors for the purpose of funding
certain pre-Offering transaction expenses and the acquisition of certain
interests of third parties in certain Properties (the "MSAM Notes"), and the
initial closing of the Term Loan and the application of the net proceeds
therefrom as described under "Use of Proceeds," and (iii) the issuance of
886,200 shares of restricted Common Stock by the Company to the Morgan Stanley
Investors in exchange for the cancellation of indebtedness under the MSAM Notes,
had occurred on January 1, 1996 with respect to the pro forma operating and
other data and on June 30, 1997 with respect to the pro forma balance sheet
data. The pro forma information is based upon certain assumptions that are
included in the notes to the pro forma financial statements included elsewhere
in this Prospectus. The pro forma financial information is unaudited and is not
necessarily indicative of what the financial position or results of operations
of the Company would have been as of the dates and for the periods indicated,
nor does it purport to represent or project the financial position or results of
operations for future periods.
16
<PAGE> 26
THE COMPANY (PRO FORMA) AND THE TOWER PREDECESSOR (HISTORICAL)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------------------ ----------------------------------------------------------------
PRO HISTORICAL PRO HISTORICAL
FORMA ------------------ FORMA ----------------------------------------------------
1997 1997 1996 1996 1996 1995 1994 1993 1992
--------- -------- ------- --------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental income........... $ 36,745 $ 13,521 $13,467 $72,939 $ 26,138 $ 25,202 $ 25,994 $ 23,496 $ 22,949
Management fees(1)...... 245 626 1,261 961 82 221 183
Construction, leasing
and other fees........ 519 474 543 1,703 1,335 1,041 320 604 737
--------- -------- ------- --------- -------- -------- -------- -------- --------
Total revenues.......... 37,264 14,240 14,636 74,642 28,734 27,204 26,396 24,321 23,869
--------- -------- ------- --------- -------- -------- -------- -------- --------
Expenses:
Property operating and
maintenance........... 9,282 2,703 2,781 18,613 5,481 5,332 5,278 5,938 5,316
Real estate taxes....... 5,324 2,331 2,360 11,011 4,722 4,571 3,971 4,409 4,920
General office and
administrative........ 1,747 1,746 1,767 3,363 3,494 3,497 2,512 2,591 2,658
Interest expense........ 4,641 7,028 7,172 9,283 15,511 15,150 12,751 12,756 14,390
Depreciation and
amortization.......... 6,824 3,494 3,384 13,600 6,853 6,897 7,415 7,982 6,775
Ground rent and air
rights expense........ 299 299 299 599 599 599 599 599 561
--------- -------- ------- --------- -------- -------- -------- -------- --------
Total expenses.......... 28,117 17,601 17,763 56,469 36,660 36,046 32,526 34,275 34,620
--------- -------- ------- --------- -------- -------- -------- -------- --------
Income (loss) from
operations.............. 9,147 (3,361) (3,127) 18,173 (7,926) (8,842) (6,130) (9,954) (10,751)
Equity in joint
ventures(1)............. 496 68 198 398 461 193 1
--------- -------- ------- --------- -------- -------- -------- -------- --------
Income (loss) before
minority interest and
extraordinary item...... 9,643 (3,293) (2,929) 18,571 (7,465) (8,649) (6,129) (9,954) (10,751)
Minority interest(2)...... 935 1,801
--------- -------- ------- --------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item...... 8,708 (3,293) (2,929) 16,770 (7,465) (8,649) (6,129) (9,954) (10,751)
Extraordinary item........ 6,475
--------- -------- ------- --------- -------- -------- -------- -------- --------
Net income (loss)......... $ 8,708 $ 3,182 $(2,929) $16,770 $ (7,465) $ (8,649) $ (6,129) $ (9,954) $(10,751)
========== ======== ======= ========== ======== ======== ======== ======== ========
Net income per share...... $ 0.59 -- -- $ 1.14 -- -- -- -- --
========== ==========
Weighted average number of
shares of common stock
outstanding............. 14,664 -- -- 14,664 -- -- -- -- --
Weighted average number of
shares of common stock
and OP Units
outstanding............. 16,248 -- -- 16,248 -- -- -- -- --
BALANCE SHEET DATA (at
period end):
Real estate investments
net of accumulated
depreciation............ $453,381 $127,577 -- -- $129,064 $128,138 $132,904 $137,662 $140,916
Total assets.............. 474,713 170,632 -- -- 172,987 173,889 184,174 188,742 193,363
Long-term debt............ 129,000 193,381 -- -- 202,892 199,962 202,454 204,853 177,145
Total liabilities......... 141,951 229,292 -- -- 234,857 230,977 235,343 236,211 231,110
Owners'/stockholders'
equity (deficit)........ 300,484 (58,660) -- -- (61,870) (57,088) (51,169) (47,469) (37,747)
OTHER DATA:
EBITDA (Company's pro
forma 90.3% share)(3)... $ 19,062 $ 14,069 $ 7,909 $37,450 $ 15,496 $ 13,695 $ 13,834 $ 10,268 $ 9,895
Funds from operations
(Company's pro forma
90.3% share)(4)......... 14,892 616 806 29,097 129 (1,449) 1,292 (1,972) (3,976)
Cash flow from operating
activities.............. -- 2,573 (693) -- 951 1,762 4,118 -- --
Cash flow from investing
activities.............. -- (834) (1,329) -- (6,787) (3,440) (3,137) -- --
Cash flow from financing
activities.............. -- (2,398) 1,643 -- 5,613 238 30 -- --
Number of properties (at
period end)............. 21 7 7 21 7 6 6 3 3
</TABLE>
- ---------------
(1) The pro forma information accounts for the Management Company's operations
under the equity method of accounting; therefore, the net operations are
reported in one line item titled "Equity in Joint Ventures." The historical
information includes the Tower Predecessor management companies' operations
fully consolidated; therefore, the revenues and expenses are reported on a
gross basis for income and expense line items. See "The
Company -- Operations of the Company -- The Management Company."
17
<PAGE> 27
Equity in Joint Ventures includes the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
------------------------ ------------------------
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1997 1997 1996 1996
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
2800 North Central Property....................................... $ (39) $ (9) $ (12) $ (3)
DRA Joint Ventures................................................ -- 77 464
Management Company................................................ 535 -- 410
--- --- ---- ----
$ 496 $ 68 $ 398 $461
=== === ==== ====
</TABLE>
On a pro forma basis, the Company will own 10% (subject to an increase to up
to 27.5% if certain performance criteria are achieved) of 2800 North Central
Property and 95% of the economic interest in the Management Company. On a
historical basis, the Tower Predecessor owned, at December 31, 1996, 3.8% of
2800 North Central Property and approximately 18% of the DRA Joint Ventures
(which represents Lawrence H. Feldman's effective ownership interest).
(2) Represents the approximate 9.7% interest in the Operating Partnership that
will be owned by the Primary Contributors and certain other Continuing
Investors in the Company.
(3) EBITDA is defined as operating income before mortgage and other interest,
income taxes, depreciation and amortization. The Company believes EBITDA is
useful to investors as an indicator of the Company's ability to service debt
or pay cash distributions. EBITDA, as calculated by the Company, may not be
comparable to EBITDA reported by other REITs that do not define EBITDA
exactly as the Company defines that term. EBITDA does not represent cash
generated from operating activities determined in accordance with GAAP and
should not be considered as an alternative to operating income or net income
determined in accordance with GAAP as an indicator of performance or as an
alternative to cash flows from operating activities as an indicator of
liquidity.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- ----------------------------------------------------------
PRO HISTORICAL PRO HISTORICAL
FORMA ----------------- FORMA ------------------------------------------------
1997 1997 1996 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss).................... $ 8,708 $ 3,182 $(2,929) $16,770 $(7,465) $(8,649) $(6,129) $(9,954) $(10,751)
Add:
Interest expense..................... 4,641 7,028 7,172 9,283 15,511 15,150 12,751 12,756 14,390
Real estate depreciation and
amortization....................... 6,824 3,494 3,384 13,600 6,853 6,897 7,415 7,982 6,775
Real estate depreciation and
amortization of unconsolidated
joint ventures..................... 25 415 351 52 741 303 6 -- --
Minority interest.................... 935 -- -- 1,801 -- -- -- -- --
Less:
Interest income...................... (23) (50) (69) (144) (144) (6) (209) (516) (519)
------- ------- ------- ------- ------- ------- ------- ------- -------
EBITDA............................... $21,110 $14,069 $ 7,909 $41,362 $15,496 $13,695 $13,834 $10,268 $ 9,895
======= ======= ======= ======= ======= ======= ======= ======= =======
Company's 90.3% share................ $19,062 $37,450
======= =======
</TABLE>
(4) The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ("NAREIT") in
March 1995 defines Funds from Operations as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring
and sales of properties, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. The Company believes that Funds from Operations is helpful to
investors as a measure of the performance of an equity REIT because, along
with cash flow from operating activities, financing activities and investing
activities, it provides investors with an indication of the ability of the
Company to incur and service debt, to make capital expenditures and to fund
other cash needs. The Company computes Funds from Operations in accordance
with standards established by NAREIT which may not be comparable to Funds
from Operations reported by other REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the current
NAREIT definition differently than the Company. Funds from Operations does
not represent cash generated from operating activities determined in
accordance with GAAP and should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indication of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company's
liquidity, nor is it indicative of funds available to fund the Company's
cash needs, including its ability to make cash distributions.
The following is a reconciliation of net income to Funds from Operations.
18
<PAGE> 28
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- ----------------------------------------------------------
PRO HISTORICAL PRO HISTORICAL
FORMA ----------------- FORMA ------------------------------------------------
1997 1997 1996 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss).................... $ 8,708 $ 3,182 $(2,929) $16,770 $(7,465) $(8,649) $(6,129) $(9,954) $(10,751)
Add:
Real estate depreciation and
amortization....................... 6,824 3,494 3,384 13,600 6,853 6,897 7,415 7,982 6,775
Real estate depreciation and
amortization of unconsolidated
joint ventures..................... 25 415 351 52 741 303 6 -- --
Minority interest.................... 935 -- -- 1,801 -- -- -- -- --
Less:
Gain on extinguishment of debt....... -- (6,475) -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------ --------
Funds From Operations................ $16,492 $ 616 $ 806 $32,223 $ 129 $(1,449) $ 1,292 $(1,972) $ (3,976)
======= ======= ======= ======= ======= ======= ======= ====== ========
Funds From Operations
(Company's 90.3% share).............. $14,892 $29,097
======= =======
</TABLE>
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<PAGE> 29
RISK FACTORS
An investment in the Common Stock involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained in this Prospectus before making a decision
to purchase Common Stock in the Offering.
THERE IS NO ASSURANCE THAT THE COMPANY HAS PAID FAIR MARKET VALUE FOR THE
PROPERTIES
Except with respect to the appraisal of the Maitland Forum Property as
described in "Formation and Structure of the Company -- Certain Estimate of
Value," no independent third-party appraisals were obtained by the Company in
connection with the Formation Transactions. Accordingly, there can be no
assurance that the combined value of the consideration (consisting of cash, OP
Units, shares of restricted Common Stock and assumed debt) paid by the Company
in the Formation Transactions, which was generally based on the value of the
Company as a going concern, will not exceed the fair market value of the
Properties and other assets acquired by the Company in the Formation
Transactions. In addition, the value of the Company will not be determined on a
property-by-property basis because, in the view of management, the appropriate
basis or valuing the Company is as an ongoing business enterprise, rather than a
collection of assets. The valuation of the Company also will not be determined
by a valuation of its assets based on historical cost or fair market value, but
instead will be determined based upon a capitalization of the Company's
estimated pro forma Funds from Operations, estimated Cash Available for
Distribution and potential for growth, and the other factors discussed under
"Underwriting." There can be no assurance that there will not be discrepancies
between assumed results and actual results which could lead to a reduction in
actual distributions compared to assumed distributions or that the price paid by
the Company for its interests in the Properties and for its other assets will
not exceed the fair market value of such assets. It is possible that the
Offering Price per share of Common Stock may exceed the per share market value
of the Company's assets.
CONFLICTS OF INTEREST IN THE FORMATION TRANSACTIONS; SUBSTANTIAL BENEFITS TO
RELATED PARTIES
The Formation Transactions are not the result of arm's-length negotiations.
The Primary Contributors (including Lawrence H. Feldman (Chief Executive Officer
and President of the Company), Robert L. Cox (Executive Vice President and Chief
Operating Officer of the Company), Joseph D. Kasman (Senior Vice President and
Chief Financial Officer of the Company), Robert M. Adams (a nominee for director
of the Company), Richard M. Wisely (a nominee for director of the Company), Eric
S. Reimer (Vice President -- Leasing of the Company), Reuben Friedberg (Vice
President -- Finance of the Company), Clifford L. Stein (Managing Director of
the Company's Southeast Region), and Reid Berman (Southeast Regional Director of
Leasing for the Company)) have preexisting ownership interests in certain
Properties and certain of the other assets to be acquired by the Company through
their direct or indirect interests in Tower Equities, and will receive, directly
or indirectly, OP Units in exchange for such interests in the Formation
Transactions, and other material benefits from the Formation Transactions that
will not generally be received by other persons participating in the formation
of the Company. Because the Primary Contributors, who may be deemed to be
promoters of the Company, were involved in structuring the Formation
Transactions, they had the ability to influence the type and level of benefits
they received. As such, the Primary Contributors may have interests that
conflict with the interests of others participating in the Formation
Transactions and with the interests of persons acquiring Common Stock in the
Offering. The type and level of benefits the Primary Contributors will receive
may have been different if they had not participated in structuring the
Formation Transactions. These benefits include the following: (i) receipt of an
aggregate of 1,509,490 OP Units including their pro rata share of any OP Units
that will be issued to certain Property Partnerships (valued at approximately
$37.7 million based on the Offering Price); (ii) receipt by the five executive
officers of the Company and members of the Board of Directors of options to
purchase an aggregate of 711,000 shares of Common Stock under the Company's
option plans at the Offering Price, subject to certain vesting requirements,
which will have an aggregate purchase price of approximately $17.8 million based
on the Offering Price; (iii) deferral of certain tax consequences resulting from
the conveyances of their interests in the Properties to the Operating
Partnership; and (iv) entry by Messrs. Feldman, Cox, and Kasman into employment
agreements with the Company. See "Formation and Structure of the
Company -- Benefits to Related Parties" and "Manage-
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<PAGE> 30
ment -- Stock Option and Restricted Stock Plans, -- Executive Compensation
and -- Employment Agreements."
CONFLICTS OF INTEREST IN THE BUSINESS OF THE COMPANY
Leasing Services Provided to Other Properties. After the completion of the
Offering and the Formation Transactions, the Management Company (which will be
controlled by Lawrence H. Feldman, its controlling stockholder and sole
director, and not by the Company) will provide leasing services to other
properties (including the Excluded Properties). Certain conflicts of interest
may result from the Management Company providing management and leasing services
both to Properties in which the Company has an interest and other properties in
which some or all of the Primary Contributors have an interest.
Possible Less Vigorous Enforcement of Terms of Contribution and Other
Agreements by the Company. The Primary Contributors each, directly or
indirectly, have ownership interests in certain of the Properties and in the
other assets to be acquired by the Company. Following the consummation of the
Offering and the Formation Transactions, the Company, under certain agreements
relating to the contribution of such interests, will be entitled to
indemnification and damages in the event of breaches of representations or
warranties made by certain of the contributors of such interests (including
certain of the Primary Contributors). In addition, each of Messrs. Feldman, Cox,
and Kasman has entered into an employment agreement with the Company pursuant to
which they have agreed not to engage in certain business activities in
competition with the Company. See "Management -- Employment Agreements." To the
extent that the Company chooses to enforce its rights under any of these
contribution or employment agreements, it may determine to pursue available
remedies, such as actions for damages or injunctive relief, less vigorously than
it otherwise might because of its desire to maintain its ongoing relationship
with the individual involved. In addition, the aggregate liability of certain of
the Primary Contributors, including Messrs. Feldman, Cox and Kasman, to the
Company under a supplemental representations, warranties and indemnity agreement
relating to the Properties and the business to be owned by the Management
Company is limited to the initial value of the OP Units received by them in the
Formation Transactions based on the Offering Price. The Company, therefore, will
have no right of recovery as to any damages in excess of such aggregate amount
against such persons.
For a Period of Time, Sales of Properties and Repayment of Indebtedness May
Have Different Effects on Holders of OP Units than on Stockholders. Holders of
OP Units, including the Primary Contributors, may have unrealized taxable gain
associated with their interests in certain Properties contributed to the
Operating Partnership. Because holders of OP Units may suffer different and more
adverse tax consequences than the Company upon the sale or refinancing of those
Properties, the Primary Contributors and the Company may have different
objectives regarding the appropriate pricing and timing of any sale or
refinancing of such Properties. While the Company (as the general partner of the
Operating Partnership) has the exclusive authority as to whether and on what
terms to sell or refinance each individual Property, the Primary Contributors
through their status as executive officers and/or directors of the Company may
influence the Company not to sell, refinance or prepay the indebtedness
associated with the Properties even though such event might otherwise be
financially advantageous to the Company, or may influence the Company to
refinance Properties with a high level of debt. See "Policies with Respect to
Certain Activities -- Conflict of Interest Policies."
Outside Interests of Officers and Directors. Certain officers and
directors of the Company who are affiliated with Tower Equities will continue to
own direct and indirect interests in the Excluded Properties, which consist
entirely of interests in seven retail shopping center properties containing an
aggregate of 800,000 rentable square feet (the "Excluded Properties"). See "The
Properties -- Excluded Properties." Four of the Excluded Properties are
controlled by the Primary Contributors and have non-cancellable management
contracts with the Management Company (except upon the sale of the property).
The remaining three properties are under management contracts which may be
terminated upon payment of two years of management fees or upon a sale of such
property. In addition, the Company has adopted certain policies relating to
conflicts of interest. These policies include a Bylaw provision requiring all
transactions in which executive officers or directors have a conflicting
interest to that of the Company to be approved by a majority of the
disinterested directors or by the holders of a majority of the shares of Common
Stock held by
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<PAGE> 31
disinterested stockholders. There can be no assurance, however, that the
Company's policies will be successful in eliminating the influence of such
conflicts, and if they are not successful, decisions could be made that might
fail to reflect fully the interests of all stockholders. See "Policies with
Respect to Certain Activities -- Conflict of Interest Policies."
THE COMPANY'S PERFORMANCE AND VALUE ARE SUBJECT TO RISKS ASSOCIATED WITH THE
REAL ESTATE INDUSTRY
General Real Estate Industry Risks Could Adversely Affect the
Company. Real property investments are subject to varying degrees of risk. The
yields available from equity investments in real estate depend in large part on
the amount of income generated and expenses incurred. If the Properties do not
generate revenues sufficient to meet operating expenses, including debt service,
tenant improvements, leasing commissions and other capital expenditures, the
Company may have to borrow additional amounts to cover fixed costs which could
cause the Company's cash flow and ability to make distributions to its
stockholders to be adversely affected.
The Company's revenues and the value of its properties may be adversely
affected by a number of factors, including the national, state and local
economic climate and real estate conditions (such as oversupply of or reduced
demand for space and changes in market rental rates); the perceptions of
prospective tenants of the safety, convenience and attractiveness of the
properties; the ability of the owner to provide adequate management, maintenance
and insurance; the ability to collect on a timely basis all rents from tenants;
the expense of periodically renovating, repairing and reletting spaces; and
increasing operating costs (including real estate taxes and utilities) which may
not be passed through to tenants. Certain significant expenditures associated
with investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) are generally not reduced when circumstances
cause a reduction in rental revenues from the property. In addition, real estate
values and income from properties are also affected by such factors as
compliance with laws, including tax laws, interest rate levels and the
availability of financing. Also, the amount of available rentable square feet of
commercial property is often affected by market conditions and may therefore
fluctuate over time. If any of the above occurred, the Company's ability to make
expected distributions to its stockholders could be adversely affected.
Tenant Defaults and Bankruptcy Could Adversely Affect the Company's
Financial Condition. Substantially all of the Company's income will be derived
from rental income on the Properties and, consequently, the Company's
distributable cash flow and ability to make expected distributions to
stockholders would be adversely affected if a significant number of tenants of
the Properties failed to meet their lease obligations. At any time, a tenant of
the Properties may seek the protection of the bankruptcy laws, which could
result in delays in rental payments or in the rejection and termination of such
tenant's lease and thereby cause a reduction in the Company's cash flow and,
possibly, the amount of Cash Available for Distribution to its stockholders. No
assurance can be given that tenants will not file for bankruptcy protection in
the future or, if any tenants file, that they will affirm their leases and
continue to make rental payments in a timely manner. In addition, a tenant from
time to time may experience a downturn in its business which may weaken its
financial condition and result in the failure to make rental payments when due.
If tenant leases are not affirmed following bankruptcy or if a tenant's
financial condition weakens, the Company's cash flow and the amount of Cash
Available for Distribution to its stockholders may be adversely affected.
Increased Operating Expenses Could Adversely Affect the Company's Cash
Flow. The Properties are subject to operating risks common to commercial real
estate in general, any and all of which may adversely affect occupancy or rental
rates. The Properties are subject to increases in operating expenses such as
cleaning; electricity; heating, ventilation and air conditioning; elevator
repair and maintenance; insurance and administrative costs; and other general
costs associated with security, landscaping, repairs and maintenance. While the
Company's tenants generally are obligated to pay a portion of these escalating
costs, there can be no assurance that tenants will agree to pay such costs upon
renewal or that new tenants will agree to pay such costs. If operating expenses
increase, the local rental market may limit the extent to which rents may be
increased to meet increased expenses without decreasing occupancy rates. While
the Company implements cost-saving incentive measures at each of its Properties,
the Company's ability to make distributions to stockholders could be adversely
affected if operating expenses increase without a corresponding increase in
revenues.
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<PAGE> 32
The Failure to Renew or Relet Space Under Expiring Leases Could Adversely
Affect the Company's Cash Flow. The Company will be subject to the risk that
upon expiration of leases for space located in the Properties, the leases may
not be renewed, the space may not be relet or the terms of renewal or reletting
(including the cost of required renovations) may be less favorable than current
lease terms. Leases relating to an aggregate of approximately 5.7% and 9.9% of
the total rentable square feet in the Properties will expire in the twelve-month
periods ending August 31, 1998 and August 31, 1999, respectively. Furthermore,
because Tower Equities has managed 14 of the Properties for less than two years,
(including the 100 Wall Street Property which prior to the consummation of the
Offering was not managed by the Company), the Company's estimate of projected
leasing commissions and tenant improvement costs for renewing leases at these
Properties may be understated. If the Company were unable to renew the leases or
relet promptly for all or a substantial portion of this space, if the rental
rates upon such renewal or reletting were significantly lower than expected
rates or if its reserves for these purposes proved inadequate, then the
Company's cash flow and ability to make expected distributions to stockholders
may be adversely affected. See "The Properties -- Lease Expirations -- Portfolio
Total."
Loss of Major Tenants Could Adversely Affect the Company's Cash Flow. As
of August 31, 1997, the Company's largest tenant, American Express Financial
Advisors Inc. and its affiliates ("American Express"), accounted for 5.52% of
the Company's total Escalated Rent and 8.07% of aggregate leased square feet.
The Company's 10 largest tenants at the Properties (based on rentable square
feet as of August 31, 1997) collectively accounted for approximately 28.9% of
the Company's total portfolio Escalated Rent and 27.5% of the Company's rentable
square feet, and have a weighted average remaining lease term of approximately
five years. In addition, as of August 31, 1997, the Veterans
Administration -- General Services Administration accounted for 2.04% of the
Company's total Escalated Rent and 3.20% of aggregate leased square feet under
five leases that, under federal law, may be unilaterally terminated or
renegotiated by the lessee under certain limited circumstances. If the Company
were to lose any one or more of such tenants, or any one or more of such tenants
were to declare bankruptcy, experience a downturn in its business or fail to
make rental payments when due, the cash flow to the Company would be decreased
and the Company's ability to make distributions to stockholders would be
adversely affected. See "The Properties -- Tenants."
Impact of Competition on Occupancy Levels, Rent Charged, Acquisitions and
Management Services. All of the Properties are located in highly developed areas
that include a large number of other office properties, including the five
Properties located in New York City, which is by far the largest office market
in the United States, eight Properties located in the Metropolitan Phoenix
office market; six Properties located in Metropolitan Orlando office market; one
Property located in the Long Island office market; and one Property located in
the Metropolitan Tucson office market. The number of office properties in such
locations which may be newer, better located, or better capitalized than the
Company's Properties could have a material adverse effect on the Company's
ability to lease office space at its Properties, and on the effective rents the
Company is able to charge. In addition, the Company may compete with other
property owners that are willing to acquire properties in transactions which are
more highly leveraged than the Company is willing to undertake. In particular,
the Company may compete with other REITs that own, operate and acquire office
properties in the same locations as the Company. The Company also will face
competition from other real estate companies that provide management, leasing
and other services similar to those to be provided by the Management Company.
The Company believes its major competitors are local real estate companies in
its markets that specialize in the redevelopment and development of office
buildings and (i) in the New York City office market; SL Green Realty Corp.,
(ii) in the Metropolitan Orlando office market; Highwoods Properties, Inc., and
(iii) in the Metropolitan Phoenix office market; Prentiss Properties Trust, and
CarrAmerica Realty Corporation.
Liability for Environmental Matters Could Adversely Affect the Company's
Financial Condition. Under various federal, state, and local environmental
laws, ordinances and regulations, a current or previous owner or operator of
real property may be liable for the costs of removal or remediation of hazardous
or toxic substances on, under or in such property. Such laws often impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. In addition, the presence of
hazardous or toxic substances, or the failure to remediate such property
properly, may adversely affect the
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<PAGE> 33
owner's ability to lease such property or to borrow using such real property as
collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic substances may also be liable for the costs of removal or remediation of
hazardous substances at the disposal or treatment facility, whether or not such
facility is or ever was owned or operated by such person. In connection with the
ownership (direct or indirect), operation, management and development of real
properties, the Company may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances and, therefore, potentially liable for removal or remediation
costs, as well as certain other related costs, including governmental fines and
injuries to persons and property. Certain environmental laws and common law
principles could be used to impose liability for release of and exposure to
hazardous substances, including asbestos-containing materials ("ACMs") into the
air, and third parties may seek recovery from owners or operators of real
properties for personal injury or property damage associated with exposure to
released hazardous substances, including ACMs. As the owner of the Properties,
the Company may be potentially liable for any such costs. No assurances can be
given that (i) a prior owner, operator or occupant, such as a tenant, did not
create a material environmental condition not known to the Company or Tower
Equities, (ii) a material environmental condition with respect to any Property
does not exist, or (iii) future uses or conditions (including, without
limitation, changes in applicable environmental laws and regulations) will not
result in the imposition of environmental liability.
The Company engaged an independent consulting firm to perform Phase I
environmental site assessments ("ESAs"), or updates on ESAs performed within the
last 12 months, on all of the Properties. The purpose of Phase I ESAs is to
identify potential sources of contamination for which the Company may be
responsible and to assess the status of environmental regulatory compliance. For
a number of the Properties, the Phase I ESAs referenced prior Phase II ESAs
obtained on such Properties. Phase II ESAs generally involve more invasive
procedures than Phase I ESAs, such as soil sampling and testing or the
installation and monitoring of groundwater wells. The ESAs have not revealed any
environmental condition, liability or compliance concern that the Company
believes would have a material adverse affect on the Company's business, assets
or results of operations, nor is the Company aware of any such condition,
liability or concern. It is possible that the ESAs relating to any one of the
Properties do not reveal all environmental conditions, liabilities or compliance
concerns or that there are material environmental conditions, liabilities or
compliance concerns that arose at a Property after the related ESA report was
completed of which the Company is otherwise unaware. Moreover, no assurance can
be given that: (i) future laws, ordinances or regulations will not impose any
material environmental liability; or (ii) the current environmental condition of
the Properties will not be affected by tenants and occupants of the Properties,
by the condition of properties in the vicinity of the Properties (such as the
presence of underground storage tanks) or by third parties unrelated to the
Company.
The Cost of Complying with the Americans with Disabilities Act Could
Adversely Affect the Company's Cash Flow. Under the Americans with Disabilities
Act of 1990 (the "ADA"), all public accommodations and commercial facilities are
required to meet certain federal requirements related to access and use by
disabled persons. Compliance with the ADA requirements could require removal of
access barriers and non-compliance could result in imposition of fines by the
U.S. government or an award of damages to private litigants. Although the
Company believes that the Properties are in material compliance with these
requirements, a determination that the Company is not in compliance with the ADA
could result in the imposition of fines or an award of damages to private
litigants. If the Company were required to make unanticipated expenditures to
comply with the ADA, the Company's cash flow and the amounts available for
distributions to its stockholders may be adversely affected.
Changes in Tax and Environmental Laws Could Affect the Company's Financial
Condition. Because increases in income, service or transfer taxes are generally
not passed through to tenants under leases, such increases may adversely affect
the Company's cash flow and its ability to make distributions to stockholders.
The Properties also are subject to various federal, state and local regulatory
requirements and to state and local fire and life-safety requirements. Failure
to comply with these requirements could result in the imposition of fines by
governmental authorities or awards of damages to private litigants. The Company
believes that the Properties are currently in material compliance with all such
regulatory requirements. However, there can be
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<PAGE> 34
no assurance that these requirements will not be changed or that new
requirements will not be imposed which would require significant unanticipated
expenditures by the Company and could have an adverse effect on the Company's
cash flow and expected distributions.
Uninsured Losses Could Adversely Affect the Company's Cash Flow. The
Company will initially carry comprehensive liability, fire, flood (where
appropriate), extended coverage, rental loss insurance with respect to the
Properties with policy specifications and insured limits customarily carried for
similar properties. There are, however, certain types of losses (such as from
wars, nuclear accidents, civil disturbances and environmental matters) that may
be either uninsurable or not economically insurable. Should an uninsured loss or
a loss in excess of insured limits occur, the Company could lose both its
capital invested in, and anticipated profits from, one or more of its
Properties, and may continue to be obligated on any mortgage indebtedness or
other obligations related to the Property. Any such loss may adversely affect
the business of the Company and its financial condition and results of
operations.
Lack of Control Over Property Owned through Partnerships and Joint Ventures
Could Result in Decisions Inconsistent with the Company's Objectives. After
completion of the Offering, the Company will own a 10% interest (subject to
increase to up to 27.5% if certain performance criteria are achieved) in the
partnership that owns the 2800 North Central Property. As a result, the Company
will not have sole control over the Property or the ability to control decisions
with respect to this Property (such as decisions regarding sale, refinancing,
and the timing and amount of distributions). In addition, the Company's
investment in this partnership may, under certain circumstances, involve risks
not otherwise present in property ownership, including (i) buy/sell rights that
exist with respect to such Property; (ii) the risk that the Company may be
exposed to liability as a general partner of the partnership that owns the 2800
North Central Property even though the Company does not have total control over
major decisions relating to the Property; and (iii) the risk that the Company's
partner in the partnership might at any time have economic or other business
interests or goals that are inconsistent with the business interests or goals of
the Company, and that such partners may be in a position to veto actions which
may be consistent with the Company's objectives or policies. See "The
Properties -- Submarket and Property Information -- Description of Uptown
Phoenix Submarket Property."
In addition, the Company may participate with other entities in property
ownership through joint ventures or partnerships. Partnership or joint venture
investments may, under certain circumstances, involve risks not otherwise
present, including the possibility that the Company's partners or co-venturers
might become bankrupt, that such partners or co-venturers might at any time have
economic or other business interests or goals that are inconsistent with the
business interests or goals of the Company, and that such partners or
co-venturers may be in a position to take action contrary to the instructions or
the requests of the Company or contrary to the Company's policies or objectives,
including the Company's policy with respect to maintaining its qualification as
a REIT. The Company will, however, seek to maintain sufficient control of such
partnerships or joint ventures to permit the Company's business objectives to be
achieved. There is no limitation under the Company's organizational documents as
to the amount of available funds that may be invested in partnerships or joint
ventures. In addition, the Company may in the future acquire either a limited
partnership interest in a property partnership without partnership management
responsibility or a co-venturer interest or co-general partnership interest in a
property partnership with shared responsibility for managing the affairs of a
property partnership or joint venture and, therefore, will not be in a position
to exercise sole decision-making authority regarding the property partnership or
joint venture.
Illiquidity of Real Estate Investments Could Adversely Affect the Company's
Financial Condition. Equity real estate investments are relatively illiquid.
Such illiquidity will tend to limit the ability of the Company to sell and
purchase properties promptly in response to changes in economic or other
conditions. In addition, the Code may limit the ability of a REIT to sell
properties held for fewer than four years, which may affect the Company's
ability to sell properties even if a sale were in the best interests of the
Company's stockholders.
Acquisition, Redevelopment, and Development Risks Could Adversely Affect
the Company. In the future, the Company expects to acquire additional office
properties. See "Operating and Growth Strategies -- Growth Strategies."
Acquisitions of office properties entail the risk that investments will fail to
perform in
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<PAGE> 35
accordance with expectations, including operating and leasing expectations.
Redevelopment and new project development are subject to numerous risks,
including risks of construction delays, cost overruns or force majeure that may
increase project costs, new project commencement risks such as the receipt of
zoning, occupancy and other required governmental approvals and permits and the
incurrence of development costs in connection with projects that are not pursued
to completion. The Company anticipates that certain of its acquisitions,
redevelopments, and developments will be financed using the proceeds of periodic
equity or debt offerings, lines of credit or other forms of secured or unsecured
financing that will result in a risk that permanent financing for newly acquired
projects might not be available or would be available only on disadvantageous
terms. If permanent debt or equity financing is not available on acceptable
terms to refinance acquisitions undertaken without permanent financing, further
acquisitions may be curtailed or Cash Available for Distribution may be
adversely affected. In addition, it is anticipated that acquisition risks may be
heightened for acquisitions of Manhattan office properties due to the large size
of many Manhattan office properties and the complexity of acquisition
transactions in the Manhattan office market.
MANAGED PROPERTY BUSINESS AND NON-REIT SERVICES
Termination of Management and Leasing Contracts. The Company, through the
Operating Partnership and the Management Company, intends to pursue the
management, leasing, development and construction of properties owned by third
parties. Risks associated with these activities include the risk that the
related contracts (which are typically cancelable upon 30 days' notice or upon
certain events, including sale of the property) will be terminated by the
property owner or will be lost in connection with a sale of such property, that
contracts may not be renewed upon expiration or may not be renewed on terms
consistent with current terms and that the rental revenues upon which
management, leasing, and development fees are based will decline as a result of
general real estate market conditions or specific market factors affecting
properties managed, leased or developed by the Company, resulting in decreased
management or leasing fee income.
Adverse Consequences of Lack of Control Over the Business of the Management
Company. The capital stock of the Management Company will be divided into two
classes: voting common stock, 95% of which will be owned by Lawrence H. Feldman,
the Company's Chairman, Chief Executive Officer, and President, and 5% of which
will be owned by the Company, and non-voting common stock, all of which will be
owned by the Company, through the Operating Partnership. The voting common stock
and the non-voting common stock represent 5% and 95%, respectively, of the
economic interests in the Management Company. Lawrence H. Feldman is the holder
of 95% of the voting common stock of the Management Company and is currently the
sole director of the Management Company. The Company will not be able to elect
directors of the Management Company and, therefore, will not be able to
influence the day-to-day management decisions of such entity. As a result, the
board of directors and management of the Management Company may implement
business policies or decisions that would not have been implemented by persons
controlled by the Company and that are adverse to the interests of the Company
or that lead to adverse financial results, which could adversely impact the
Company's net operating income and cash flow. In addition, certain requirements
for REIT qualification may in the future limit the Company's ability to increase
the third-party management, leasing, development and construction operations
conducted, and related services offered, by the Operating Partnership and the
Management Company without jeopardizing the Company's qualification as a REIT.
See "Federal Income Tax Considerations -- Failure to Qualify as a REIT."
LIMITS ON CHANGES IN CONTROL
Stock Ownership Limit in Charter Could Inhibit Acquisitions and Changes in
Control. For the Company to maintain its qualification as a REIT under the
Code, not more than 50% in value of the outstanding shares of equity securities
of the Company may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) at any time
during the last half of the Company's taxable year (other than the first taxable
year for which the election to be treated as a REIT has been made). To assist
the Company in qualifying as a REIT under this and other provisions under the
Code, the Company's Charter, subject to certain exceptions, prohibits ownership,
directly or indirectly by virtue of certain attribution provisions of the Code,
of more than (i) 9.8% of the number or value of the outstanding
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<PAGE> 36
shares of Common Stock or (ii) 9.8% of the number or value of the outstanding
shares of any class of preferred stock of the Company, par value $0.01 per share
(the "Preferred Stock"), or any series of Preferred Stock (collectively, the
"Ownership Limitation"). Generally, the stock owned by affiliated owners will be
aggregated for purposes of the Ownership Limitation, subject to an exception
that permits mutual funds and certain other entities to own or purchase up to
15% of any class of the Company's stock in appropriate circumstances (the
"Look-Through Ownership Limitation"). The Company's Board of Directors may,
under certain circumstances (upon receipt of a ruling from the Internal Revenue
Service (the "IRS"), an opinion of counsel or other evidence satisfactory to the
Board and upon such other conditions as the Board may establish), exempt a
proposed transferee from the Ownership Limit or the Look-Through Ownership
Limitation (as applicable). However, the Board may not grant an exemption from
the Ownership Limit or the Look-Through Ownership Limitation to any proposed
transferee whose ownership, direct or indirect, of shares of capital stock of
the Company in excess of the Ownership Limit or the Look-Through Ownership
Limitation (as applicable) would result in the termination of the Company's
status as a REIT. See "Description of Capital Stock -- Restrictions on
Transfer." Absent any such exemption, shares of capital stock acquired in
violation of the Ownership Limit will be transferred to a trust for the benefit
of a designated charitable beneficiary, with the person who acquired such shares
in violation of the Ownership Limit or the Look-Through Ownership Limitation (as
applicable) not entitled to receive any distributions thereon, to vote such
shares, or to receive any proceeds from the subsequent sales thereof in excess
of the lesser of the price paid therefor or the amount realized from such sale.
A transfer of shares to a person who, as the result of the transfer, violates
the Ownership Limit or the Look-Through Ownership Limitation (as applicable) may
be void under certain circumstances. The foregoing restrictions on
transferability and ownership will continue to apply until (i) the Board of
Directors determines that it is no longer in the best interests of the Company
to attempt to qualify, or to continue to qualify, as a REIT and (ii) there is an
affirmative vote of two-thirds of the votes entitled to be cast on such matter
at a regular or special meeting of the stockholders of the Company. The
Ownership Limit may have the effect of delaying, deferring, or preventing a
transaction or a change in control of the Company that might involve a premium
price for the Common Stock or otherwise be in the best interest of the
stockholders. See "Description of Capital Stock -- Restrictions on Transfer."
Staggered Board Could Prevent Acquisitions and Changes in Control. The
Company's Board of Directors is divided into three classes. The initial terms of
the first, second and third classes will expire in 1998, 1999, and 2000,
respectively. Beginning in 1998, directors of each class will be chosen for
three-year terms upon the expiration of their existing terms and each year one
class of directors will be elected by the stockholders. The staggered terms of
directors may reduce the possibility of a tender offer or an attempt to change
control of the Company, even if a tender offer or change in control would be in
the best interest of the stockholders. See "Certain Provisions of Maryland Law
and of the Company's Charter and Bylaws -- Number of Directors; Classification
of the Board of Directors."
The Issuance of Additional Shares Could Prevent Acquisitions and Changes in
Control. The Company's Charter authorizes the Board of Directors to issue
additional authorized but unissued shares of Common Stock or Preferred Stock and
to classify or reclassify any unissued shares of Common Stock or Preferred Stock
and to set the preferences, rights and other terms of such classified or
unclassified shares. See "Description of Capital Stock." Although the Board of
Directors has no such intention to do so at the present time, it could establish
a class or series of Preferred Stock that could, depending on the terms of such
series, delay, defer or prevent a transaction or a change in control of the
Company that might involve a premium price for the Common Stock or otherwise be
in the best interest of the stockholders. The Charter and Bylaws of the Company
also contain other provisions that may have the effect of delaying, deferring,
or preventing a transaction or a change in control of the Company that might
involve a premium price for the Common Stock or otherwise be in the best
interest of the stockholders. See "Certain Provisions of Maryland Law and of the
Company's Charter and Bylaws -- Removal; Filling Vacancies -- Control Share
Acquisition Statute and -- Advance Notice of Director Nominations and New
Business."
Limitations on Acquisition of and Changes in Control Pursuant to Maryland
Law. Certain provisions of the Maryland General Corporation Law (the "MGCL")
may have the effect of inhibiting a third party from making an acquisition
proposal for the Company or of impeding a change in control of the Company under
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circumstances that otherwise could provide the holders of shares of Common Stock
with the opportunity to realize a premium over the then-prevailing market price
of such shares. In particular, the MGCL provides that, unless exempted by action
of the Board of Directors, certain "business combinations" between a Maryland
corporation, such as the Company, and a stockholder holding 10% or more of the
corporation's voting securities (an "Interested Stockholder") may not occur for
a period of five years after such stockholder becomes an Interested Stockholder.
Therefore, a business combination may be impeded or prohibited, even if such a
combination were in the best interest of the Company's stockholders. The MGCL
also provides that, unless exempted by the Charter or Bylaws, so-called "control
shares" may be voted only upon the approval of two-thirds of the outstanding
stock of the corporation exclusive of the control shares. Control shares are
shares which, if aggregated with all other shares previously acquired by the
acquiror, would entitle the acquiror to vote certain statutorily determined
percentages of outstanding shares. Under certain circumstances, a Maryland
corporation also may redeem the control shares and, in the event the control
shares are permitted to vote, the other stockholders of the corporation are
entitled to appraisal rights. Therefore, a control share acquisition could be
impeded and the attempt of any such transaction could be discouraged, even if it
were in the best interest of the Company's stockholders. The Company has opted
out of the business combination and control share provisions of the MGCL, but
the Board of Directors may elect for the Company to become subject to these
provisions of the MGCL in the future.
FAILURE TO QUALIFY AS A REIT WOULD CAUSE THE COMPANY TO BE TAXED AS A
CORPORATION
The Company Will Be Taxed As a Corporation if it Fails to Qualify as a
REIT. The Company intends to operate so as to qualify as a REIT for federal
income tax purposes, commencing with its taxable year ending December 31, 1997.
The Company expects to qualify initially as a REIT, but no assurance can be
given that it will so qualify or be able to remain so qualified. Although the
Company has not requested, and does not expect to request, a ruling from the IRS
that it qualifies as a REIT, it will receive at the closing of the Offering an
opinion of its tax counsel that, based on certain assumptions and
representations, the Company is organized in conformity with the requirements
for qualification as a REIT under the Code, and that the Company's proposed
method of operation will enable it to meet the requirements for qualification
and taxation as a REIT. No assurance can be given, however, that new
legislation, Treasury Regulations, administrative interpretations or court
decisions will not significantly change the tax laws with respect to the
Company's qualification as a REIT or the federal income tax consequences of such
qualification. Investors should be aware, however, that opinions of counsel are
not binding on the IRS or any court. Furthermore, this opinion will be based on
an analysis of the facts, including the proposed method of operation of the
Company, as they exist at the Closing. Moreover, the qualification of the
Company as a REIT will depend on the Company's continuing ability to meet
various requirements concerning, among other things, the ownership of its
outstanding stock, the nature of its assets, the sources of its income, and the
amount of its distributions to its stockholders. Because the Company has no
history of operating so as to qualify as a REIT, there can be no assurance that
the Company will do so successfully. See "Federal Income Tax
Considerations -- Taxation of the Company -- Failure to Qualify as a REIT." If
the Company were to fail to qualify as a REIT for any taxable year, the Company
would not be allowed a deduction for distributions to its stockholders in
computing its taxable income and would be subject to federal income tax
(including any applicable minimum tax) on its taxable income at regular
corporate rates. Unless entitled to relief under certain Code provisions, the
Company also would be disqualified from treatment as a REIT for the four taxable
years following the year during which qualification was lost. As a result, Cash
Available for Distribution would be reduced for each of the years involved. In
addition, although the Company intends to operate in a manner designed to
qualify as a REIT, it is possible that future economic, market, legal, tax or
other considerations may cause the Board of Directors, with the consent of
stockholders by two-thirds of the vote entitled to be cast on such matter at a
regular or special meeting of stockholders, to revoke the REIT election. See
"Federal Income Tax Considerations."
To Qualify As a REIT the Company Will Need to Maintain a Certain Level of
Distributions. In order to qualify as a REIT, the Company generally will be
required each year to distribute to its stockholders at least 95% of its net
taxable income (excluding any net capital gain). In addition, the Company will
be subject to a 4% nondeductible excise tax on the amount, if any, by which
certain distributions paid by it with respect to any calendar year are less than
the sum of (i) 85% of its ordinary income for that year, (ii) 95% of its capital
gain
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net income for that year, and (iii) 100% of its undistributed taxable income
from prior years. See "Federal Income Tax Considerations -- Taxation of the
Company -- Requirements for Qualification as a REIT." The Company intends to
make distributions to its stockholders to comply with the 95% distribution
requirement and to avoid the nondeductible excise tax. The Company's income will
consist primarily of its share of the income of the Operating Partnership, and
the Cash Available for Distribution by the Company to its stockholders will
consist of its share of cash distributions from the Operating Partnership.
Differences in timing between (i) the actual receipt of income and actual
payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company could
require the Company, through the Operating Partnership, to borrow funds on a
short-term basis to meet the 95% distribution requirement and to avoid the
nondeductible excise tax. The requirement to distribute a substantial portion of
the Company's net taxable income could cause the Company to distribute amounts
that otherwise would be spent on future acquisitions, unanticipated capital
expenditures or repayment of debt, which would require the Company to borrow
funds or to sell assets to fund the costs of such items.
Other Tax Liabilities. Even if the Company qualifies as a REIT, it will be
subject to certain federal, state and local taxes on its income and property. In
addition, the net taxable income, if any, of the Management Company will be
subject to federal and state income tax. See "Federal Income Tax
Considerations -- Other Tax Considerations."
THE COMPANY'S USE OF DEBT TO FINANCE ACQUISITIONS AND DEVELOPMENTS COULD
ADVERSELY AFFECT THE COMPANY
Rising Interest Rates Could Adversely Affect the Company's Cash
Flow. Initially, the $35.0 million loan encumbering the Tower 45 Property will
bear interest at a variable rate. See "The Properties -- Mortgage Indebtedness
Remaining Following the Offering." In addition, the Company anticipates that
advances under the Line of Credit will bear interest at a variable per annum
rate which will depend on the Company's overall leverage. The Company may incur
additional indebtedness in the future that also bears interest at variable
rates. Variable rate debt creates higher debt service requirements if market
interest rates increase, which would adversely affect the Company's cash flow
and the amounts available for distributions to its stockholders. The Company may
in the future engage in transactions to limit its exposure to rising interest
rates as appropriate and cost effective which expose the Company to the risk
that counterparties to such a transaction may not perform and cause the Company
to lose the anticipated benefits therefrom, which would have the adverse affects
associated with increases in market interest rates described above. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
Debt Financing and Potential Adverse Effects on Cash Flows and
Distributions. The Company will be subject to risks normally associated with
debt financing, including the risk that the Company's cash flow will be
insufficient to pay distributions at expected levels and meet required payments
of principal and interest, the risk that indebtedness on the Properties (which
will not have been fully amortized at maturity in all cases) will not be able to
be refinanced or that the terms of such refinancing will not be as favorable as
the terms of existing indebtedness. Upon consummation of the Offering and the
Formation Transactions, the Company expects to have outstanding consolidated
indebtedness of approximately $131.7 million (including its pro rata share of
indebtedness of unconsolidated investments), with maturities ranging from 1998
to 2006. The Company has the right to prepay, commencing 40 days following the
Offering and prior to maturity, the $35.0 million of mortgage indebtedness that
will be secured by the Tower 45 Property. If the Company determines to prepay
the loan encumbering the Tower 45 Property prior to maturity, the Company is
positioned to finance such prepayment by drawing upon the Company's Term Loan.
If the Company does not repay the indebtedness relating to the Tower 45 Property
in full on or prior to December 31, 1997, the Company will be required to apply
all net cash flow from the Tower 45 Property and certain escrowed amounts toward
the reduction of outstanding principal of such loan. Such required prepayments
would have a material adverse impact on, among other things, the amount of Cash
Available for Distribution by the Company to its stockholders. See "-- Changes
in Policies, Such as the Company's Debt Policy, Without Stockholder Approval
Could Adversely Affect the Company."
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In addition, the Company has obtained a commitment for the $200 million
unsecured Line of Credit to fund the acquisition and development of additional
office properties, tenant and capital improvements to office properties and
working capital. The Line of Credit will be recourse to the Company and the
Operating Partnership and will mature three years following the closing of the
loan. If principal payments due at maturity cannot be refinanced, extended or
paid with proceeds of other capital transactions, such as the issuance of new
equity capital, the Company expects that its cash flow will not be sufficient in
all years to pay distributions at expected levels and to repay all maturing
debt. Furthermore, if prevailing interest rates or other factors at the time of
refinancing result in higher interest rates upon refinancing, the interest
expense relating to such refinanced indebtedness would increase, which would
adversely affect the Company's cash flow and the amounts available for
distributions to its stockholders. If a property or properties are mortgaged to
secure payment of indebtedness and the Company is unable to meet mortgage
payments, the property could be foreclosed upon by or otherwise transferred to
the mortgagee with a consequent loss of income and asset value to the Company.
The Inability to Obtain Permanent Financing of Construction Loans Could
Result in a Loss of Income and Asset Value of the Company. If new developments
are financed through construction loans, there is a risk that upon completion of
construction, permanent financing for newly developed properties may not be
available or may be available only on disadvantageous terms. In the event that
the Company is unable to obtain permanent financing for a developed property on
favorable terms, it could be forced to sell such property at a loss or the
property could be foreclosed upon by the lender and result in loss of income and
asset value to the Company. On July 15, 1997, an affiliate of Tower Equities
transferred to a lender its ownership interest in a medical office property
pursuant to a deed in lieu of foreclosure in favor of such lender in respect of
mortgage indebtedness of approximately $11.5 million.
HIGH DISTRIBUTION PAYOUT RATIO
The Company's estimated initial distribution rate represents 93.4% of the
Company's estimated Cash Available for Distribution resulting in the risk that
actual Cash Available for Distribution will be insufficient to permit the
Company to maintain its proposed initial distribution rate. See "Distributions."
Should actual Cash Available for Distribution be less than estimated cash
available for distribution, the Company may not be able to achieve and maintain
its proposed initial distribution rate. Any such failure to make expected
distributions could result in a decrease in the market price of the Common
Stock.
UNCONTROLLABLE MARKET FACTORS AFFECTING THE PROPERTIES' PERFORMANCE AND VALUE
COULD PRODUCE LOWER RETURNS
Nine Properties (aggregating 38% of the Company's total rentable square
feet) of the Company's 21 Properties are located in Arizona, including eight
Properties (aggregating 30% of the Company's total rentable square feet) located
in the Metropolitan Phoenix office market, five Properties (aggregating 39% of
the Company's total rentable square feet) are located in the Manhattan office
market, and six Properties (aggregating 23% of the Company's total rentable
square feet) are located in the Metropolitan Orlando office market. In addition,
the Company initially intends to concentrate its future acquisitions in its
primary markets. Like other real estate markets, these commercial real estate
markets have experienced economic downturns in the past, and future declines in
any of these economies or real estate markets could adversely affect the
Company's Cash Available for Distribution. The Company's financial performance
and its ability to make distributions to stockholders are therefore dependent on
the economic conditions in the Manhattan, Metropolitan Phoenix and Metropolitan
Orlando office markets. The Company's revenues and the value of its Properties
may be affected by a number of factors, including the local economic climate
(which may be adversely impacted by business layoffs or downsizing, industry
slowdowns, changing demographics and other factors) and local real estate
conditions (such as oversupply of or reduced demand for office, industrial and
other competing Manhattan commercial properties). There can be no assurance as
to the continued growth of the economies in the Metropolitan Phoenix, or
Metropolitan Orlando office markets, or the future growth rate of the Company.
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LACK OF OPERATING HISTORY AND RISKS OF ACQUISITIONS COULD ADVERSELY AFFECT THE
COMPANY
Fourteen of the Properties have been under the Company's management for two
years or less (including the 100 Wall Street Property which prior to the
consummation of the Offering was not managed by the Company). The most recently
acquired Properties may have characteristics or deficiencies unknown to the
Company affecting their value or revenue potential, and it is also possible that
the operating performance of the most recently acquired Properties may decline
under the Company's management. As the Company acquires additional properties,
the Company will be subject to risks associated with managing new properties,
including lease-up and tenant retention. In addition, the Company's ability to
manage growth effectively will require it to successfully integrate its new
acquisitions into its management structure. No assurance can be given that the
Company will be able to succeed with such integration or effectively manage
additional properties or that newly acquired properties will perform as
expected.
CHANGES IN POLICIES, SUCH AS THE COMPANY'S DEBT POLICY, WITHOUT STOCKHOLDER
APPROVAL COULD ADVERSELY AFFECT THE COMPANY
The investment, financing, borrowing and distribution policies, including
the Debt Policy, of the Company and its policies with respect to all other
activities, including growth, capitalization and operations, will be determined
by the Board of Directors. The Company's Debt Policy limits the Company's total
consolidated indebtedness plus its pro rata share of indebtedness of
unconsolidated investments ("Joint Venture Debt") to 50% or less of the
Company's total equity market capitalization plus its consolidated indebtedness
and pro rata share of Joint Venture Debt ("Total Market Capitalization"), but
the organizational documents of the Company do not contain any limitation on the
amount of indebtedness the Company may incur. Although the Company's Board of
Directors has no present intention to do so, these policies may be amended or
revised at any time and from time to time at the discretion of the Board of
Directors without a vote of the stockholders of the Company. A change in these
policies could adversely affect the Company's financial condition, results of
operations or the market price of the Common Stock. See "Policies with Respect
to Certain Activities."
THE COMPANY RELIES ON KEY PERSONNEL WHOSE CONTINUED SERVICE IS NOT GUARANTEED
The Company is dependent on the efforts of its executive officers,
particularly Lawrence H. Feldman, the Company's Chairman, Chief Executive
Officer, and President. The loss of any of their services could have an adverse
effect on the operations of the Company. Prior to the consummation of the
Offering, each of Messrs. Feldman, Cox, and Kasman will enter into an employment
agreement with the Company; however, such employment agreements (including the
obligations of such persons to provide services to the Company and to not
compete with the Company under certain circumstances) may not be enforceable
under applicable state law, exposing the Company to the risk of loss of the
services of such persons, which could have an adverse effect on the operations
of the Company. See "Management -- Employment Agreements." Certain assets of the
Primary Contributors, including the Excluded Properties which consist of seven
retail shopping center properties containing and aggregate of 800,000 rentable
square feet, are not being contributed to the Company, and certain of the
executive officers of the Company, including Mr. Feldman, may devote a small
portion of their management time towards the management of these Excluded
Properties. See "Management -- Employment Agreements" and "The
Properties -- Excluded Properties."
CONTROL OF MANAGEMENT
None of the directors or officers of the Company is selling any Common
Stock in the Offering. Upon completion of the Offering and the Formation
Transactions, all directors and management personnel of the Company as a group
will beneficially own approximately 9.3% of the total issued and outstanding
Common Stock and OP Units (which will be exchangeable by the holders for cash
or, at the election of the Company, shares of Common Stock on a one-for-one
basis after one year). See "Principal Stockholders." Management currently
expects that the Company will elect to exchange such OP Units for Common Stock.
Mr. Feldman will serve as Chairman, Chief Executive Officer and President of the
Company. Mr. Cox will serve as Executive Vice President and Chief Operating
Officer of the Company and Mr. Kasman will serve as Senior
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Vice President and Chief Financial Officer of the Company. In addition, Messrs.
Feldman and Cox serve as two of the seven directors of the Company. Accordingly,
such persons will have substantial influence over the Company, which influence
might not be consistent with the interests of other stockholders, and may in the
future have a substantial influence on the outcome of any matters submitted to
the Company's stockholders for approval if all of their OP Units are exchanged
for Common Stock. See "-- Conflicts of Interests in the Formation Transactions;
Substantial Benefits to Related Parties."
ABSENCE OF PRIOR PUBLIC MARKET FOR COMMON STOCK AND MARKET CONDITIONS COULD
ADVERSELY IMPACT THE TRADING PRICE OF THE COMMON STOCK
Prior to the Offering there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop or be
sustained or that Common Stock will be resold at or above the Offering Price.
The Common Stock has been approved for listing on the New York Stock Exchange
(the "NYSE"), subject to official notice of issuance. The Offering Price of the
Common Stock has been determined by agreement among the Company and the
Underwriters and may not be indicative of the market price for the Common Stock
after the Offering. See "Formation and Structure of the Company -- Determination
and Valuation of Ownership Interests" and "Underwriting." The market value of
the Common Stock could be substantially affected by general market conditions,
which could change from time to time, including (i) changes in interest rates;
(ii) the extent to which a secondary market develops for the Common Stock
following the Offering; (iii) the extent of institutional investor interest in
the Company; (iv) the general reputation of REITs and the attractiveness of
their equity securities in comparison to other equity securities (including
securities issued by other real estate-based companies); (v) the Company's
financial performance; and (vi) general stock and bond market conditions.
Moreover, numerous other factors, such as regulatory action and changes in tax
laws, could have a significant impact on the future market price of the Common
Stock. One of the factors that will influence the market price of the Common
Stock in public markets will be the annual distribution rate on the Common
Stock. An increase in market interest rates may lead prospective purchasers of
the Common Stock to expect a higher annual distribution rate from future
distributions, which would adversely affect the market price of the Common
Stock. There also can be no assurances that, upon listing, the Company will
continue to meet the criteria for continued listing of the Common Stock on the
NYSE.
PURCHASERS OF COMMON STOCK IN THE OFFERING WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL BOOK VALUE DILUTION
As set forth more fully under "Dilution," the pro forma net tangible book
value per share of the assets of the Company after the Offering will be
substantially less than the Offering Price. Accordingly, purchasers of the
Common Stock offered hereby will experience immediate and substantial dilution
of $5.33 per share in the net tangible book value of the Common Stock from the
Offering Price. See "Dilution."
POSSIBLE ADVERSE EFFECT ON COMMON STOCK PRICE OF SHARES AVAILABLE FOR FUTURE
SALE
Sales of a substantial number of shares of Common Stock, or the perception
that such sales could occur, could adversely affect prevailing market prices of
the Common Stock. The Operating Partnership, in connection with the Formation
Transactions, will issue to persons other than the Company an aggregate of
1,583,640 OP Units, and the Company will issue 3,149,360 shares of restricted
Common Stock in connection with the Formation Transactions and the Concurrent
Private Placements and the cancellation of the MSAM Notes. These OP Units may be
exchanged for cash based on their fair market value or, at the Company's option,
for shares of Common Stock on a one-for-one basis. In certain circumstances, the
Company may not be able to exercise its option to satisfy such partners'
exchange rights with Common Stock because of tax or securities law limitations.
An exercise of exchange rights in such circumstances could adversely affect the
Operating Partnership's liquidity because it would then be required to satisfy
such rights with cash. The Exchange Agreement (as defined in "Partnership
Agreement -- Exchange Rights") prohibits the exchange of OP Units for a period
of one year following the closing of the Offering. In addition, the officers and
directors of the Company have agreed, subject to certain limited exceptions, not
to offer, sell, contract to sell or otherwise
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dispose of any shares of Common Stock (or any securities convertible into or
exercisable for shares of Common Stock) for a two-year period after the date of
this Prospectus without the prior written consent of the Representatives. The
purchasers of the shares of Common Stock in the Concurrent Private Placements
and the recipients of shares of Common Stock in the Formation Transactions have
agreed not to offer, sell, contract to sell or otherwise dispose of any shares
of Common Stock for at least a one-year period after the date of this Prospectus
without the prior written consent of the Representatives. See "Underwriting."
The Registration Rights Agreement (as defined in "Partnership
Agreement -- Registration Rights") requires the Company to register all
restricted shares of Common Stock under the Act, including shares issuable upon
the exchange of OP Units. As a result, at the conclusion of the one-year
restriction period and the applicable Lock-up Period, all shares of Common Stock
issued in connection with the Formation Transactions or acquired upon exchange
of OP Units may be sold in the public market. In addition, a number of shares of
Common Stock equal to 9.5% of the total number of issued and outstanding shares
of Common Stock (on a fully diluted basis assuming the exchange of all OP Units
for shares of Common Stock) will be reserved for issuance pursuant to the 1997
Plan, and 200,000 shares also will be reserved for issuance to non-employee
directors pursuant to the Directors' Plan. Options to purchase 975,000 shares of
Common Stock at the Offering Price will be granted to the Company's executive
officers and employees under the 1997 Plan and the Company's directors under the
Directors' Plan in connection with the Formation Transactions. See
"Management -- Stock Option and Restricted Stock Plans -- Compensation of
Directors, -- Executive Compensation and -- 1997 Plan." No prediction can be
made about the effect that future sales of Common Stock will have on the market
prices of shares. See "Shares Available for Future Sale."
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THE COMPANY
GENERAL
The Company has been formed to continue and expand the commercial real
estate business of Tower Equities, which since 1985 has been engaged in
developing, acquiring, owning, renovating, managing, and leasing office
properties in the Manhattan, Phoenix/Tucson and Orlando markets. Upon completion
of the Offering, the Company will own interests in 21 Properties encompassing
approximately 3.4 million rentable square feet. The Company will also own two
parcels of land which can support an aggregate of approximately 370,000 square
feet of development and will have options to acquire two other parcels of land
which can support approximately 1.8 million square feet of development. See "The
Properties -- Development Parcels and -- Land Parcel Options." As of August 31,
1997, the Properties were approximately 92.4% leased and approximately 80% of
the Escalated Rent from the Company's portfolio was derived from Properties
located in central business district locations, including approximately 54% from
Properties located in the Manhattan office market. Substantially all of the
Properties are located in Manhattan, Phoenix, Tucson, and Orlando. The Company
will operate as a fully integrated, self-administered, and self-managed real
estate company and expects to qualify as a REIT for federal income tax purposes.
The Company will continue its turnaround strategy of acquiring office
properties at a significant discount to replacement cost that are attractively
priced due to physical, leasing, and/or operational deficiencies. Consistent
with this strategy, the Company will seek to acquire office properties that
present an attractive opportunity to create value and enhance cash flow through
the Company's hands-on approach to property repositioning, including the
implementation of property-specific renovation programs for underperforming
assets. The Company believes that the significant experience of its management
in property development, redevelopment, construction, management, and leasing
provides it with the expertise necessary to identify, acquire, upgrade,
renovate, and reposition underperforming office properties.
The Company initially intends to focus its turnaround strategy in Manhattan
because the Company believes that the current supply/demand fundamentals in that
office market provide an attractive environment for owning and operating office
properties. As a result of increasing demand for office space in Manhattan, and
limited new supply, vacancy rates in Manhattan have declined during the last
five years and rental rates for office properties in Manhattan have increased.
See "Property Office Markets and Market Economies." The Company believes that
demand for office space in Manhattan has increased recently because of
consistent job growth, a strengthening New York City metropolitan economy, and
an improving business environment and quality of life offered by New York City.
At the same time, the supply of Manhattan office space has remained virtually
unchanged since 1992, and the Company believes that supply is unlikely to
increase substantially over the near term primarily because there are relatively
few sites available for new construction, the lead time required for new
construction typically exceeds three years, and new construction generally is
not economically feasible given current market rental rates.
The Company believes that opportunities exist to acquire office properties
in Manhattan on attractive terms, including at prices significantly below
replacement cost. Notwithstanding the current favorable supply/demand
fundamentals in the Manhattan office market, the Company believes that, in order
to justify new construction in this market, asking rents generally would have to
increase at least 40% over current asking rents for Class A office space in
Manhattan (as estimated by Landauer), not taking into account any tax subsidies
that may apply.
The Company will also pursue the strategic acquisition of office properties
located in the Phoenix and Orlando markets that are consistent with its
turnaround strategy, as well as the development of the Company's development
parcels located in those markets. The Company believes these office markets
generally have significant rental growth potential due to employment growth,
declining vacancies, and limited new construction activity. According to the
1997 Landauer Market Forecast, Phoenix and Orlando ranked first and second,
respectively, based on a supply/demand projection for 60 office markets in the
United States. The improved economic fundamentals in these markets have resulted
in a decline in direct vacancy rates from December 31,
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1992 to June 30, 1997 from 16.8% to 7.2% in the Metropolitan Orlando office
market and 25.1% to 8.3% in the Metropolitan Phoenix office market.
Tower Equities was formed in 1985 by Lawrence H. Feldman, the Company's
Chairman, Chief Executive Officer, and President, and Edward Feldman, his father
(who has since retired), and traces its origins to a predecessor family-owned
general contracting business that was founded at the beginning of the twentieth
century by Lawrence H. Feldman's grandfather, the late H.J. Feldman. Tower
Equities has acquired and/or developed many of the Properties owned by the
Company with institutional joint venture partners which will continue as
stockholders in the Company following the Offering; these joint venture partners
include affiliates of General Electric Capital Corp., DRA Advisors, Inc., and
Carlyle.
The Company operates from its midtown Manhattan headquarters and its two
full service regional offices (Orlando and Phoenix), and is a fully integrated
real estate company with approximately 70 employees with in-house expertise in
acquisition, development, construction, property management, and leasing. The
five executive officers of the Company and the two managing directors of the
Company's Orlando and Phoenix regional offices have an average of 17 years'
experience in the real estate industry (including an average of over eight years
with the Company). Upon completion of the Offering, the Company's management and
directors will, in the aggregate, own approximately 9.3% of the Company's
equity. See "Management -- Directors and Executive Officers."
OPERATIONS OF THE COMPANY
The Company's operations will be carried out through subsidiaries which
consist primarily of the Operating Partnership, the Subsidiary Partnerships and
the Management Company. The Company will form additional subsidiaries or
affiliates in cases where the Company determines that the use of a separate
entity is advisable.
The Operating Partnership. Upon completion of the Offering, the Company
will acquire an approximately 90.3% interest in the Operating Partnership, a
recently formed Delaware limited partnership. The Company will be the sole
general partner of the Operating Partnership and will own a 1.0% general partner
interest in the Operating Partnership. Through the ownership of this general
partner interest, the Company will control the Operating Partnership and its
assets. The Company also will be one of the Operating Partnership's limited
partners (the "Limited Partners") and will initially own an approximately 89.3%
limited partnership interest in the Operating Partnership. Other initial limited
partners will be the Primary Contributors and other holders of interests in the
Properties who have elected to receive OP Units in exchange for all or a portion
of their interests in the Properties. In their capacity as such, the Limited
Partners will have no authority to transact business for, or participate in the
management, activities or decisions of, the Operating Partnership. The Operating
Partnership will own, directly or through one or more Subsidiary Partnerships,
interests in all of the Properties. The Operating Partnership will own, directly
or indirectly, a 99.9% interest in each Subsidiary Partnership with the
remaining 0.1% interest held by the Company.
The Management Company. The Company conducts its real estate management
and leasing and tenant/landlord representation businesses, through the
Management Company. The Management Company manages all of the Properties, as
well the Excluded Properties. See "The Properties -- Excluded Properties." As of
June 30, 1997, the Management Company was managing properties containing an
aggregate of 3.6 million rentable square feet, of which 2.7 million rentable
square feet related to the Properties and 800,000 rentable square feet related
to the Excluded Properties. For the years ended December 31, 1994, 1995 and
1996, the Management Company's tenant/landlord representation business (formerly
conducted by Properties Atlantic) had revenues of $512,400, $430,000, and
$930,000, respectively. Through its ownership of 100% of the non-voting common
stock and 5% of the voting common stock of the Management Company, the Operating
Partnership is entitled to receive approximately 95% of the amounts paid as
dividends by the Management Company. Additionally, the certificate of
incorporation of the Management Company requires the quarterly distribution of
all the net operating cash flow after working capital to its stockholders as
dividends. Lawrence H. Feldman is the sole director of the Management Company
and owns 95% of the voting common stock thereof.
35
<PAGE> 45
CONCURRENT PRIVATE PLACEMENTS
Concurrent with the closing of the Offering, (i) the Morgan Stanley
Investors advised by MSAM have agreed to purchase $20 million in Common Stock
and (ii) the Carlyle Funds have agreed to purchase $10 million in Common Stock,
in each case, directly from the Company in a private placement at the Offering
Price. The Underwriters will not receive a discount or commission on the sale of
Common Stock in the Concurrent Private Placements. The closings of the
Concurrent Private Placements are subject to the closing of the Offering and the
satisfaction of other customary conditions. In addition, in connection with the
Formation Transactions, the Company will cancel the outstanding balance of the
MSAM Notes and issue to the Morgan Stanley Investors approximately 886,200
shares of restricted Common Stock in complete satisfaction of the MSAM Notes.
The Company has granted to the Morgan Stanley Investors and to the Carlyle Funds
certain registration rights with respect to sales of Common Stock received by
the Morgan Stanley Investors and the Carlyle Funds and any affiliates thereof in
connection with the Concurrent Private Placements and the Formation
Transactions, including the right to include such shares in a shelf registration
statement the Company has agreed to file within 15 days after the expiration of
the one-year period following completion of this Offering. In addition, in
connection with the Offering, the Morgan Stanley Investors and the Carlyle Funds
have agreed, subject to certain exceptions, not to sell, offer or contract to
sell, grant any option for the sale of, or otherwise dispose of any shares of
Common Stock or any securities convertible in to or exchangeable for Common
Stock for a period of one year from the date of this Prospectus, without the
prior written consent of the Representatives. Also, the Company has granted to
the Morgan Stanley Investors the right to have a representative observe the
meetings of the Board of Directors and its committees. These Board observation
rights terminate at any time the Morgan Stanley Investors hold less than 60% of
the shares of Common Stock acquired by them at the closing of the Offering. In
addition, Esko I. Korhonen, a principal of Carlyle Realty, L.P., an affiliate of
Carlyle, will serve as a director of the Company following the Offering. See
"Underwriting," "Shares Available for Future Sale" and "Management -- Directors
and Executive Officers."
The Company is a Maryland corporation incorporated on March 21, 1997. The
Company's executive offices are located at 120 West 45th Street, 24th Floor, New
York, New York 10036 and its telephone number is (212) 768-9010.
OPERATING AND GROWTH STRATEGIES
The Company's primary business objective is to maximize stockholder value
through increases in Cash Available for Distribution per share and appreciation
in the value of the Common Stock. The Company plans to achieve this objective by
continuing Tower Equities' operating strategies and implementing the internal
and external growth strategies described below.
OPERATING STRATEGIES
Through its midtown Manhattan headquarters and its two full service
regional offices (Orlando and Phoenix), the Company applies a vertically
integrated approach to acquisition, management, leasing, and renovation
activities that is designed to facilitate decision-making and enhance
responsiveness to market opportunities and tenant needs. The Company's operating
strategies include (i) emphasizing tenant satisfaction, and thereby promoting
tenant retention, through activities such as quarterly tenant satisfaction
surveys, property newsletters, and Company/tenant special events, all of which
are designed to keep the Company highly attuned to the needs of its tenants;
(ii) employing intensive property marketing within the commercial brokerage
communities, including regular promotional presentations at broker offices,
Company-sponsored sporting events, such as golf outings, and the distribution of
monthly mailers, property videos, and other Company marketing materials, all of
which foster long-standing relationships with brokers; and (iii) implementing
cost control management and systems that capitalize on economies of scale
arising from the size and location of the Company's portfolio. The Company
believes that these operating practices have, over time, increased occupancy
rates and rental revenue of its existing portfolio, which was 92.4% occupied as
of August 31, 1997.
36
<PAGE> 46
In addition, the Company uses cost control management and systems that
capitalize on economies of scale arising from the size and location of the
Company's portfolio. Upon the acquisition of a property, the Company implements
a standard expense reduction program that is designed to assimilate the new
property into its portfolio with the objective of capitalizing on cost reduction
opportunities. Each expense item is compared to a standard measure of
performance and from this data a plan is implemented to reduce operating costs.
The program typically includes the upgrade of energy delivery systems through
the retrofitting of light fixtures, the improvement of heating, ventilation and
air conditioning systems, the termination of above market service contracts and
the evaluation of personnel resources and payroll costs. This program has
resulted in the achievement of an average investment yield (calculated by
dividing the reduction in operating expenses of the Company by the cost of
implementing the expense reduction program) at each Property (other than
development Properties) of approximately 33% following the first 12 months of
the Company's implementation of its standard expense reduction program for that
Property.
GROWTH STRATEGIES
Internal Growth
The Company believes that opportunities to increase cash flow from its
existing portfolio will be realized as the Company begins to achieve the
benefits of its property repositioning strategy. The Company intends to increase
Cash Available for Distribution per share and the value of the Common Stock from
the following sources:
- Contractual Rental Rate Increases: As of August 31, 1997, 48% of the
rentable square feet at the Properties, included built-in contractual
rate increases over the remainder of the lease term. Between September 1,
1997 and August 31, 1998 the contractual base rents received by the
Company under such leases are expected to increase by an aggregate of
$1.06 million (exclusive of increases attributable to the transition from
free or partial rent to full rent or rent increases tied to indices such
as the CPI).
- Leasing of Vacant Space: The Company expects to realize additional cash
flow through the leasing or occupancy of approximately 257,000 rentable
square feet of vacant space at the Properties as of August 31, 1997
(approximately 7.6% of the Company's total rentable square feet).
External Growth
The Company intends to pursue an external growth strategy to enable
stockholders to benefit from potential value to be realized from acquisitions,
property repositioning, development, and opportunities generated by the
Company's property management operations. The Company's external growth
strategy, which initially will focus in the Manhattan office market, includes
(i) acquiring at a significant discount to replacement cost office properties
that are attractively priced due to physical, leasing, and/or operational
deficiencies, and redeveloping those assets; (ii) property repositioning through
renovation and refurbishment programs for underperforming assets; and (iii)
exploring the development of office properties on its owned and optioned
development land within the Phoenix/Tucson and Orlando markets, as well as the
development of other office properties in these markets where such development
will result in a favorable risk-adjusted return.
Acquisition Strategies. The Company intends to initially target the
acquisition of office properties located in Manhattan that have purchase prices
of less than $100 million and that are attractively priced due to physical,
leasing or operational deficiencies. The Company believes that its turnaround
strategy will allow it to capitalize on Manhattan acquisition opportunities that
are not typically sought by many institutional buyers. In addition, the Company
expects to use its renovation and repositioning expertise to acquire
underperforming Manhattan office properties that have the potential to be
converted into fully leased Class A Manhattan office towers.
The Company believes it has certain competitive advantages which enhance
its ability to identify and capitalize on acquisition opportunities, including:
(i) management's strong local market expertise and experience and knowledge of
properties, submarkets and potential tenants within its primary markets;
37
<PAGE> 47
(ii) management's long-standing relationships with tenants, real estate brokers,
and institutional and other owners of commercial real estate; (iii) its fully
integrated real estate operations which allow the Company to respond quickly to
acquisition opportunities; (iv) its access to capital as a public company
following the Offering, including the Company's proposed $200 million Line of
Credit; and (v) its ability to acquire properties in exchange for OP Units or
Common Stock if the sellers so desire (which ability may not be available to
other prospective competitors who are not structured like the Company or cannot
otherwise exchange securities for property). In addition, the Company may, under
certain circumstances, be able to structure acquisitions in Manhattan in a
manner that qualifies for reduced rates under New York State and New York City
transfer tax laws, which reduced rates (from 3.025% to 1.5125%) are applicable
only to certain REIT transactions through October 1999. The Company intends to
fund future acquisitions and property development with proceeds from credit
facilities, including the Line of Credit, long-term secured and unsecured
indebtedness, and the issuance of additional debt and equity securities.
As evidence of the Company's ability to grow its portfolio, the Company
successfully acquired in excess of 2.0 million square feet of office properties
between January 1, 1994 and December 31, 1996.
An example which best illustrates how the Company executes its turnaround
acquisition strategy is the purchase through a joint venture with an affiliate
of Carlyle of the 2800 North Central Property. The Property was acquired in May
1996 for $30.7 million, which the Company believes represented a 47% discount to
replacement cost with leases representing 32% of the net rentable square feet
scheduled to expire within seven months. Within 10 months of the acquisition,
the Company's leasing division completed lease renewals with creditworthy
tenants for a total of 95,520 rentable square feet (representing approximately
82% of the rentable square feet scheduled to expire during 1996), which
stabilized the leasing exposure at the Property (which was 91% leased as of
August 31, 1997). In addition to the successful renewal campaign, the Company
signed new leases with creditworthy tenants for over 22,000 square feet by the
end of 1996. The Company's aggressive leasing program increased the Escalated
Rent per leased square foot at the Property from approximately $15.06 at the
time of acquisition to $16.24 as of August 31, 1997. In addition, the Annualized
Net Operating Income at Acquisition of the Property was approximately $2.5
million. As a result of the Company's activities, the Property's Annualized Net
Operating Income at August 31, 1997 was approximately $3.1 million. There can be
no assurance that the Company will be able to achieve similar results with
respect to the Properties or other properties acquired in the future. As of
August 31, 1997, the 2800 North Central Property accounted for approximately
7.0% of the Company's aggregate Escalated Rent and 10.6% of the Company's total
rentable square feet.
Repositioning Strategies. As discussed above, the Company intends to
acquire office properties that are performing at levels substantially below
their potential due to physical, leasing, and/or operational deficiencies. The
Company believes that a property-specific program of renovating and improving
underperforming properties will help the Company capture long-term growth
potential and will enhance and maintain the competitiveness of these properties.
From January 1, 1995 until June 30, 1997, the Company spent approximately $4.3
million on revenue-enhancing capital improvements at newly acquired Properties.
These improvements included lobby and elevator renovations, the installation of
updated mechanical equipment and building systems, such as new chillers, as well
as targeted cosmetic renovation. The Company's objective was to improve the
Properties in order to attract creditworthy tenants at increased rental rates.
An example which best illustrates the Company's repositioning strategy is
the acquisition of the 5151 East Broadway Property that the Company made in a
joint venture with an institutional investor in November 1994. The joint venture
acquired this Property for approximately $10 million or approximately $40 per
square foot which the Company believes represented a 75% discount to replacement
cost. At the time the Company acquired the Property, it was only 40% leased and
in need of capital improvements. Shortly after the acquisition, the Company
implemented a major renovation program of the common areas coupled with an
aggressive marketing and leasing effort. The Company's repositioning program
resulted in an increase in Escalated Rent from approximately $1.7 million as of
November 30, 1994 to approximately $3.3 million as of August 31, 1997 (a 92%
increase), and an increase in Annualized Net Operating Income from $353,000 at
acquisition to approximately $2.0 million as of August 31, 1997, which generated
an Adjusted Investment Yield of 13.3%. As of August 31, 1997, the 5151 East
Broadway Property accounted for approximately 4.4% of
38
<PAGE> 48
the Company's aggregate Escalated Rent and 7.3% of its total rentable square
feet. There can be no assurance that the Company will be able to achieve similar
results with respect to the Properties or other office properties acquired in
the future.
Development and Redevelopment. The Company intends to explore the
development of its development land within the Phoenix/Tucson and Orlando
markets when market fundamentals support a favorable risk-adjusted return on
such development. See "The Properties -- Development Parcels and -- Land Parcel
Options." The Company's executive officers average approximately 17 years of
experience in the development of office properties. Since 1985, the Company's
executive officers have been integrally involved in the development of more than
1.0 million square feet of office properties (including the 40-story midtown
Manhattan Tower 45 Property). The Company currently does not intend to develop
or redevelop any properties outside of its primary markets and it is expected
that the Company's development activities will be limited by the terms of the
Line of Credit.
Management's development expertise provides the Company with the capability
to purchase properties that are in need of significant capital improvements and
to redevelop and reposition such properties to make them competitive in their
respective markets. An example which best illustrates this strategy includes the
Company's redevelopment of a 93,000 rentable square foot office building at 5750
Major Boulevard in Orlando. The Company acquired the Property in a joint venture
with an affiliate of General Electric Capital Corp. in October 1996 for a
purchase price of $3.8 million, or approximately $45 per square foot (a 50%
discount to the Company's estimate of replacement cost). The Company is
currently redeveloping the Property through a $1.8 million capital improvement
program designed to reposition this Property into a Class A property, attracting
higher quality tenants and corresponding increase in market rental rates. The
Property was only 33% leased as of December 31, 1996 and, after the Company
implemented an aggressive marketing and leasing program, the building will be
74.5% leased as of December 31, 1997 (based on leases signed as of August 31,
1997). As of August 31, 1997, the 5750 Major Boulevard Property accounted for
approximately 0.4% of the Company's aggregate Escalated Rent and 2.7% of the
Company's total rentable square feet. There can be no assurance however that the
Company will meet any of the foregoing expectations. The Company expects to
implement this type of property repositioning strategy for the future
redevelopment of the Company's Madison Avenue properties. See "The
Properties -- Submarket and Property Information -- Madison Avenue Property
Redevelopment Strategy."
Financing Strategy
The Company intends to maintain the Debt Policy limiting the Company's
total consolidated indebtedness plus its pro rata share of Joint Venture Debt to
50% of the Company's Total Market Capitalization. The Company's organizational
documents, however, do not limit the amount of indebtedness that the Company may
incur. At the closing of the Offering, the Company will have outstanding
consolidated indebtedness of approximately $131.7 million or 24.5% of its Total
Market Capitalization (including its pro rata share of Joint Venture Debt). See
"The Properties -- Mortgage Indebtedness Remaining Following the Offering." The
Company has obtained a commitment from Merrill Lynch Capital Corporation for the
$200 million Line of Credit that the Company intends to close concurrent with,
or shortly after, the consummation of the Offering. See "The Properties -- Line
of Credit." The Line of Credit is expected to be used primarily to finance the
Company's acquisition and development activities and for working capital
purposes. The Company believes that its access to capital through the Line of
Credit and other sources of private financing, as well as its access to the
public capital markets, will provide it with a competitive advantage in
acquisitions and developments over certain competitive bidders which may have to
qualify their bids with financing contingencies or which have less access to
capital.
39
<PAGE> 49
USE OF PROCEEDS
The net cash proceeds to the Company from the Offering ($287.8 million) and
the Concurrent Private Placements ($30 million), after deducting the estimated
underwriting discount and estimated expenses of the Offering, are expected to be
approximately $287.3 million (approximately $327.2 million if the Underwriters'
over-allotment option is exercised in full), based on the Offering Price. Such
net cash proceeds will be contributed to the Operating Partnership in exchange,
in part, for the Company's approximate 90.3% interest therein. The Operating
Partnership will subsequently use the proceeds received from the Company, the
$72 million net cash proceeds from the Term Loan borrowed concurrent with the
Offering, and approximately $12.3 million of proceeds received in exchange for
the MSAM Notes as follows: (i) approximately $246.5 million for repayment of
certain indebtedness (including associated prepayment penalties) relating to the
Properties and the Property Partnerships; (ii) approximately $118.7 million to
acquire certain equity, debt and fee interests in the Properties; (iii)
approximately $2.4 million to pay for commitment fees and expenses relating to
the Term Loan and Line of Credit; (iv) approximately $3.5 million to pay
transfer taxes and other expenses associated with the acquisitions of the
Properties; and (v) the remaining approximately $500,000 for working capital.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Underwriting."
If the Underwriter's over-allotment option to purchase 1,727,250 shares of
Common Stock is exercised in full, the Company expects to use the additional net
proceeds (which will be approximately $39.9 million, based on the Offering
Price) for general corporate purposes.
Pending application of cash proceeds, the Company will invest such portion
of the net proceeds in interest-bearing accounts and short-term,
interest-bearing securities, which are consistent with the Company's intention
to qualify for taxation as a REIT.
The following table sets forth certain information regarding the debt to be
repaid upon completion of the Offering. The mortgages and other indebtedness to
be repaid upon completion of the Offering have a weighted average interest rate
of approximately 8.03% and a weighted average remaining term to maturity of
approximately 3.5 years as of June 30, 1997.
MORTGAGE DEBT TO BE REPAID
<TABLE>
<CAPTION>
PREPAYMENT
AMOUNT TO PENALTIES INTEREST RATE AT MATURITY
PROPERTY BE REPAID(1) AND EXPENSES JUNE 30, 1997(2) DATE
- ---------------------------- -------------- -------------- ----------------- -------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Tower 45.................... $ 88,064 $1,250 7.44%(3) December 1998
Maitland Forum.............. 28,875 -- 8.90%(4) January 2001
Maitland West Properties.... 4,548 -- 9.15%(5) August 1998
120 Mineola Boulevard....... 11,260(6) 630(6) 8.70% May 1998
5750 Major Boulevard........ 4,651 -- 9.50% October 2001
One Orlando Center
5151 East Broadway
286, 290 and 292 Madison
Avenue Properties......... 107,231 -- 8.13% July 2002
-------- ------ ----
Total/Weighted
Average.............. $244,629 $1,880 8.03%
======== ====== ====
</TABLE>
- ---------------
(1) Represents the mortgage balances as of June 30, 1997 expected to be repaid
with the proceeds of the Offering. Exact repayment amounts may differ due to
amortization and additional fundings.
(2) Represents the weighted average rate as of June 30, 1997; for purposes of
these calculations for floating rate debt, as of June 30, 1997, LIBOR is
5.69% and GECC Commercial Paper is 5.65%.
(3) Interest rate is based on LIBOR plus 1.75%.
(4) Interest rate is based on the GECC Commercial Paper Rate plus 3.25%.
(5) Interest rate is based on the GECC Commercial Paper Rate plus 3.5%.
(6) 120 Mineola Boulevard indebtedness was incurred in May 1997, the proceeds of
which were used to refinance existing indebtedness encumbering that
Property. The prepayment penalty relates to this prior indebtedness and
previously was paid by the Company.
40
<PAGE> 50
DISTRIBUTIONS
Subsequent to the Offering, the Company intends to make regular quarterly
distributions to the holders of its Common Stock. The initial distribution,
covering a partial quarter commencing on the date of the closing of the Offering
and ending on December 31, 1997, is expected to be $ per share, which
represents a pro rata distribution based on a full quarterly distribution of
$0.4225 per share. On an annualized basis, this would be $1.69 per share, or an
annual distribution rate of approximately 6.75% based on the Offering Price. The
Company does not intend to reduce the expected distribution per share if the
Underwriters' over-allotment option is exercised. The following discussion and
the information set forth in the table and footnotes below should be read in
conjunction with the financial statements and notes thereto, the pro forma
financial information and notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" included elsewhere in this Prospectus.
The Company's initial intended annual distribution rate after the Offering
is based on an estimate of Cash Available for Distribution. The Company's
estimate of Cash Available for Distribution after the Offering is based on
estimated pro forma Funds from Operations for the twelve months ending June 30,
1998, with certain adjustments based on the items described below. To estimate
Cash Available for Distribution for the twelve months ending August 31, 1998,
pro forma Funds from Operations for the twelve months ended June 30, 1997 was
adjusted (i) for certain known events and/or contractual commitments that either
occurred subsequent to June 30, 1997 or during the twelve months ended June 30,
1997, but were not effective for the full twelve months, and (ii) for certain
non-GAAP adjustments consisting of (A) revising historical rent estimates from a
straight-line GAAP basis to amounts currently being paid or due from tenants
based on contractual rents, (B) pro forma amortization of deferred financing
fees, (C) an estimate of amounts anticipated for recurring tenant improvements,
leasing commissions and capital expenditures and (D) scheduled debt principal
payments. The Company anticipates that, except as reflected in the following
table and the notes thereto, investing and financing activities will not have a
material effect on estimated Cash Available for Distribution. The Company's
estimated pro forma Funds from Operations, as adjusted in clause (A) above and
without giving effect to any changes in working capital, is substantially
equivalent to the Company's estimated pro forma cash flows from operating
activities determined in accordance with GAAP. The estimate of Cash Available
for Distribution is being made solely for the purpose of setting the initial
distribution rate and is not intended to be a projection or forecast of the
Company's results of operations or its liquidity, nor is the methodology upon
which such adjustments were made necessarily intended to be a basis for
determining future distributions. Future distributions by the Company will be at
the discretion of the Board of Directors. There can be no assurance that any
distributions will be made or that the estimated level of distributions will be
maintained by the Company.
The Company anticipates that its distributions will exceed earnings and
profits for income tax reporting purposes due to non-cash expenses, primarily
depreciation and amortization, to be incurred by the Company. Therefore,
approximately 48% (or $0.81 per share) of the distributions anticipated to be
paid by the Company for the first twelve months subsequent to the Offering are
expected to represent a return of capital for Federal income tax purposes and in
such event will not be subject to Federal income tax under current law to the
extent such distributions do not exceed a stockholder's basis in his Common
Stock. The nontaxable distributions will reduce the stockholder's tax basis in
the Common Stock and, therefore, the gain (or loss) recognized on the sale of
such Common Stock or upon liquidation of the Company will be increased (or
decreased) accordingly. The percentage of stockholder distributions that
represents a nontaxable return of capital may vary substantially from year to
year.
Federal income tax law requires that a REIT distribute annually at least
95% of its taxable income. See "Federal Income Tax Considerations -- Taxation of
the Company." The amount of distributions on an annual basis necessary to
maintain the Company's REIT status based on pro forma taxable income of the
Company for the twelve months ended June 30, 1997, as adjusted for certain items
in the following table, would have been approximately $15.9 million. The
estimated Cash Available for Distribution is anticipated to be in excess of the
annual distribution requirements applicable to REITs. Under certain
circumstances, the Company may be required to make distributions in excess of
Cash Available for Distribution in order to meet such
41
<PAGE> 51
distribution requirements. For a discussion of the tax treatment of
distributions to holders of Common Stock, see "Federal Income Tax
Considerations."
The Company believes that its estimate of Cash Available for Distribution
constitutes a reasonable basis for setting the initial distribution rate, and
the Company expects to maintain its initial distribution rate for the twelve
months subsequent to the Offering unless actual results of operations, economic
conditions or other factors differ from the assumptions used in the estimate.
The Company's actual results of operations will be affected by a number of
factors, including the revenue received from the Properties, the operating
expenses of the Company, interest expense, the ability of tenants of the
Properties to meet their obligations and unanticipated capital expenditures.
Variations in the net proceeds from the Offering and the Concurrent Private
Placements as a result of a change in the Offering Price or the exercise of the
Underwriters' over-allotment option may affect the Cash Available for
Distribution and the payout ratio of Cash Available for Distribution and
available reserves. No assurance can be given that the Company's estimate will
prove accurate. Actual results may vary substantially from the estimate.
The following table describes the calculation of pro forma Funds from
Operations for the twelve months ended June 30, 1997 and the adjustments to pro
forma Funds from Operations for the twelve months ended June 30, 1997 in
estimating Cash Available for Distribution for the twelve months ending August
31, 1998:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS,
EXCEPT PER
SHARE DATA)
-----------
<S> <C>
Pro forma net income before minority interest of $1,801 for the year ended
December 31, 1996............................................................... $18,571
Plus: Pro forma real estate depreciation and amortization....................... 13,600
Pro forma real estate depreciation and amortization from unconsolidated
partnership............................................................... 52
-------
Pro forma Funds from Operations for the year ended December 31, 1996(1)........... 32,223
Less: Pro forma Funds from Operations for the six months ended June 30, 1996.... (15,268)
Plus: Pro forma Funds from Operations for the six months ended June 30, 1997.... 16,492
-------
Pro forma Funds from Operations for the twelve months ended June 30, 1997......... 33,447
Net increases in contractual rental income(2)................................ 6,814
Provision for lease expirations, assuming no renewals(3)..................... (4,423)
-------
Estimated pro forma Funds from Operations for the twelve months ending August 31,
1998............................................................................ 35,838
Net effect of straight-line rents(4)......................................... (2,934)
Pro forma amortization of deferred financing fees(5)......................... 176
-------
Estimated pro forma Cash Flows from Operating Activities for the twelve months
ending August 31, 1998.......................................................... 33,080
-------
Estimated annual provision for recurring tenant improvements and leasing
commissions(6).............................................................. (3,075)
Estimated recurring capital expenditures(7).................................. (459)
Scheduled debt principal payments(8)......................................... (182)
-------
Estimated Cash Available for Distribution for the twelve months ending August 31,
1998............................................................................ $29,364
=======
Company's share of estimated Cash Available for Distribution(9).............. $26,516
=======
Minority interest's share of estimated Cash Available for Distribution....... $ 2,848
=======
Estimated initial annual cash distributions to stockholders of the Company(10).... $24,783
Estimated initial annual distribution per share................................... $ 1.69
Payout ratio based on Estimated Cash Available for Distribution (11).............. 93.4%
</TABLE>
- ---------------
(1) The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ("NAREIT") in
March 1995 defines Funds from
42
<PAGE> 52
Operations as net income (loss) (computed in accordance with GAAP),
excluding gains (or losses) from debt restructuring and sales of
properties, plus real estate related depreciation and amortization and
after adjustments for unconsolidated partnerships and joint ventures. The
Company believes that Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flow
from operating activities, financing activities and investing activities,
it provides investors with an indication of the ability of the Company to
incur and service debt, to make capital expenditures and to fund other cash
needs. The Company computes Funds from Operations in accordance with
standards established by NAREIT which may not be comparable to Funds from
Operations reported by other REITs that do not define the term in
accordance with the current NAREIT definition or that interpret the current
NAREIT definition differently than the Company. Funds from Operations does
not represent cash generated from operating activities in accordance with
GAAP and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of the Company's
financial performance or to cash flow from operating activities (determined
in accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including
its ability to make cash distributions.
(2) Represents the net increases in contractual rental revenues from (i)
existing leases and renewals that were not in effect for the entire twelve
months ended August 31, 1997 ($4,282), and (ii) new leases and renewals
that went into effect between July 1, 1997 through August 31, 1997
($2,532). All calculations assume that no extension options were exercised.
(3) Represents the elimination of rental revenue from: (i) leases which expired
in the twelve months ended August 31, 1997 ($2,542) and (ii) leases which
will expire between September 1, 1997 and August 31, 1998 for that portion
of the twelve months ending August 31, 1998 that such leases are no longer
in effect ($1,881). This table assumes that leases which expire prior to
August 31, 1998 will not be renewed or re-leased during the period. As a
result of this assumption and the assumption in footnote 2 above, the
effective average occupancy rate of the Properties for the twelve months
ended August 31, 1998 would equal approximately 88.9%, versus the actual
occupancy rate for the Properties of approximately 92.4% as of August 31,
1997. The Company's weighted average tenant retention rate for expiring
leases for the period January 1, 1994 through August 31, 1997 was
approximately 58.5%.
(4) Represents the effect of adjusting straight-line rental income included in
pro forma Funds from Operations from the straight-line accrual basis under
GAAP to amounts currently being paid or due from tenants.
(5) Represents the amortization of deferred financing fees which is reflected
as an expense in the pro forma financial statements of the Company.
(6) Reflects estimated recurring tenant improvements ("TI") and leasing
commissions ("LC") for the Properties for the twelve months ending August
31, 1998 based on the weighted average TI and LC expenditures per square
foot for renewed and retenanted space at the Properties during 1994, 1995,
1996 and the six months ended June 30, 1997 multiplied by the average
annual square feet of leased space for
43
<PAGE> 53
which leases expire during the three-year period ending December 31, 2000.
The weighted average annual per square foot cost of TI and LC expenditures
is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
------------------------ ENDED
1994 1995 1996 JUNE 30, 1997 WEIGHTED AVERAGE
------ ------ ------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Renewals:
Recurring TI and LC per rentable
square foot........................ $ 0.00 $ 8.79 $10.89 $ 0.15 $ 10.13
Average annual square feet for which
leases expire during the three-year
period ending December 31,
2000(i)............................ 272,075
----------
2,756,120
Rate of Renewals (ii)................. x 70%
----------
Total cost of renewals................ $1,929,284
==========
Retenanted:
Recurring TI and LC per rentable
square foot........................ $16.83 $19.47 $12.40 $12.46 $ 14.04
Average annual square feet for which
leases expire during the three-year
period ending December 31, 2000
(i)................................ 272,075
----------
3,819,933
Rate of Retenanting (ii)................ x 30%
----------
Total cost of retenanting............. $1,145,980
----------
Total TI and LC cost.......... $3,075,264
==========
</TABLE>
- ---------------
(i) Includes the Company's pro forma 10% ownership share of 2800 North Central
Avenue Property.
(ii) Assumes that 70% of expiring leases will be renewed and 30% will be
retenanted. See footnote (2) under "The Properties -- Historical Lease
Renewals."
(7) The Company's historical average annual cost per square foot for recurring
capital expenditures during the three-year period 1994 through 1996 was
$0.10. The Company has calculated this based upon replacement or renovation
costs and actual useful lives of: parking lots, roofs, heating, ventilation
and air conditioning systems, elevators and mechanical systems, lobbies,
restrooms, and corridors. The Company believes its future annual cost per
square foot for recurring capital expenditures will be approximately $0.15
as the Company's portfolio matures, which is the amount used for purposes
of this calculation.
(8) Represents scheduled payments of mortgage loan principal on the debt
encumbering the Corporate Center Properties due during the twelve months
ending August 31, 1998.
(9) The Company's share of estimated Cash Available for Distribution and
estimated initial annual cash distributions to stockholders of the Company
is based on its approximately 90.3% aggregate partnership interest in the
Operating Partnership.
(10) Based on a total of 14,664,360 shares of Common Stock to be outstanding
after the consummation of the Offering, the Concurrent Private Placements
and the Formation Transactions multiplied by an anticipated distribution
per share of $1.69. The Company estimates that approximately 48% of the
estimated initial annual cash distributions with respect to the twelve
months ending August 31, 1998 will represent a return of capital for
Federal income tax purposes.
(11) Calculated as estimated initial annual cash distributions to stockholders
of the Company divided by the Company's share of estimated Cash Available
for Distribution for the twelve months ending August 31, 1998. The payout
ratio based on the Company's share of estimated pro forma Funds from
Operations for the twelve months ending August 31, 1998 is 76.6%.
44
<PAGE> 54
CAPITALIZATION
The following table sets forth the combined historical capitalization of
the Company and Tower Predecessor and the pro forma capitalization of the
Company as of June 30, 1997, as adjusted to give effect to the Offering, the
Concurrent Private Placements, the issuance and subsequent cancellation of the
MSAM Notes and the Formation Transactions, and the use of the net proceeds
therefrom as set forth under "Use of Proceeds." The information set forth in the
table should be read in conjunction with the financial statements and notes
thereto, the pro forma financial information and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------
COMBINED
HISTORICAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt(1)............................................................... $200,660 $ 129,000
Minority interest in Operating Partnership............................ 32,278
Shareholders' equity:
Preferred Stock, par value $.01 per share, 50,000,000 shares
authorized; none issued and outstanding..........................
Common Stock, par value $.01 per share, 150,000,000 shares
authorized; 1,000 shares issued and outstanding historical, and
14,664,360 shares issued and outstanding, as adjusted(2)......... 1 147
Additional paid-in capital.......................................... 300,420
Owners' equity (deficit)............................................ (58,743) (83)
-------- --------
Total Owners'/Shareholders' equity (deficit)..................... (58,742) 300,484
-------- --------
Total Capitalization........................................ $141,918 $ 461,762
======== ========
</TABLE>
- ---------------
(1) See Note 6 of Notes to Combined Financial Statements of Tower Predecessor
for information relating to the indebtedness.
(2) Includes (i) 11,515,000 shares of Common Stock to be issued in the Offering,
(ii) 1,200,000 shares of Common Stock to be issued in the Concurrent Private
Placements, and (iii) 1,949,360 shares of Common Stock to be issued in the
Formation Transactions in connection with the acquisition of interests in
certain of the Properties and the cancellation of the MSAM Notes. Excludes
(i) 1,583,640 shares of Common Stock that may be issued upon the exchange of
OP Units issued in connection with the Formation Transactions, (ii)
1,727,250 shares of Common Stock subject to the Underwriters' over-allotment
option, and (iii) 975,000 shares of Common Stock subject to options being
granted concurrent with the Offering under the Company's stock option plans.
See "Management -- Stock Option and Restricted Stock Plans," "Formation and
Structure of the Company," and "Partnership Agreement -- Exchange Rights."
45
<PAGE> 55
DILUTION
At June 30, 1997, the Company and the Tower Predecessor had a deficiency in
net tangible book value of approximately $79.2 million. After giving effect to
(i) the sale of the shares of Common Stock offered hereby at the Offering Price,
(ii) the sale of shares of Common Stock in connection with the Concurrent
Private Placements, (iii) the issuance of shares of Common Stock in exchange for
the cancellation of indebtedness under the MSAM Notes, (iv) the application of
the net proceeds from the Offering, the Concurrent Private Placements, the MSAM
Notes and the Term Loan, and (v) the Formation Transactions, the pro forma net
tangible book value at June 30, 1997 would have been $319.6 million, or $19.67
per share of Common Stock. This amount represents an immediate increase in net
tangible book value of $69.70 per share to the Primary Contributors and
Continuing Investors and an immediate dilution in pro forma net tangible book
value of $5.35 per share of Common Stock to new investors. The following table
illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........... $25.00
Deficiency in net tangible book value per share prior
to the Offering and Concurrent Private
Placements(1)...................................... $(50.03)
Increase in net tangible book value per share
attributable to the Offering(2).................... $ 69.70
Pro forma net tangible book value after the Offering(3)... $19.67
------
Dilution in net tangible book value per share of Common
Stock to purchasers in the Offering(4).................. $ 5.33
======
</TABLE>
- ---------------
(1) Net tangible book value per share prior to the Offering and the Concurrent
Private Placements attributable to the Primary Contributors and Continuing
Investors is determined by dividing net tangible book value of the Company
(based on the June 30, 1997 net book value of the assets less intangible
deferred charges to be contributed in connection with the Formation
Transactions, net of liabilities to be assumed) by the number of shares of
Common Stock (i) issued and outstanding and (ii) issuable upon the exchange
of all OP Units to be issued to the Primary Contributors and Continuing
Investors in connection with the Formation Transactions.
(2) Based on the Offering Price and after deducting the Underwriters' discount
and estimated Offering expenses.
(3) Based on total pro forma net tangible book value of $319.6 million divided
by the total number of shares of Common Stock issued and outstanding after
the Offering (16,248,000 shares of Common Stock, including Common Stock
issuable upon exchange of OP Units to the Primary Contributors and
Continuing Investors), excluding the Common Stock that may be issuable upon
exercise of Common Stock options. There is no impact on dilution
attributable to the issuance of Common Stock in exchange for OP Units to be
issued to the Primary Contributors and Continuing Investors in the Formation
Transactions because such OP Units would be exchanged for Common Stock on a
one-for-one basis.
(4) Dilution is determined by subtracting net tangible book value per share of
Common Stock after the Offering from the Offering Price.
The following table summarizes, on a pro forma basis giving effect to the
Offering, the Concurrent Private Placements and the Formation Transactions, the
number of shares of Common Stock to be sold by the Company in the Offering, the
Concurrent Private Placements and the number of shares of Common Stock and OP
Units to be issued in connection with the Formation Transactions (including
shares of Common Stock issued in satisfaction of the MSAM Notes), the net
tangible book value as of June 30, 1997 of the assets contributed in the
Formation Transactions and the net tangible book value of the average
contribution per share based on total contributions.
<TABLE>
<CAPTION>
COMMON STOCK/
OP UNITS ISSUED CASH/BOOK VALUE OF BOOK VALUE
-------------------- CONTRIBUTIONS OF AVERAGE
SHARES/ --------------------- CONTRIBUTION
OP UNITS PERCENT $ PERCENT PER SHARE/OP UNIT
--------- ------- --------- ------- -----------------
(IN THOUSANDS EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C>
New investors in the Offering.... 11,515 71% $ 257,285 103% $ 25(1)
Concurrent Private Placements.... 1,200 7% $ 30,000 12% $ 25
Restricted Common Stock issued to
Continuing and New Investors... 1,949 12% 40,571 16% $ 20.82
OP Units issued to Primary
Contributors and Continuing
Investors...................... 1,584 10% $ (79,232)(2) (31)% $ (50.03)
-------- ------ -------- ------
Total.................. 16,248 100.00% $ 248,624 100.00%
======== ====== ======== ======
</TABLE>
- ---------------
(1) Before deducting the underwriting discount and other estimated expenses of
the Offering.
(2) Based on the June 30, 1997 net book value of the assets less deferred
charges to be contributed in connection with the Formation Transaction, net
of liabilities assumed.
46
<PAGE> 56
SELECTED COMBINED FINANCIAL AND OPERATING DATA
The following tables set forth selected combined operating, balance sheet
and other data for the Tower Predecessor on a historical basis and the Company
on a pro forma basis. The following data have been derived from and should be
read in conjunction with the combined financial statements and notes thereto of
the Tower Predecessor, DRA Joint Ventures, the pro forma financial statements
and notes thereto of the Company, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
The combined historical balance sheet data as of December 31, 1996 and 1995
and the combined historical operating data for the years ended December 31,
1996, 1995 and 1994 of the Tower Predecessor have been derived from the
historical combined financial statements audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report with respect thereto is included elsewhere
in this Prospectus.
The selected financial data at June 30, 1997 and for the six months ended
June 30, 1997 and 1996 are derived from unaudited financial statements. The
unaudited financial information includes all adjustments (consisting of normal
recurring adjustments) that management considers necessary for a fair
presentation of the combined financial position and results of operations for
these periods. Combined operating results for the six months ended June 30, 1997
are not necessarily indicative of the results to be expected for the entire year
ended December 31, 1997.
The Tower Predecessor is comprised of the following entities controlled or
managed by Tower Equities: Tower 45 Associated Limited Partnership (the Tower 45
Property), CXX Mineola Limited Partnership (the 120 Mineola Boulevard Property),
Maitland Property Investors, Ltd. (the Maitland Forum Property), Maitland
Associates, Ltd. (the Maitland Forum ground lessor), Maitland West Associates
Limited Partnership (the three Maitland Center Parkway Properties), 5750
Associates Limited Partnership (the 5750 Major Boulevard Property), and the
predecessor management companies, including Tower Equities and Realty Corp., CXX
Mineola Management Corp., Forum Realty and Management Corp., and Tower Equities
of Arizona L.L.C. The Tower Predecessor includes 100% of the assets, liabilities
and operations of such entities and the respective Properties owned by them. In
addition, the Primary Contributors, including Lawrence H. Feldman, hold
non-controlling interests in the partnership controlling the 2800 North Central
Property and the DRA Joint Ventures: 286 Madison Avenue, 290 Madison Avenue, 292
Madison Avenue, the six Corporate Center Properties, 5151 East Broadway, and One
Orlando Center. The Tower Predecessor includes these investment in the 2800
North Central Property and the DRA Joint Ventures using the equity method of
accounting.
Pro forma information is presented as if (i) the transfer of the
Properties, certain development parcels, and other assets of Tower Equities and
Properties Atlantic to be contributed to the Company, (ii) the completion of the
Offering, the Concurrent Private Placements, the issuance of the MSAM Notes to
the Morgan Stanley Investors for the purpose of funding certain pre-Offering
transaction expenses and the acquisition of certain interests of third parties
in certain Properties, and the initial closing of the Term Loan and the
application of the net proceeds therefrom as described under "Use of Proceeds,"
and (iii) the issuance of 886,200 shares of restricted Common Stock by the
Company to the Morgan Stanley Investors in exchange for the cancellation of
indebtedness under the MSAM Notes, had occurred on January 1, 1996 with respect
to the pro forma operating and other data and on June 30, 1997 with respect to
the pro forma balance sheet data. The pro forma information is based upon
certain assumptions that are included in the notes to the pro forma financial
statements included elsewhere in this Prospectus. The pro forma financial
information is unaudited and is not necessarily indicative of what the financial
position or results of operations of the Company would have been as of the dates
and for the periods indicated, nor does it purport to represent or project the
financial position or results of operations for future periods.
In addition, the following tables set forth selected combined operating,
balance sheet and other data for the DRA Joint Ventures on a historical basis.
The following data has been derived from and should be read in conjunction with
the Combined Statements of Revenues and Certain Operating Expenses of the DRA
Joint Ventures and notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
47
<PAGE> 57
THE COMPANY (PRO FORMA) AND THE TOWER PREDECESSOR COMPANY (HISTORICAL)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------------- ----------------------------------------------------------------
HISTORICAL HISTORICAL
PRO FORMA ------------------ PRO FORMA ----------------------------------------------------
1997 1997 1996 1996 1996 1995 1994 1993 1992
--------- -------- ------- --------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental income.................. $ 36,745 $ 13,521 $13,467 $72,939 $ 26,138 $ 25,202 $ 25,994 $ 23,496 $ 22,949
Management fees................ 245 626 1,261 961 82 221 183
Construction, leasing and other
fees......................... 519 474 543 1,703 1,335 1,041 320 604 737
-------- -------- ------- ------- -------- -------- -------- -------- --------
Total revenues................. 37,264 14,240 14,636 74,642 28,734 27,204 26,396 24,321 23,869
-------- -------- ------- ------- -------- -------- -------- -------- --------
Expenses:
Property operating and
maintenance.................. 9,282 2,703 2,781 18,613 5,481 5,332 5,278 5,938 5,316
Real estate taxes.............. 5,324 2,331 2,360 11,011 4,722 4,571 3,971 4,409 4,920
General office and
administrative............... 1,747 1,746 1,767 3,363 3,494 3,497 2,512 2,591 2,658
Interest expense............... 4,641 7,028 7,172 9,283 15,511 15,150 12,751 12,756 14,390
Depreciation and
amortization................. 6,824 3,494 3,384 13,600 6,853 6,897 7,415 7,982 6,775
Ground rent and air rights
expense...................... 299 299 299 599 599 599 599 599 561
-------- -------- ------- ------- -------- -------- -------- -------- --------
Total expenses................. 28,117 17,601 17,763 56,469 36,660 36,046 32,526 34,275 34,620
-------- -------- ------- ------- -------- -------- -------- -------- --------
Income (loss) from operations.... 9,147 (3,361) (3,127) 18,173 (7,926) (8,842) (6,130) (9,954) (10,751)
Equity in joint ventures(1)...... 496 68 198 398 461 193 1
-------- -------- ------- ------- -------- -------- -------- -------- --------
Income (loss) before minority
interest....................... 9,643 (3,293) (2,929) 18,571 (7,465) (8,649) (6,129) (9,954) (10,751)
Minority interest (2)............ 935 1,801
-------- -------- ------- ------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary item............. 8,708 (3,293) (2,929) 16,770 (7,465) (8,649) (6,129) (9,954) (10,751)
Extraordinary item............... 6,475
-------- -------- ------- ------- -------- -------- -------- -------- --------
Net income (loss)................ $ 8,708 $ 3,182 $(2,929) $16,770 $ (7,465) $ (8,649) $ (6,129) $ (9,954) $(10,751)
======== ======== ======= ======= ======== ======== ======== ======== ========
Net income per share............. $ 0.59 $ 1.14
======== =======
Weighted average number of shares
of common stock outstanding.... 14,664 14,664
Weighted average number of shares
of common stock and OP Units
outstanding.................... 16,248 16,248
BALANCE SHEET DATA (at period
end):
Real estate investments net of
accumulated depreciation....... $453,381 $127,577 -- -- $129,064 $128,138 $132,904 $137,662 $140,916
Total assets..................... 474,713 170,632 -- -- 172,987 173,889 184,174 188,742 193,363
Long-term debt................... 129,000 193,381 -- -- 202,892 199,962 202,454 204,853 177,145
Total liabilities................ 141,951 229,292 -- -- 234,857 230,977 235,343 236,211 231,110
Owners'/stockholders' equity
(deficit)...................... 300,484 (58,660) -- -- (61,870) (57,088) (51,169) (47,469) (37,747)
OTHER DATA:
EBITDA (Company's pro forma 90.3%
share)(3)...................... $ 19,062 $ 14,069 $ 7,909 $37,450 $ 15,496 $ 13,695 $ 13,834 $ 10,268 $ 9,895
Funds from operations (Company's
pro forma 90.3% share)(4)...... 14,892 616 806 29,097 129 (1,449) 1,292 (1,972) (3,976)
Cash flow from operating
activities..................... -- 2,573 (693) -- 951 1,762 4,118 -- --
Cash flow from investing
activities..................... -- (834) (1,329) -- (6,787) (3,440) (3,137) -- --
Cash flow from financing
activities..................... -- (2,398) 1,643 -- 5,613 238 30 -- --
Number of properties (at period
end)........................... 21 7 7 21 7 6 6 3 3
</TABLE>
48
<PAGE> 58
DRA JOINT VENTURES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ----------------------------------
1997 1996 1996 1995 1994
--------- -------- --------- --------- --------
(IN THOUSANDS, EXCEPT FOR PER SHARE AND PROPERTY DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental income.............................................. $ 14,503 $ 14,331 $ 29,010 $ 12,629 $ 207
Other income............................................... 83 98 288 224
--------- -------- --------- --------- --------
Total revenues............................................. 14,586 14,429 29,298 12,853 207
--------- -------- --------- --------- --------
Expenses
Property operating and maintenance......................... 4,371 4,585 8,592 4,373 101
Real estate taxes.......................................... 1,796 1,810 3,572 1,746 38
General office and administrative.......................... 40 169 282 164 31
Interest expense........................................... 5,692 4,816 10,176 3,814
Depreciation and amortization.............................. 2,307 1,949 4,118 1,684 31
--------- -------- --------- --------- --------
Total expenses............................................. 14,206 13,329 26,740 11,781 201
--------- -------- --------- --------- --------
Net income................................................... $ 380 $ 1,100 $ 2,558 $ 1,072 $ 6
======== ======= ======== ======== =======
BALANCE SHEET DATA (at period end):
Real estate investments net of accumulated depreciation...... $ 140,285 -- $ 140,759 $ 139,169 $ 10,503
Total assets................................................. 159,686 -- 160,008 149,928 11,001
Long-term debt............................................... 129,225 -- 126,517 119,288 --
Total liabilities............................................ 133,322 -- 130,473 124,716 768
Owners' equity (deficit)..................................... 26,364 -- 29,535 25,212 10,233
OTHER DATA:
EBITDA (5)................................................... $ 8,338 $ 7,820 $ 16,759 $ 6,532 $ 37
Funds from Operations (5).................................... 2,687 3,049 6,676 2,756 37
</TABLE>
- ---------------
(1) The pro forma information includes the Management Company's operations under
the equity method of accounting; therefore, the net operations are reported
in one line item titled "Equity in Joint Ventures." The historical
information includes the Tower Predecessor management companies' operations
fully consolidated; therefore, the revenues and expenses are reported on a
gross basis for income and expense line items. See "The
Company -- Operations of the Company -- The Management Company."
Equity in Joint Ventures includes the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
---------------------- ----------------------
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1997 1997 1996 1996
--------- ---------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
2800 North Central Property............................ $ (39) $ (9) $ (12) $ (3)
DRA Joint Ventures..................................... -- 77 464
Management Company..................................... 535 -- 410
---- ---- ---- ----
$ 496 $ 68 $ 398 $461
==== ==== ==== ====
</TABLE>
On a pro forma basis, the Company will own 10% (subject to an increase to up
to 27.5% if certain performance criteria are achieved) of 2800 North Central
Property and 95% of the economic interest in the Management Company. On a
historical basis, the Tower Predecessor owned, at December 31, 1996, 3.8% of
2800 North Central Property and approximately 18% of the DRA Joint Ventures
(which represents Lawrence H. Feldman's effective ownership interest).
(2) Represents the approximate 9.7% interest in the Operating Partnership that
will be owned by the Primary Contributors and certain other Continuing
Investors in the Company.
(3) EBITDA is defined as operating income before mortgage and other interest,
income taxes, depreciation and amortization. The Company believes EBITDA is
useful to investors as an indicator of the Company's ability to service debt
or pay cash distributions. EBITDA, as calculated by the Company, may not be
comparable to EBITDA reported by other REITs that do not define EBITDA
exactly as the Company defines that term. EBITDA does not represent cash
generated from operating activities determined in accordance with GAAP and
should not be considered as an alternative to operating income or net income
determined in accordance with GAAP as an indicator of performance or as an
alternative to cash flows from operating activities as an indicator of
liquidity.
49
<PAGE> 59
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- ----------------------------------------------------------
PRO HISTORICAL PRO HISTORICAL
FORMA ----------------- FORMA ------------------------------------------------
1997 1997 1996 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)....................... $ 8,708 $ 3,182 $(2,929) $16,770 $(7,465) $(8,649) $(6,129) $(9,954) $(10,751)
Add:
Interest expense........................ 4,641 7,028 7,172 9,283 15,511 15,150 12,751 12,756 14,390
Real estate depreciation and
amortization.......................... 6,824 3,494 3,384 13,600 6,853 6,897 7,415 7,982 6,775
Real estate depreciation and
amortization of unconsolidated joint
ventures.............................. 25 415 351 52 741 303 6 -- --
Minority interest....................... 935 -- -- 1,801 -- -- -- -- --
Less:
Interest income......................... (23) (50) (69) (144) (144) (6) (209) (516) (519)
------- ------- ------- ------- ------- ------- ------- ------- --------
EBITDA.................................. $21,110 $14,069 $ 7,909 $41,362 $15,496 $13,695 $13,834 $10,268 $ 9,895
======= ======= ======= ======= ======= ======= ======= ======= ========
Company's 90.3% share................... $19,062 $37,450
======= =======
</TABLE>
(4) The White Paper on Funds from Operations approved by the Board of Governors
of NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation
and amortization and after adjustments for unconsolidated partnerships and
joint ventures. The Company believes that Funds from Operations is helpful
to investors as a measure of the performance of an equity REIT because,
along with cash flow from operating activities, financing activities and
investing activities, it provides investors with an indication of the
ability of the Company to incur and service debt, to make capital
expenditures and to fund other cash needs. The Company computes Funds from
Operations in accordance with standards established by NAREIT which may not
be comparable to Funds from Operations reported by other REITs that do not
define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than the Company. Funds
from Operations does not represent cash generated from operating activities
determined in accordance with GAAP and should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indication of the Company's financial performance or to cash flow from
operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make cash distributions.
The following is a reconciliation of net income to Funds from Operations.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------- ----------------------------------------------------------
PRO HISTORICAL PRO HISTORICAL
FORMA ---------------- FORMA ------------------------------------------------
1997 1997 1996 1996 1996 1995 1994 1993 1992
------- ------ ------- ------- ------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)........................ $ 8,708 $3,182 $(2,929) $16,770 $(7,465) $(8,649) $(6,129) $(9,954) $(10,751)
Add:
Real estate depreciation and
amortization........................... 6,824 3,494 3,384 13,600 6,853 6,897 7,415 7,982 6,775
Real estate depreciation and amortization
of unconsolidated joint ventures....... 25 415 351 52 741 303 6 -- --
Minority interest........................ 935 -- -- 1,801 -- -- -- -- --
Less:
Gain on extinguishment of debt........... -- (6,475) -- -- -- -- -- -- --
------ ------- ------- ------- ------- ------- ------- ------- ------
Funds from Operations.................... $16,492 $ 616 $ 806 $32,223 $ 129 $(1,449) $ 1,292 $(1,972) $ (3,976)
====== ======= ======= ======= ======= ======= ======= ======= ======
Funds from Operations
(Company's 90.3% share).................. $14,892 $29,097
====== =======
</TABLE>
50
<PAGE> 60
(5) EBITDA and Funds from Operations for the DRA Joint Ventures are as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------
1997 1996 1996 1995 1994
------ ------ ------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EBITDA:
Net income.................................................... $ 380 $1,100 $ 2,558 $1,072 $ 6
Interest expense.............................................. 5,692 4,816 10,176 3,814 --
Real estate depreciation and amortization..................... 2,307 1,949 4,118 1,684 31
Interest income............................................... (41) (45) (93) (38) --
------ ------ ------- ------ ---
EBITDA.......................................................... $8,338 $7,820 $16,759 $6,532 $ 37
====== ====== ======= ====== ===
Funds from Operations:
Net income.................................................... 380 1,100 $ 2,558 $1,072 $ 6
Real estate depreciation and amortization..................... 2,307 1,949 4,118 1,684 31
------ ------ ------- ------ ---
Funds from Operations....................................... $2,687 $3,049 $ 6,676 $2,756 $ 37
====== ====== ======= ====== ===
</TABLE>
51
<PAGE> 61
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Combined Financial and Operating Data" and the historical and pro forma
financial statements appearing elsewhere in this Prospectus. The following
discussion is based primarily on the combined financial statements of Tower
Predecessor for periods prior to the completion of the Offering and related
Formation Transactions. The pro forma condensed consolidated balance sheet is
presented as if the Offering and the Formation Transactions had occurred on June
30, 1997. The pro forma results of operations are presented as if the Offering
and the Formation Transactions had occurred on January 1, 1996. The combined
financial statements include the assets, liabilities and operations of the
properties and predecessor management companies to be acquired by the Company in
the Formation Transactions from entities controlled and managed by Tower
Equities as follows: Tower 45, 120 Mineola Boulevard, Maitland Forum, the three
Maitland Center Parkway Properties, 5750 Major Boulevard and the predecessor
management companies, including Tower Equities and Realty Corp., CXX Mineola
Management Corp., Forum Realty and Management Corp., and Tower Equities of
Arizona L.L.C.
The Company owns and operates office properties in its primary markets of
Manhattan, Orlando, Phoenix and Tucson. The Company will generally receive real
estate operating revenues from wholly owned properties from interests in certain
real estate joint ventures. The Company will also receive service revenues from
its property management, leasing, and construction management business for owned
properties, as well as for real estate owned by certain affiliates and third
parties.
RESULTS OF OPERATIONS
Comparison of the Six Months Ended June 30, 1997 to the Six Months Ended June
30, 1996
Total revenues for the six months ended June 30, 1997 decreased by $0.4
million, or 2.7%, to $14.2 million as compared to $14.6 million for six months
ended June 30, 1996. Rental income remained constant for the six months ended
June 30, 1997 and 1996 at $13.5 million.
Management fee income decreased $0.4 million to $0.2 million for the six
months ended June 30, 1997 as compared to $0.6 million for the six months ended
June 30, 1996 due to the fact that management fee income for the period from
April 1, 1997 through June 30, 1997 is recorded by the Management Company.
Construction, leasing, and other fees relating to one office and seven retail
properties as well as the DRA Joint Ventures and 2800 North Central Property
remained constant for the six months ended June 30, 1997 and 1996 at $0.5
million. See "--Management and Construction, Leasing and Other Fees."
Total expenses for the six months ended June 30, 1997 decreased by $0.1
million, or 0.9%, to $17.6 million as compared to $17.7 million for the six
months ended June 30, 1996. Expenses excluding interest and depreciation and
amortization remained relatively stable, decreasing slightly from $7.2 million
for the six months ended June 30, 1996 to $7.1 million for the six months ended
June 30, 1997. Expenses, excluding interest and depreciation and amortization,
as a percentage of total revenues, increased from 49.2% for the six months ended
June 30, 1996 to 49.7% for the six months ended June 30, 1997 due to increases
in real estate taxes. The increases in real estate taxes are primarily due to
the lower total revenue base, which is due to reduction in management fees
discussed above. Management believes that expenses as a percentage of revenues
will decrease for the remainder of 1997. Each component of expenses excluding
interest and depreciation and amortization changed as a percentage of total
revenues as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
---------------
1997 1996
----- -----
<S> <C> <C>
Property operating and maintenance........................ 19.0% 19.0%
Real estate taxes......................................... 16.4% 16.1%
General office and administration......................... 12.2% 12.1%
Ground rent and air rights................................ 2.1% 2.0%
----- -----
49.7% 49.2%
===== =====
</TABLE>
52
<PAGE> 62
Interest expense decreased by $0.2 million, or 2%, to $7.0 million for the
six months ended June 30, 1997 as compared to $7.2 million for the six months
ended June 30, 1996 due to a decrease in interest rates associated with debt
related to one property.
Equity in joint ventures decreased slightly by $0.1 million to $0.1 million
for the six months ended June 30, 1997 as compared to $0.2 million for the six
months ended June 30, 1996 due primarily to higher interest expense due to
higher interest rates on the debt of the DRA Joint Venture properties, offset by
increased rental income of the DRA Joint Venture property.
Net loss decreased by $6.7 million, to net income of $3.8 million for the
six months ended June 30, 1997 as compared to net loss of $2.9 million primarily
due to extraordinary gain on extinguishment of debt for one of the properties.
Comparison of Year Ended December 31, 1996 Compared to Year Ended December 31,
1995
Total revenues increased by $1.5 million, or 5.6%, to $28.7 million in 1996
as compared to $27.2 million in 1995. Rental income increased by $0.9 million,
or 3.7%, to $26.1 million in 1996 as compared to $25.2 million in 1995 due to
the following: base rents increased $0.5 million, or 2.5%, to $19.9 million in
1996 as compared to $19.4 million in 1995, primarily due to (i) the resolution
of a tenant dispute that reduced 1995 base rent by approximately $0.9 million as
described below, (ii) the purchase of 5750 Major Boulevard in October 1996 which
increased base rents by $0.1 million, and (iii) a decrease of approximately $0.4
million related to tenant turnover at Maitland Forum. Escalation income
(primarily for common area maintenance and real estate taxes) remained constant
from 1995 to 1996 at $5.4 million for each year. Miscellaneous rental revenues
increased $0.5 million to $0.8 million in 1996 as compared to $0.3 million in
1995 due to early lease termination fees received in 1995 from tenants.
Management fee income increased $0.3 million, or 31.2%, to $1.3 million in
1996 as compared to $1.0 million in 1995 due to a full year of management fees
in 1996 from the DRA Joint Ventures versus a partial year of management fees in
1995. Construction, leasing, and other fees relating to one office and seven
retail properties as well as the DRA Joint Ventures and 2800 North Central
Property increased $0.3 million, or 28.2%, to $1.3 million in 1996 as compared
to $1.0 million in 1995. The increase is attributable to fees received from the
DRA Joint Ventures. See "--Management and Construction, Leasing and Other Fees."
Total expenses in 1996 increased by $0.6 million, or 1.7%, to $36.7 million
as compared to $36.0 million in 1995. Expenses excluding interest and
depreciation and amortization increased from $14.0 million in 1995 to $14.3
million in 1996 due to an increase in occupancy and the purchase of 5750 Major
Boulevard. Expenses, excluding interest and depreciation and amortization as a
percentage of total revenue decreased from 51.5% in 1995 to 49.8% in 1996
reflecting economies realized through spreading fixed costs over larger total
revenues. Each component of expenses excluding interest and depreciation and
amortization decreased as a percentage of total revenue as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Property operating and maintenance............................. 19.1% 19.6%
Real estate taxes.............................................. 16.4 16.8
General office and administration.............................. 12.2 12.9
Ground rent and air rights..................................... 2.1 2.2
---- ----
49.8% 51.5%
==== ====
</TABLE>
Interest expense increased by $0.4 million, or 2.4%, to $15.5 million in
1996 as compared to $15.1 million in 1995 due to additional borrowings in 1996
of $1.5 million related to the three Maitland Center Parkway Properties, $2.4
million related to Maitland Forum and $2.5 million related to the purchase of
5750 Major Boulevard.
Equity in joint ventures increased $0.3 million primarily due to a full
year of ownership in 1996 of the DRA Joint Ventures versus a partial year of
ownership in 1995.
53
<PAGE> 63
Net loss decreased by $1.2 million, or 13.7%, to $7.4 million in 1996 as
compared to $8.6 million in 1995 primarily reflecting economies realized through
the spreading of fixed costs over the larger total revenues as discussed
previously.
Comparison of Year Ended December 31, 1995 Compared to Year Ended December 31,
1994
Total revenues decreased by $0.8 million, or 3.1%, to $27.2 million in 1995
as compared to $26.4 million in 1994. Rental income decreased by $0.8 million,
or 3.0%, to $25.2 million in 1995 as compared to $26.0 million in 1994 due to
the following: base rents decreased by $0.5 million, or 2.3%, to $19.4 million
in 1995 as compared to $19.9 million for 1994, due primarily to the resolution
of a dispute in 1995 with a tenant in Tower 45 which resulted in a decrease of
base rent of approximately $0.8 million which is partially offset by an increase
in base rent on all other Properties. In resolution of the dispute, Tower
Predecessor agreed to restructure a tenant's lease by reducing the square
footage under the lease by approximately 12,000 and increasing the rent per
square foot. A portion of the previously recognized straight line rent was
reduced in 1995. The higher rent per square foot to be received through 2004
aggregates approximately $1.1 million and will be recognized as revenue in the
periods received. Escalation income (primarily for common area maintenance and
real estate tax bill backs) increased $0.3 million, or 5.1%, to $5.5 million in
1995 from $5.2 million in 1994 due to an increase in reimbursable operating
expenses on all Properties. Miscellaneous rental revenues decreased $0.6 million
to $0.3 million in 1995 as compared to $0.9 million in 1994 due to a reduced
number of early lease termination fees received from tenants.
Management fee income increased $0.9 million in 1995. During 1995, Tower
Predecessor entered into management contracts with one office and seven retail
properties as well as the DRA Joint Ventures, thereby increasing management fee
revenue by $0.9 million. Prior to 1995, Tower Predecessor provided property
management services to fewer properties. Construction, leasing, and other fees
increased $0.7 million to $1.0 million in 1995 as compared to $0.3 million in
1994, primarily due to construction and leasing fees earned from the DRA Joint
Ventures and certain Excluded Properties. See "--Management and Construction,
Leasing and Other Fees."
Total expenses in 1995 increased by $3.5 million, or 10.8%, to $36.0
million in 1995 as compared to $32.5 million in 1994. Expenses excluding
interest and depreciation and amortization increased from $12.4 million in 1994
to $14.0 million in 1995 due primarily to the following: (i) real estate taxes
increased $0.6 million in 1995 over 1994 from successful appeals of prior year
real estate tax assessments and (ii) general office and administrative expenses
increased $1.0 million in 1995 over 1994 due primarily to expenses associated
with the new property management contracts previously described and general
inflation. Expenses excluding interest and depreciation and amortization as a
percentage of total revenue increased from 46.8% in 1994 to 51.5% in 1995 due to
(i) the base rent decrease described above and (ii) expenses as a percentage of
management fee revenues relating to management contracts being higher than
expenses as a percentage of total revenues related to leasing operations. Each
component of expenses excluding interest and depreciation and amortization
changed as a percentage of total revenues as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Property operating and maintenance............................. 19.6% 20.0%
Real estate taxes.............................................. 16.8 15.0
General office and administration.............................. 12.9 9.4
Ground rent and air rights..................................... 2.2 2.3
---- ----
51.5% 46.8%
==== ====
</TABLE>
Interest expense increased $2.4 million or 18.8% due primarily to interest
rate increases on borrowings related to Tower 45 of $2.1 million (9.1% and 7.7%
weighted average interest rates in 1995 and 1994, respectively) and 120 Mineola
Boulevard of $0.3 million (7.13% and 6.15% weighted average interest rates in
1995 and 1994, respectively). This increase was offset slightly by a net
reduction in weighted average borrowings of approximately $2.5 million (debt on
real estate at December 31, 1995 and 1994 of $200.0 million and $202.5 million,
respectively.)
54
<PAGE> 64
During 1995, the Tower Predecessor increased its investment in the DRA
Joint Ventures from an interest in one property to interests in eleven
properties. As a result, the equity in joint ventures increased by $0.2 million.
Net loss increased $2.5 million, or 41.1%, to $8.6 million in 1995 as
compared to $6.1 million in 1994 primarily due to the increased interest expense
and other operating expenses discussed previously.
Management and Construction, Leasing and Other Fees
Tower Predecessor's management and construction, leasing and other fees and
income are summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- --------------------------
1997 1996 1996 1995 1994
---------- ---------- ------ ------ ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Management fees from Excluded Properties.... $ 342 $ 214 $ 514 $ 590 $ 76
Construction, leasing and other fees from
Excluded Properties....................... 234 194 419 835 320
Management fees from joint ventures......... 93 392 801 371 6
Construction, leasing and other fees from
joint ventures and other income........... 50 369 862 206 --
------ ------ ------ ------ ----
Total management fees and construction,
leasing and other fees.................... $ 719 $1,169 $2,596 $2,002 $402
====== ====== ====== ====== ====
</TABLE>
Beginning April 1, 1997, Tower Predecessor's third-party management and
other activities are conducted through the Management Company. The Tower
Predecessor's management and other activities from joint ventures relate to the
Properties which will be or have been acquired by the Company in the Offering
and Formation Transactions.
A portion of the related expenses of development and management services
are fixed in nature and have not fluctuated significantly, while the majority of
the related expenses are variable in nature and fluctuate with the level of
development and management activities.
PRO FORMA OPERATING RESULTS
Six Months Ended June 30, 1997
For the six months ended June 30, 1997, pro forma net income would have
been $8.7 million compared to a historical net loss before extraordinary item
(gain on extinguishment of debt) of $3.3 million for the same period. The pro
forma operating results for the six months ended June 30, 1997 include rental
revenues and property expenses (operating, maintenance, real estate taxes and
depreciation) on a gross basis from the DRA Joint Ventures whereas the
historical financial statements of Tower Predecessor include the equity in
earnings of the DRA Joint Ventures. Likewise, pro forma operating results
include the acquisition of the Century Plaza and 100 Wall Street Properties, the
results of which are not included in the historical statement of operations.
The decrease in the pro forma management, construction, leasing and other
fees by $0.2 million primarily results from the Company's transfer of certain
management contracts and predecessor management companies and personnel to the
Management Company for the pro forma statement of operations. General and
administrative expenses remained consistent as compared to the combined Company
and Tower Predecessor. See "Formation and Structure of the Company -- Effects of
the Formation Transactions."
Interest expense decreased $2.4 million, or 34%, in the pro forma statement
of operations due to mortgage loans repaid concurrent with the Offering and
lower interest rates on the $107.0 million Term Loan that will be entered into
concurrent with the Offering. The Term Loan is expected to bear interest at a
fixed rate equal to .9% in excess of seven-year United States Treasury Notes at
the closing of the Offering. The seven-year Treasury note rate of 6.05% as of
September 18, 1997 was used for the calculation of the interest rate in the pro
forma results.
55
<PAGE> 65
Year Ended December 31, 1996.
For the year ended December 31, 1996, pro forma net income would have been
$16.8 million compared to a historical net loss of $7.5 million for the same
period. The pro forma operating results for the year ended December 31, 1996
include rental revenues and property expenses (operating, maintenance, real
estate taxes and depreciation) on a gross basis from the DRA Joint Ventures
whereas the historical financial statements of Tower Predecessor include the
equity in earnings of the DRA Joint Ventures. Likewise, pro forma operating
results include the acquisition of the Century Plaza and 100 Wall Street
Properties, the results of which are not included in the historical statement of
operations.
The decrease in the pro forma management, construction, leasing and other
fees by $.9 million primarily results from the Company's transfer of certain
management contracts and predecessor management companies and personnel to the
Management Company. General and administrative expenses decreased $0.1 million,
or 0.4%, due to the aforementioned contribution of certain management contracts
and personnel to the Management Company offset by additional expenses associated
with being a public company. See "Formation and Structure of the
Company -- Effects of the Formation Transactions."
Interest expense decreased $6.2 million, or 40.2%, in the pro forma
statement of operations due to mortgage loans repaid concurrent with the
Offering and lower interest rates on the $107.0 million Term Loan that will be
entered into concurrent with the Offering.
RECENTLY ISSUED ACCOUNTING STANDARDS
During 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"), No.
129 "Disclosure of Information About Capital Structure" ("SFAS 129"), No. 130
"Reporting Comprehensive Income" ("SFAS 130"), and No. 131 "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131"), all of which
are effective for fiscal years beginning after December 15, 1997.
SFAS 128 specifies the computation, presentation and disclosure
requirements for earnings per share. SFAS 129 establishes standards for
disclosing information about an entity's capital structure such as information
about securities, liquidation preference of preferred stock and redeemable
stock. SFAS 130 specifies the presentation and disclosure requirements for
reporting comprehensive income which includes those items which have been
formerly reported as a component of shareholders' equity. SFAS 131 establishes
the disclosure requirements for reporting segment information.
Management believes that, when adopted, SFAS 128, 129, 130 and 131 will not
have a significant impact on the Company's financial statements.
LIQUIDITY AND CAPITAL RESOURCES
Historically, property operations, long-term mortgage financing and partner
equity contributions were the principal sources of capital used by the Tower
Predecessor to acquire, renovate and develop office properties. In connection
with the Formation Transactions, the Company issued the MSAM Notes to fund
certain costs relating to the Offering and the formation of the Company. Upon
consummation of the Offering and Formation Transactions, (i) MSAM is expected to
convert the notes into approximately 886,200 shares of restricted Common Stock,
and to purchase an additional $20 million of shares of restricted Common Stock
in the Concurrent Private Placements and (ii) the Carlyle Funds are expected to
purchase $10 million of shares of restricted Common Stock in the Concurrent
Private Placements. Proceeds from these transactions and the Offering will be
used to repay and modify the terms of certain indebtedness, to acquire debt,
equity and fee interests in the Properties, reduce its total indebtedness to
approximately $131.7 million (including its pro rata share of Joint Venture
Debt), and establish working capital cash reserves of approximately $500,000. In
the future, the Company intends to rely upon Funds from Operations and debt and
equity financing as its sources of funding for developing, acquiring, and
renovating properties. The Company expects that, after the Offering and related
Formation Transactions, Funds from Operations will be significantly greater than
it has been
56
<PAGE> 66
historically because of the repayment and modification of certain debt in
connection with the Offering and the acquisitions of additional properties.
Mortgage Financing. Upon completion of the Offering, the Concurrent
Private Placements, and the Formation Transactions and the application of the
net proceeds therefrom as described in "Use of Proceeds," the Company expects to
have reduced total consolidated indebtedness to approximately $131.7 million
(including its pro rata share of Joint Venture Debt), which will initially be
collateralized by 10 of the Properties, with a weighted average interest rate of
7.11% (see footnote (4) to the mortgage indebtedness table below). There will be
a total of approximately $0.2 million of scheduled loan principal payments due
during the year ending December 31, 1998. The mortgage indebtedness will
represent approximately 24.5% of the Company's Total Market Capitalization.
Mortgage Indebtedness. Upon the consummation of the Offering, the Company
expects to have outstanding approximately $129.0 million of total consolidated
mortgage indebtedness, and approximately $2.7 million of unconsolidated
investment indebtedness, as follows:
<TABLE>
<CAPTION>
ESTIMATED
PRINCIPAL INTEREST ANNUAL DEBT MATURITY BALANCE AT
PROPERTY(IES) AMOUNT RATE SERVICE DATE MATURITY
- -------------------------- -------------- -------- -------------- ----------------- --------------
(IN THOUSANDS) (IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Corporate Center
Properties.............. $ 21,000 7.55% $1,586 January 1, 2006 $ 17,926
Corporate Center
Properties.............. 1,000 8.37% 96 January 1, 2006 843
2800 North Central
Property(1)............. 2,658 9.41% 240 May 31, 1999(2) 2,658
Term Loan................. 107,000(3) 6.95%(4) 7,437(4) (4) 100,700
-------- ----- ---- -------
Total/Weighted
Average............ $131,658 7.11% 9,359 $122,127
======== ===== ==== =======
</TABLE>
- ---------------
(1) Represents the Company's share of Joint Venture Debt relating to this
Property, in which the Company holds a 10% unconsolidated equity interest.
The lender holds a right to certain participation payments upon the
occurrence of certain events, including certain sales, maturity, refinancing
or other disposition of the underlying property.
(2) Subject to certain conditions, the borrower under this loan may extend the
maturity date to May 31, 2000.
(3) At the consummation of the Offering, the principal balance of the Term Loan
will be $72.0 million and will be secured by the One Orlando Center, 286
Madison Avenue, 290 Madison Avenue, and 292 Madison Avenue Properties.
Separately, $35.0 million of mortgage indebtedness, that will not be repaid
concurrent with the Offering, will be secured by the Tower 45 Property. It
has been assumed for pro forma purposes that the indebtedness encumbering
the Tower 45 Property will be repaid with an additional $35.0 million
borrowing under the Term Loan, at which time the Tower 45 Property will
secure the Term Loan and the three Madison Avenue Properties will become
unencumbered. See "Risk Factors -- The Company's Use of Debt to Finance
Acquisitions and Developments Could Adversely Affect the Company -- Debt
Financing and Potential Adverse Effect on Cash Flows and Distributions."
(4) The Term Loan is expected to bear interest at a fixed rate equal to .9% in
excess of seven-year United States Treasury Notes at the closing of the
Offering. The seven-year Treasury note rate of 6.05% as of September 18,
1997 was used for the calculation of the interest rate in the table above.
The Term Loan will mature seven years after the consummation of the
Offering.
In addition, the Company has assumed a liability for deferred real estate
taxes of $12.9 million which accrued from 1988 through 1995 relating to the
Tower 45 Property. This deferred real estate tax liability is to be repaid
commencing on July 1, 1998 in payments of approximately $1.3 million per year.
Approximately $2.5 million is expected to be recovered from tenants and
accordingly is recorded as a receivable which is also assumed by the Company.
The Line of Credit. The Company has obtained a commitment for the $200
million Line of Credit, which will be used primarily to finance the acquisition
of, and investment in, office properties, to refinance
57
<PAGE> 67
existing indebtedness, and for general working capital needs. The Line of Credit
will be unsecured and will have a three year term which will commence upon or
shortly after the closing of the Offering. See "The Properties -- Line of
Credit."
Analysis of Liquidity and Capital Resources. Upon completion of the
Offering, the Concurrent Private Placements, and the Formation Transactions and
the application of the net proceeds therefrom, the Company will have reduced its
total indebtedness to approximately $131.7 million (including its pro rata share
of Joint Venture Debt).
The Company believes that the Offering, the Concurrent Private Placements,
and the Formation Transactions will improve its financial performance through
changes in its capital structure, principally the substantial reduction in its
overall debt and its debt to equity ratio. The Company anticipates that
distributions will be paid from Cash Available for Distribution, which is
expected to exceed cash historically available for distribution as a result of
the reduction in debt service resulting from the repayment of indebtedness.
Following the closing of the Offering, the Company will have approximately
$500,000 in working capital. The Company believes that its principal short-term
liquidity needs are to fund normal recurring expenses, debt service
requirements, deferred real estate taxes, and the distribution requirements to
maintain the Company's REIT qualification under the Code. The Properties require
periodic investment of capital for tenant-related capital expenditures and for
general capital improvements. For the years ending December 31, 1994 through
December 31, 1996 and the six months ended June 30, 1997, the Company's
recurring tenant improvements and leasing commissions averaged $12.42 per square
foot of leased space per year. The Company expects that the average annual costs
of recurring tenant improvements and leasing commissions will be approximately
$3.1 million based upon average annual square footage of leases which expire
during the years ending December 31, 1997 through December 31, 2000 of 199,620
square feet. The Company expects the cost of general capital improvements to the
Properties to average approximately $0.5 million annually based upon an estimate
of $0.15 per square foot.
CASH FLOWS
Overview. Tower Predecessor incurred net losses in each of the last five
years. However, after adding back interest, depreciation and amortization, the
Tower Predecessor generated positive EBITDA (as defined herein).
Comparison for the Six Months Ended June 30, 1997 to the Six Months Ended June
30, 1996
Tower Predecessor's cash and cash equivalents were $4.3 million and $4.8
million at June 30, 1997 and 1996, respectively. Cash and cash equivalents
decreased $0.7 million during the six months ended June 30, 1997 due to $2.5
million of cash flow provided by operating activities, $0.8 million of cash flow
used in investing activities and $2.4 million of cash flow used in financing
activities. The increase in cash from operating activities is primarily due to
increases in amounts due to affiliates. The decrease in cash from financing
activities results primarily from repayment of real estate debt.
Comparison for the Year Ended December 31, 1996 to Year Ended December 31,
1995
Tower Predecessor's cash and cash equivalents were $5.0 million and $5.2
million at December 31, 1996 and 1995, respectively. Cash and cash equivalents
decreased $0.2 million during 1996 due to $1.0 million of cash flow provided by
operating activities, $6.8 million of cash flow used in investing activities,
and $5.6 million of cash flow provided by financing activities. The decrease in
cash from operating activities is primarily due to decreases in receivables and
deferred charges which is partially offset by increases in payables and rental
income from the properties. The decrease in cash used in investing activities is
primarily due to acquisitions (5750 Major Boulevard) and improvements to real
estate which were primarily financed from proceeds of real estate debt and
partners' contributions.
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<PAGE> 68
FUNDS FROM OPERATIONS AND EBITDA
The Company calculates Funds from Operations based upon guidance from
NAREIT. Funds from Operations is defined as net income (computed in accordance
with GAAP), excluding gains or losses from debt restructuring and sales of
property, plus depreciation and amortization on real estate, and after
adjustments for unconsolidated partnerships and joint ventures.
The White Paper on Funds from Operations approved by the Board of Governors
of NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of properties, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. The Company believes that Funds from Operations is helpful to
investors as a measure of the performance of an equity REIT because, along with
cash flow from operating activities, financing activities and investing
activities, it provides investors with an indication of the ability of the
Company to incur and service debt, to make capital expenditures and to fund
other cash needs. The Company computes Funds from Operations in accordance with
standards established by NAREIT which may not be comparable to Funds from
Operations reported by other REITs that do not define the term in accordance
with the current NAREIT definition or that interpret the current NAREIT
definition differently than the Company. Funds from Operations does not
represent cash generated from operating activities determined in accordance with
GAAP and should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial performance or
to cash flow from operating activities (determined in accordance with GAAP) as a
measure of the Company's liquidity, nor is it indicative of funds available to
fund the Company's cash needs, including its ability to make cash distributions.
EBITDA is defined as operating income before mortgage and other interest,
income taxes, depreciation and amortization. The Company believes EBITDA is also
useful to investors as an indicator of the Company's ability to service debt or
pay cash distributions. EBITDA, as calculated by the Company, may not be
comparable to EBITDA reported by other REITs that do not define EBITDA exactly
as the Company defines that term. EBITDA does not represent cash generated from
operating activities in accordance with GAAP and should not be considered as an
alternative to operating income or net income as an indicator of performance or
as an alternative to cash flows from operating activities as an indicator of
liquidity.
The Company's share (pro forma) and Tower Predecessor's (historical) Funds
from Operations and EBITDA are as follows (in millions):
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE YEAR ENDED DECEMBER 31,
30, -------------------------------------
---------------------- HISTORICAL
PRO FORMA HISTORICAL PRO FORMA -------------------------
1997 1997 1996 1996 1995 1994
--------- ---------- --------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Funds from Operations........... $14.9 $ 0.6 $29.1 $ 0.1 $(1.4) $ 1.3
EBITDA.......................... $19.1 $ 14.1 $37.5 $15.5 $13.7 $13.8
</TABLE>
Funds from Operations and EBITDA for the six months ended June 30, 1997
(pro forma) increased over Funds from Operations and EBITDA (historical) for the
same time period ended June 30, 1996 by $14.3 million and $5.0 million,
respectively. The increases are primarily attributable to the acquisition of the
DRA Joint Ventures and the Century Plaza and 100 Wall Street Properties in
connection with the Formation Transactions.
Funds from Operations and EBITDA (pro forma) for the year ended December
31, 1996 increased over Funds from Operations and EBITDA (historical) for the
same period ended December 31, 1995 by $29.0 million and $22.0 million,
respectively. The increases are primarily attributable to the acquisition of the
DRA Joint Ventures and the Century Plaza and 100 Wall Street Properties in
connection with the Formation Transactions.
Historical Funds from Operations and EBITDA increased in 1996 over 1995 by
$1.5 million and $1.8 million, respectively. The increases are primarily
attributable to the improved operating performance of the
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<PAGE> 69
properties including increased leasing as previously described. The net loss
improved by $1.2 million for the same period.
Historical Funds from Operations and EBITDA decreased in 1995 over 1994 by
$2.7 million and $0.1 million respectively. The decrease in Funds from
Operations is primarily attributable to an increase in interest expenses
associated with two of Tower Predecessor's borrowings ($2.4 million) as
previously described. The remaining decrease in Funds from Operations and the
total decrease in EBITDA is primarily attributable to the reduction in base rent
due to the tenant dispute previously described.
INFLATION
The Company's leases with the majority of its tenants require the tenants
to pay most operating expenses, including real estate taxes and insurance, and
increases in common area maintenance expenditures, which partially offsets the
Company's exposure to increases in costs and operating expenses resulting from
inflation.
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<PAGE> 70
PROPERTY OFFICE MARKETS AND MARKET ECONOMIES
All market information not specifically attributed to the Company or an
identified governmental agency is based on information supplied by Landauer and
unless otherwise noted historical data are presented as of December 31 of the
specified year. The market data reported by Landauer were based on (i) a
compilation and analysis of measures of economic and real estate activity,
including data and information with respect to income, employment, office stock,
availability of vacant space, absorption and new construction, (ii) site visits
to certain markets and submarkets in which the Properties are located, (iii) an
analysis of various market and submarket characteristics, including with respect
to tenant mix, accessibility and major employers, and (iv) an analysis of
various reports published by industry experts with respect to the Company's
markets.
MANHATTAN MARKET AND ECONOMY
Manhattan Market Economy
The Company initially intends to focus its turnaround acquisition strategy
in Manhattan. Manhattan represents the core of the Metropolitan New York City
office market, which is the largest office market in the United States,
containing more rentable square feet than the next six largest United States
office markets combined. In addition, Manhattan is the headquarters to many of
the major corporations and service firms in the United States, including more
Fortune 500 companies than any other city in the United States and 18 of the 25
largest U.S. securities firms.
The Company believes that the strength of the New York City metropolitan
area economy and the current supply/demand fundamentals in the Manhattan office
market provide an attractive environment for owning, operating, and acquiring
office properties because of consistent net private sector job growth, a
strengthening New York City metropolitan economy, and an improving business
environment and quality of life offered in New York City. Led by significant
growth in the services sector of the economy, particularly the entertainment and
other business service sectors, New York City has experienced employment growth
during each of the past three years.
Data from the New York State Department of Labor indicates that the
unemployment rate in New York City peaked in 1992 during the height of the
recessionary period in New York City during the early 1990s. Since that time,
New York City has experienced an economic recovery marked by a fall in
unemployment rates that was coupled with gains in non-agricultural employment
commencing in 1994. This illustrates employment trends and service sector growth
in New York City.
HISTORICAL NON-AGRICULTURAL EMPLOYMENT AND SERVICES GROWTH
NEW YORK, NY
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD NYC EMPLOYMENT NYC SERVICES
(FISCAL YEAR COVERED) GROWTH(%) GROWTH(%)
<S> <C> <C>
1992 -3 0.62
1993 -0.3 2.4
1994 1.0 2.6
1995 0.4 2.9
1996 1.2 4.1
</TABLE>
Source: United States Bureau of Labor Statistics
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<PAGE> 71
The strength of New York City services industry is evidenced by an
employment gain of 4.1%, or 48,900 net new jobs, in 1996 alone. This increase
exceeded previous records for services employment gains in New York City. This
growth in the service industry sector was fueled by significant increases in the
motion picture, media, and business services subsectors. Landauer reports that
the services sector of the local economy is highly concentrated in the Manhattan
office market. Landauer predicts that the services sector of the local economy
will increase at a rate of 1.95% per year, or over 191,000 service jobs through
2006.
Landauer has forecasted a total increase in non-agricultural employment for
the period from 1996 to 2006 of 7.6%, including 17.6% in the services sector. A
significant factor for primary office employment growth in the Manhattan office
market is the significant growth in the services sector of the New York City
economy. Data from the New York Department of Labor indicates a trend over the
past four years of the New York City economy of becoming more services oriented.
The employment base of this sector has increased by approximately 12.6%, or
approximately 138,000 net new jobs, since 1992.
Midtown Manhattan Market Overview
The Company believes that midtown Manhattan represents an attractive market
in which to own and operate office properties. Specifically, the midtown
Manhattan office market has the following favorable characteristics: (i) the
Class A midtown Manhattan office market has experienced five consecutive years
of positive net absorption and declining vacancy rates, (ii) there have been
virtually no new additions to supply in midtown Manhattan since 1992, and (iii)
significant new construction is unlikely at the current time because (a) there
are relatively few sites available for construction, (b) the lead time for
construction typically exceeds three years and (c) new construction generally is
not economically feasible given current market rental rates.
Increasing Demand for Office Space
Due to the significant primary office growth in the midtown Manhattan
office market and little or no new development, the underlying fundamentals of
supply and demand in the midtown Manhattan office market have improved. Between
1992 and 1996, according to Landauer, the Class A direct vacancy rate in the
midtown Manhattan office market declined from 11.2% to 9.2%. During this period
there was net absorption of approximately 6.8 million square feet. According to
Landauer, between 1992 and 1996 the entire direct vacancy rate in the midtown
Manhattan office market declined from 15.5% to 11.5%. During this period, there
was net absorption of 13 million square feet, with 6.2 million square feet being
absorbed in 1996 alone. During the first six months of 1997, the class A direct
vacancy rate in this market declined from 9.2% to 7.4% and the overall direct
vacancy rate in this market declined from 11.5% to 8.1%.
HISTORICAL DIRECT VACANCY RATES
MIDTOWN MANHATTAN, NEW YORK
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) DIRECT VACANCY RATE (%)
<S> <C>
1992 15.50
1993 14.00
1994 12.90
1995 13.70
1996 11.50
1Q97 9.00
2Q97 8.10
</TABLE>
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<PAGE> 72
Rental Rates
As a result of substantial absorption and a decreasing direct vacancy rate,
the midtown Manhattan office market has experienced a significant rise in asking
rents. According to Landauer, asking rental rates have increased from $32.84 per
square foot in 1992 to $35.39 per square foot in 1996, including a more than
$2.00 per square foot increase in asking rents during the most recent 12-month
period. Notwithstanding the current favorable supply/demand fundamentals in the
Manhattan office market, the Company believes that, in order to justify new
construction in this market, asking rents generally would have to increase 40%
over current asking rents for Class A office space in midtown Manhattan (as
estimated by Landauer), not taking into account any tax benefits which may
apply. In addition, the Company believes, based on its experience in the midtown
Manhattan office market, that effective rental rates (i.e., rental rates after
taking into account tenant improvement costs and leasing concessions) for office
properties in midtown Manhattan have increased more significantly, particularly
when taking into account such factors as the reduction in concessions to tenants
(such as free rent and tenant construction allowances).
NET ABSORPTION AND ASKING RENTAL RATES
MIDTOWN MANHATTAN, NEW YORK
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1Q97 2Q97
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Asking Rental Rates
($/s.f.)............. $33 $32 $34 $35 $36 $33 $35
Net Absorption
Millions of Sq. Ft... 3.8 3.5 4.5 -0.8 6.8 3.52 0.365
</TABLE>
Supply of Office Space
The Company expects the supply of office space in the midtown Manhattan
market to remain stable for the foreseeable future because there are relatively
few sites available for construction. The lead time required for land assemblage
construction typically exceeds three years and new construction generally is not
economically feasible at current market rental rates. Only one new development
in midtown Manhattan is anticipated in the near term, containing approximately
1.5 million square feet, scheduled to be completed in 1999, which has
substantial grandfathered tax benefits. The Company does not believe that this
property will have a material impact on the market because it represents less
than 1% of the total Class A midtown Manhattan office space and the building is
already substantially pre-leased to two tenants. In the absence of tax
incentives, the Company believes that rents generally would have to increase
significantly to justify the cost of new construction. Assuming total land and
development costs of $400-450 per square foot (as estimated by Landauer), a
market base rent of at least $55 per square foot would be needed to make
construction economically viable.
Downtown Manhattan Market Overview
The Company believes that downtown Manhattan represents an attractive
investment opportunity. Specifically, the downtown Manhattan office market has
experienced three consecutive years of positive net absorption and declining
vacancy rates. In addition, the downtown market has certain competitive
advantages over the midtown Manhattan office market, including (i) rental rates
are significantly below rental rates in the
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<PAGE> 73
midtown Manhattan office market, and (ii) the lower Manhattan revitalization
plan, which has been in effect since October 1995, includes tax and other
incentives which have and are expected to continue to incentivize growth in the
downtown Manhattan office market. The plan includes incentives for both owners
and tenants, including temporary abatement on rent for new commercial leases,
lower energy costs, rezoning for residential development or conversion and
renovation deductions. The plan has led to an increase in residential
conversions, prompting restaurants, cafes, galleries, and other neighborhood
amenities. As a result, the Company believes that the lower Manhattan
revitalization program has enabled downtown Manhattan to reposition itself,
becoming more attractive to residential tenants. Therefore, the Company believes
that downtown Manhattan is becoming more conducive to office tenants as a
24-hour business environment.
Increasing Demand for Office Space
In the past four years the underlying fundamentals of supply and demand in
the downtown Manhattan office market have improved. The total amount of office
space available has decreased from 18.3 million square feet in 1993 to 15.6
million square feet at June 30, 1997, representing a 14.9% decline. According to
Landauer, during the same period the direct vacancy rate in the downtown
Manhattan office market decreased from 19% to 16% and there was net absorption
of 4.8 million square feet.
HISTORICAL DIRECT VACANCY RATES
DOWNTOWN MANHATTAN, NEW YORK
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) DIRECT VACANCY
<S> <C>
1991 17.80
1992 18.50
1993 19.00
1994 18.60
1995 18.90
1996 17.00
1Q97 17.00
2Q97 16.00
</TABLE>
Rental Rates
Rental rates in the downtown Manhattan office market have generally
decreased from 1993 to June 30, 1997. According to Landauer, asking rental rates
have decreased from $28.99 per leased square foot in 1992 to $25.73 at December
31, 1996. Notwithstanding the overall decline in asking rental rates, the
Company believes that the recent favorable supply/demand fundamentals in the
downtown Manhattan office market have had a stabilizing effect on asking rents,
which as of the end of the first six months of 1997, were $25.54 per square
foot.
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<PAGE> 74
NET ABSORPTION AND ASKING RENTAL RATES
DOWNTOWN MANHATTAN, NEW YORK
<TABLE>
<CAPTION>
NET ABSORPTION
MILLIONS OF SQ. FT. ASKING RENT ($/S.F.)
------------------- --------------------
<S> <C> <C>
1992 ..................... 4.2 28.99
1993 ..................... -0.1 28.75
1994 ..................... 0.8 27.35
1995 ..................... 0.2 25.96
1996 ..................... 3.1 25.73
1Q97 ..................... 0.2 25.52
2Q97 ..................... 0.5 25.54
</TABLE>
Supply of Office Space
The supply of office space decreased in the downtown Manhattan office
market from 18.3 million square feet at December 31, 1993 to 15.6 million square
feet at June 30, 1997. The Company expects the supply of office space in this
market to remain stable for the foreseeable future because there are relatively
few sites available for construction. In addition, the lead time required for
land assemblage and new construction typically exceeds three years and new
construction generally is not economically feasible at current market rental
rates. In the absence of any new tax incentives, the Company believes that
rental rates generally would have to increase at least 40% to justify the cost
of new construction.
METROPOLITAN ORLANDO MARKET AND ECONOMY
Market Economy Overview
The Company believes that the current and forecast trends have created and
will continue to create a favorable economic environment for the ownership of
office properties in the Orlando office market. Metropolitan Orlando has been
rated by Landauer at the top of its annual United States Office Market Quality
ratings during four of the past five years. Economic growth during the 1990s was
fueled by Orlando's tourism service-based economy. Orlando's status as a world
class tourist destination has created significant demand for businesses that
provide support services to the tourism industry. In addition, recent growth in
the Metropolitan Orlando market has been driven by an expanding film production
industry led by the Walt Disney Company and Universal Studios, a thriving high
technology industry, and the nation's largest military and aerospace simulation
and training industry.
Total non-agricultural employment in the Orlando metropolitan area was
estimated at approximately 750,000 persons in 1996, following five years of
growth at an annual compounded rate of 3.5%. Orlando's employment growth rate
was one of the highest among all metropolitan areas in the United States. The
graph below illustrates employment trends and service sector growth in the
Metropolitan Orlando area.
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<PAGE> 75
HISTORICAL NON-AGRICULTURAL EMPLOYMENT AND SERVICES GROWTH
ORLANDO, FL
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ORLANDO EMPLOYMENT ORLANDO SERVICES
<S> <C> <C>
1992 3 6.3
1993 5 8.5
1994 5 7.5
1995 4.6 7.3
1996 4.8 6
</TABLE>
Landauer has forecast for the Metropolitan Orlando area a total increase in
non-agricultural employment for the period from 1996 to 2001 of approximately
14.5%, representing an average annual growth rate of approximately 2.7%. In
addition, the population of metropolitan Orlando had a median age of 34.9 years
in 1996, which is among the youngest among all metropolitan areas in Florida,
and almost 30.2% of the population was between the ages 25 and 44, translating
into a strong and sizeable work force, which continues to grow at a rapid rate.
A driving factor in the forecasted employment growth in Metropolitan
Orlando is a strong population growth rate, which, over the next five years is
expected to significantly outpace the population growth rates in both Florida
and the United States as shown below:
<TABLE>
<CAPTION>
POPULATION GROWTH POPULATION GROWTH
1990-1996 1996-2001
AREA ESTIMATED PROJECTED
------------------------------------------- ----------------- -----------------
<S> <C> <C>
Orlando Metropolitan Area.................. 15.9% 10.6%
Florida.................................... 11.1% 7.6%
United States.............................. 6.7% 4.4%
</TABLE>
As primary office employment grows, office demand is expected to increase.
Landauer estimates that a total of approximately 18,150 new office jobs will be
generated over the next five years, requiring approximately 3 million square
feet of new office space.
A significant factor in the demand for office space is the overall growth
in the regional economy, including the tourism sector. Employment in the
tourism-based service sector is expected to grow by more than 58,000 jobs by the
year 2001 (representing an annual compounded growth rate of 3.5%) as new
entertainment and vacation venues open, and existing ones, including Disney
World and Universal Studios, add new attractions and theme areas. Landauer
expects that as this economic sector grows, it will require additional support
services, including lawyers, financial advisors, management consultants,
insurance and real estate brokers that, in turn, will create demand for office
space for these professional services. In addition, Landauer reports that growth
in the film and television production industries will fuel growth in the service
sector of Metropolitan Orlando's economy.
An additional significant factor for demand for office space in Orlando has
been growth in the trade and transport sectors of the economy. Orlando has
evolved into a major distribution center for all of Florida due to its central
location which, unlike south Florida, provides greater access and closer
proximity to most Florida cities. Orlando's trade-related employment is expected
to increase at a compounded growth rate of 2.8% through the year 2001,
generating an estimated 27,000 new jobs.
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<PAGE> 76
The finance, insurance and real estate (FIRE) sector continues to show
strength in the Metropolitan Orlando economy. According to Landauer this sector
of the economy grew at an annual rate of 4.8% from 1992 through 1996 and is
expected to increase at a rate of approximately 11.6% per annum through the year
2001, generating an estimated 5,100 new jobs. Landauer reports that this
increase in the FIRE sector of the economy is expected to result in an increase
in demand for approximately 835,000 square feet of office space over the same
time period.
A thriving high-technology industry is another indicator of the strength of
the local market. AT&T Technologies, Inc. operates a microchip assembly plant in
Orlando. In addition, Martin Marietta Corporation operates several manufacturing
plants in the Orlando metropolitan area, and its presence has spawned a number
of smaller high-tech companies that manufacture laser-based weapons and medical
equipment. In addition, Metropolitan Orlando's simulation and training industry
has grown to become the largest in the United States with more than 150
companies.
Market Overview
Because of the growth in employment sectors that utilize office space, the
Company believes that the Metropolitan Orlando area represents an attractive
market in which to own and operate office properties. Specifically, the
Metropolitan Orlando office market, in which 17.8% of the Company's portfolio is
located (based on Escalated Rent as of June 30, 1997), has the following
favorable market characteristics according to Landauer: (i) the Orlando office
market has experienced declining direct vacancy rates in four out of the last
five years and more than five years of positive net absorption, (ii) since 1991
there has been only a minor increase in the supply of office space in the
Orlando metropolitan area, and (iii) average rental rates in the Orlando office
market have experienced increases in each of the past four years. The increase
in average rental rates is even more pronounced when taking into account such
factors as the reduction in concessions to tenants (such as free rent, tenant
construction allowances, etc.).
Increasing Demand for Office Space
In the past four years the underlying fundamentals of supply and demand in
the Metropolitan Orlando office market have improved. The peak in available
supply occurred in 1992. Since that time, the growth in the Orlando economy and
the relationship between supply and demand has resulted in declining direct
vacancy rates and positive net absorption in the market. According to Landauer,
as of December 31, 1996 the direct vacancy rate in the Metropolitan Orlando
office market was 9.5% as compared to 16.8% as of December 31, 1992. During the
same 1992-1996 period there was net absorption of approximately 2.6 million
square feet. As of June 30, 1997, the direct vacancy rate in the market was 7.2%
with approximately 850,000 square feet under construction. This compares to a
1996 annual absorption of approximately 1.1 million square feet.
HISTORICAL DIRECT VACANCY RATES
ORLANDO, FL
<TABLE>
<CAPTION>
MEASUREMENT PERIOD EMPLOYMENT AND SERVICES GROWTH
(FISCAL YEAR COVERED) (%)
<S> <C>
1992 17.00
1993 12.50
1994 12.70
1995 10.30
1996 9.50
1Q97 10.20
2Q97 7.20
</TABLE>
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<PAGE> 77
Rental Rates
Despite the substantial absorption of available office space and a
decreasing direct vacancy rate, asking rental rates in the Orlando office market
as a whole have varied from 1992 through June 30, 1997 as set forth in the chart
below. The Company believes that this variance is attributable to the fact that
average asking rents include rents relating to only vacant space in the market
and that vacancy rates for Class A office space in the market have fallen to an
extremely low level (6.0% at June 30, 1997). Average asking rental rates for
Class A Office Space in the Metropolitan Orlando office market have increased
from $17.48 per foot as of December 31, 1992 to $20.08 as of June 30, 1997.
NET ABSORPTION AND ASKING RENTAL RATES
ORLANDO, FL
<TABLE>
<CAPTION>
THOUSANDS
NET ABSORPTION ASKING RATES ($/S.F.)
------------------- --------------------
<S> <C> <C>
1992 ..................... 25 16
1993 ..................... 1100 15
1994 ..................... 189 15.5
1995 ..................... 189 16
1996 ..................... 1100 16.5
1Q97 ..................... 50 16
2Q97 ..................... 694 13.78
</TABLE>
Supply of Office Space
According to Landauer there has been little growth in the supply of new
office space in the Metropolitan Orlando market. Since 1992, office space in the
Orlando market grew by only 3.3% (approximately 700,000 square feet). In the
opinion of Landauer, the addition of any new speculative office space in this
market will continue to be limited due to the lack of available construction
financing. Landauer reports that construction lenders have remained cautious and
have continued to require at least 50% pre-leasing activity as a prerequisite
for financing speculative developments.
METROPOLITAN PHOENIX MARKET AND ECONOMY
Market Economy Overview
The Company believes the underlying fundamentals of the Metropolitan
Phoenix economy and office market have created a favorable environment for the
ownership of office properties in that market. The city of Phoenix has grown to
become the sixth largest city in the United States. This has translated into an
unemployment rate of 5.0% or less since 1992. In addition, Metropolitan Phoenix
has exceeded the national non-agricultural employment growth rate since 1992.
Urban Decision Systems predicts that employment growth in the Metropolitan
Phoenix area during the next five years will exceed the national growth rate by
more than 50%. Recent growth in the Metropolitan Phoenix market was fueled by a
thriving high technology industry together with many service industries.
Total non-agricultural employment in the Metropolitan Phoenix Area was
estimated at approximately 1.24 million persons in 1996, which represents a
compound annual increase of 5.2% since 1992. Landauer reports that in measuring
employment gains since 1994, the Phoenix Metropolitan Area ranked third among
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the 100 largest metropolitan areas in the United States. The graph below
illustrates employment trends and service sector growth in the Metropolitan
Phoenix Area.
HISTORICAL NON-AGRICULTURAL EMPLOYMENT AND SERVICES GROWTH
PHOENIX, AZ
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) PHOENIX SERVICES PHOENIX EMPLOYMENT
<S> <C> <C>
1992 3.5 1
1993 6.6 5
1994 6.2 6.6
1995 10.4 7.2
1996 9.7 6.9
</TABLE>
Landauer has forecast for the Phoenix metropolitan area a total increase in
non-agricultural employment for the period from 1996 to 2001 of approximately
14.0%, representing an average annual growth rate of approximately 2.7%.
A driving factor in the forecasted employment growth is a strong population
growth rate, which, over the next five years is expected to significantly
outpace the population growth rate in the United States as shown below:
<TABLE>
<CAPTION>
POPULATION GROWTH POPULATION GROWTH
1990-1996 1996-2001
AREA ESTIMATED PROJECTED
------------------------------------------- ----------------- -----------------
<S> <C> <C>
Phoenix Metropolitan Area.................. 18.2% 12.1%
Arizona.................................... 18.9% 12.4%
United States.............................. 6.7% 4.4%
</TABLE>
An important factor in the demand for office space in the Metropolitan
Phoenix office market has been the strength of the local economy which has been
propelled by expansions in high-tech manufacturing, tourism and service
industries. Intel has recently completed a $1.6 billion technology plant in
Metropolitan Phoenix. In addition, Motorola and Sumitomo are major high-tech
employers in the area. The region has become known as the "call center" capital
of the United States, and Landauer reports that more than 70 credit card
centers, data centers, customer service stations and call centers employ more
than 40,000 people in the market. Overall, Landauer reports that in the greater
Phoenix area, nearly 700 high technology companies employ over 74,000 people.
An additional significant factor for demand for office space has been
growth in the services sector of the economy, including the tourism sector.
Landauer predicts that tourism will continue to inject approximately $7.2
billion into the local economy annually and will continue to generate more than
103,000 jobs and support another 100,000 indirectly. According to Landauer the
services sector of the Phoenix economy increased by 33.7% from 1990 through
1996, representing an annual compounded growth rate of 5%. Landauer predicts
that the services sector of the Phoenix economy will grow by more than 20%
through the year 2001 generating in excess of 75,000 new jobs.
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<PAGE> 79
Landauer reports that as the Phoenix market evolves, it is less dependent
on employment sectors which historically have shown the greatest volatility.
After the defense cutbacks of the early 1990s, government employment now
contributes a smaller percentage of the workforce in Phoenix than it does in
Arizona or the nation as a whole. The finance, insurance and real estate sector
comprise only 8.9% of the local workforce. Consistent with a maturing city,
services and manufacturing are the largest employers. According to Landauer, a
recent survey reveals 60% of companies relocating to Phoenix are office users,
8% are distributors and one-third are manufacturers.
Market Overview
The Company believes that the current and forecast trends have created and
will continue to create a favorable economic environment for the ownership of
office properties in the Metropolitan Phoenix office market. Specifically, the
Metropolitan Phoenix office market, in which 20.3% of the Company's portfolio is
located (based on Escalated Rent as of June 30, 1997), has the following
favorable market characteristics according to Landauer: (i) the Metropolitan
Phoenix office market has experienced five years of declining direct vacancy
rates and more than 10 years of positive net absorption, (ii) since 1990 there
has only been a minor increase in the supply of office space in the Metropolitan
Phoenix area, and (iii) average rental asking rates have experienced significant
increase since 1993.
Increasing Demand for Office Space
In the past four years the underlying fundamentals of supply and demand in
the Metropolitan Phoenix office have improved. The peak in available supply
occurred in 1992. Since that time, the growth in the Metropolitan Phoenix
economy and the relationship between supply and demand has resulted in declining
direct vacancy rates and positive net absorption in the market. According to
Landauer, as of December 31, 1996, the direct vacancy rate in the Metropolitan
Phoenix office market was 9.1% as compared to 25.1% as of December 31, 1992.
During this period there was net absorption of 4.8 million square feet. As of
June 30, 1997, the direct vacancy rate in the Phoenix office market decreased
further to 8.3% and the market had positive net absorption of approximately
86,000 square feet. These positive fundamentals in the Phoenix office market
resulted in an increase in average asking rents to $16.02 per square foot as of
June 30, 1997.
HISTORICAL DIRECT VACANCY RATES
PHOENIX, AZ
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) VACANCY RATE
<S> <C>
1992 25.1
1993 22
1994 17.3
1995 12.9
1996 9
1Q97 8.6
2Q97 8.3
</TABLE>
The Greater Phoenix Blue Chip Economic Forecast (the "Greater Phoenix
Forecast") predicts that total net absorption in the Metropolitan Phoenix office
market will be approximately 1.0 million square feet in 1997, representing an
increase of over 130% from 1996 net absorption totals. In addition, the Greater
Phoenix Forecast projects that available space in the Metropolitan Phoenix
office market will decrease to approximately 3.0 million square feet by December
31, 1997 from approximately 3.5 million square feet as of
70
<PAGE> 80
December 31, 1996. The Greater Phoenix Forecast anticipates that direct
vacancies in the market will remain in the 9.0 to 9.5 percent range during 1997
despite an increase in supply. There can be no assurance that the Greater
Phoenix Forecast's projections will be consistent with actual results in the
market.
Rental Rates
In addition to the substantial absorption of available office space coupled
with a decreasing direct vacancy rate, the Metropolitan Phoenix office market
has experienced a substantial increase in landlord average asking rents.
Landauer reports that average asking rents in the Metropolitan Phoenix office
market have increased from $13.02 per square foot in 1993 to $15.40 per square
as of December 31, 1996. During the first six months of 1997, landlord average
asking rents increased further from $15.40 to $16.00, representing a 4.0%
increase during that period alone.
NET ABSORPTION AND ASKING RENTAL RATES
PHOENIX, ARIZONA
[NET ABSORPTION AND ASKING RENTAL RATES PHOENIX, ARIZONA]
<TABLE>
<CAPTION>
Net Absorption Asking Rental Rates ($/s.f.)
<S> <C> <C>
"1992" 1188 13.2
"1993" 1658 13.02
"1994" 1681 13.6
"1995" 1074 14.53
"1996" 433 16
"1Q97" 420 16
"2Q97" 88 16
</TABLE>
Supply of Office Space
According to Landauer, there has been little growth in the supply of new
office space in the Metropolitan Phoenix market. Since 1992, office space in the
Metropolitan Phoenix market grew by only approximately 600,000 square feet in an
overall market that, as of December 31, 1996, consisted of 38 million square
feet. Landauer reports that three new office buildings containing approximately
500,000 square feet will be added to the market during 1997. This compares to an
average annual absorption of 1.2 million square feet during the period from 1992
to 1996
METROPOLITAN TUCSON MARKET AND ECONOMY
The Company believes that the office market in Metropolitan Tucson has
improved and will be an excellent market to own and operate office properties in
the future. The Tucson metropolitan area, which is located approximately 120
miles southeast of Phoenix near the Mexican border, consists of Pima County and,
as of December 31, 1996, included approximately 18% of Arizona's population.
After a period of sustained growth from 1991 to 1994 the local economy slowed in
1995 (primarily due to the peso devaluation) and then rebounded significantly in
1996. Growth in the 1990s was precipitated by significant employment gains in
the high-technology, service and trade sectors of the economy.
Total non-agricultural employment in the Metropolitan Tucson area was
estimated at approximately 310,000 persons in 1996, following compounded annual
growth at the rate of approximately 3.9% per year
71
<PAGE> 81
since 1992. The graph below illustrates employment trends and service sector
growth in the Tucson Metropolitan area.
HISTORICAL NON-AGRICULTURAL EMPLOYMENT AND SERVICES GROWTH
TUCSON, AZ
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) TUCSON SERVICES TUCSON EMPLOYMENT
<S> <C> <C>
1992 3.3 2.4
1993 6.4 3.7
1994 6 6.3
1995 3.8 3.9
1996 6 1.8
</TABLE>
A significant factor in the forecasted employment growth in Metropolitan
Tucson is a strong population growth rate. Since 1990 the local population has
grown at a compounded rate of 2.5%. According to Landauer, by 2001 the Tucson
population is expected to grow at an annual compounded growth rate of 2.1%
compared to .9% in the United States.
The strength of the Tucson economy is also evidenced by a low unemployment
rate. According to the Arizona Department of Economic Security, the average
unemployment rate in the Metropolitan Tucson area during 1996 was 3.4%, more
than 1.5 percentage points below the Arizona average.
The growth in the Metropolitan Tucson economy has been driven by
significant improvements in the services and government sectors, which combined
for over one-half of the area's employment base. According to Landauer, the
services sector of the economy increased by an average of 4.5% per year for the
past 10 years, led by significant improvements in the computer and data
processing subsectors. Landauer projects that the services sector of the economy
will continue to grow at the rate of 3.8% per year over the next 10 years.
Manufacturing is another major component of the Metropolitan Tucson economy
that is an indication of the general strength of the market. Although
manufacturing experienced market declines in the past year, according to
Landauer this sector of the economy is expected to grow at the annual compounded
rate of 1.6% during the next 10 years. According to Landauer, most of the growth
in this sector can be attributed to growth in the biotechnology and high
technology areas. The Greater Tucson Economic Counsel 1995/1996 Annual Report
documents 14 new companies recently recruited to Tucson, largely in the high
technology and telecommunications industries that have resulted in the creation
of 3,700 new jobs. In addition, according to Landauer, the government sector of
the economy has increased by approximately 15.7% since 1990 and is expected to
increase at a compounded annual growth rate of 2.8% from 1996 to 2001.
Market Overview
The Company believes that the Metropolitan Tucson area represents an
attractive market to own and operate office properties. Specifically, according
to Landauer, the Metropolitan Tucson office market, in which 4.3% of the
Company's portfolio is located (based on Escalated Rent as of June 30, 1997),
has the following favorable market characteristics: (i) the Metropolitan Tucson
office market has experienced nine years of declining direct vacancy rates and
seven years of positive net absorption, (ii) average rental rates in the
72
<PAGE> 82
Metropolitan Tucson office market have steadily increased since 1994, and (iii)
since 1988 there has only been a minor increase in the supply of office space in
the Tucson metropolitan area.
Increasing Demand for Office Space
The growth in demand for office space since 1987, combined with relatively
limited increases in supply, is directly reflected in vacancy reductions. As of
December 31, 1996, the direct vacancy rate in the Tucson office market was 9.0%
as compared to 16.9% as of December 31, 1992. During this period, there was net
absorption of approximately 600,000 square feet. Since 1992, office space in the
Metropolitan Tucson market grew by only 3.4% (approximately 335,000 square
feet). The positive fundamentals in the Tucson office market continued to
improve during the first six months of 1997 which resulted in a further decrease
in the direct vacancy rate to approximately 8.2% and additional net absorption
of approximately 15,200 square feet.
HISTORICAL DIRECT VACANCY RATES
TUCSON, AZ
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) DIRECT VACANCY RATE
<S> <C>
1991 23.40
1992 16.90
1993 13.80
1994 11.50
1995 10.20
1996 9.00
1Q97 8.10
2Q97 8.15
</TABLE>
Rental Rates
Rental rates, as quoted by local landlords, have risen to approximately
$18.00 per square foot in 1996 from approximately $12.50 in 1992, an increase of
approximately 44%. The increase does not reflect the concomitant reduction in
concessions to tenants. As of June 30, 1997, average asking rental rates in this
market have remained relatively constant at approximately $17.85 per square
foot. Landauer projects that rents will continue to increase at healthy rates
through 1999 and then slowly plateau, reaching approximately $25.00 per square
foot in 2001. There can be no assurance such increases in rental rates will be
achieved.
73
<PAGE> 83
NET ABSORPTION AND ASKING RENTAL RATES
TUCSON, AZ
CHART OF NET ABSORPTION AND ASKING RENTAL RATES
<TABLE>
<CAPTION>
Thousands
Net Absorption Asking Rental Rates ($/s.f.)
<S> <C> <C>
"1992" 85 13
"1993" 240 14
"1994" 141.6 13.5
"1995" 232.2 16
"1996" -8.7 18
1Q97 75 18
2Q97 15.16 17.85
</TABLE>
Supply of Office Space
From 1992 to June 30, 1997, only approximately 341,000 square feet have
been added to the supply, or approximately 84,000 square feet per year. Largely
because certain submarket vacancies are currently below 5%, Landauer estimates
that approximately 1.2 million square feet will be added to the market over the
next five years. Landauer projects that little or no space will be added to the
market in 1997, 130,000 square feet will be added in 1998 and the balance will
be divided evenly over the following three years.
74
<PAGE> 84
THE PROPERTIES
GENERAL
Upon completion of the Offering, the Company will own interests in the 21
Properties, which contain 3.4 million rentable square feet. Substantially all of
the Properties are located in nine submarkets in the Manhattan, Orlando, Phoenix
and Tucson office markets and individually range from 10,300 to 459,000 rentable
square feet. Certain of the Properties include a small amount of retail space on
their lower floors. All of the Properties are wholly owned by the Company,
except for the 2800 North Central Property which is owned in a joint venture
with an affiliate of Carlyle in which the Company owns a 10% interest (which
economic interest increases to up to 27.5% if certain performance criteria are
achieved). As of August 31, 1997, approximately 80% of the Escalated Rent from
the Company's portfolio was derived from Properties located in central business
district locations, including approximately 54% from Properties located in the
Manhattan office market. Generally, the Company believes that all the Properties
have desirable locations within established business communities and are
well-maintained. The Company will also own two parcels of land which can support
an aggregate of approximately 370,000 square feet of development and will have
options to acquire two other parcels of land which can support approximately 1.8
million square feet of development. See "-- Submarket and Property Information."
Management believes that the location, quality of construction and building
amenities, as well as the Company's reputation for providing a high level of
tenant service, have enabled the Company to attract and retain a diverse tenant
base. As of August 31, 1997, the Properties had a weighted average occupancy
rate of 92.4% and were leased to over 350 tenants. As of August 31, 1997, no
single tenant represented more than approximately 5.5% of the aggregate
Escalated Rent of the Company's portfolio and only 17 tenants individually
represented more than 1% of such Escalated Rent.
PROPERTIES
The following tables set forth certain information, as of August 31, 1997,
with respect to the Properties.
75
<PAGE> 85
<TABLE>
<CAPTION>
PERCENT YEAR BUILT/ RENTABLE PERCENT NUMBER
MARKET/PROPERTY OWNED RENOVATED(1) SQUARE FEET LEASED OF LEASES
----------------------------------------------------------- ------- --------------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
METROPOLITAN NEW YORK CITY MARKET
Manhattan Market
Tower 45................................................ 100% 1989 443,114 100.0% 34
286 Madison Avenue...................................... 100% 1918 (4) 111,999 94.8 39
290 Madison Avenue...................................... 100% 1950 (4) 38,512 100.0 4
292 Madison Avenue...................................... 100% 1920/86 186,901 98.9 20
100 Wall Street......................................... 100% 1969/94 458,848 88.7 17
Long Island Market
120 Mineola Boulevard................................... 100% 1984/92 100,810 91.2 15
--------- ----- ---
Market Subtotal/Weighted Average............................................... 1,340,184 94.9% 129
--------- ----- ---
ARIZONA MARKETS
Metropolitan Phoenix Market
Corporate Center Building 10010-30...................... 100% 1976/86 188,614 100.0% 3
Corporate Center Building 10040......................... 100% 1976/86 23,155 100.0 10
Corporate Center Building 10050......................... 100% 1976/86 42,398 100.0 12
Corporate Center Building 10210......................... 100% 1976/86 45,100 100.0 4
Corporate Center Building 10220......................... 100% 1976/86 24,128 100.0 1
Corporate Center Building 9630(5)....................... 100% 1976/86 130,164 100.0 13
2800 North Central(6)................................... 10% 1987 357,923 91.0 37
Century Plaza........................................... 100% 1974/90 219,769 84.2 31
Metropolitan Tucson Market
5151 East Broadway...................................... 100% 1975/89/96 246,486 82.1% 45
--------- ----- ---
Market Subtotal/Weighted Average............................................... 1,277,737 91.3% 156
--------- ----- ---
METROPOLITAN ORLANDO MARKET
One Orlando Center...................................... 100% 1989 357,184 99.5% 36
5750 Major Boulevard.................................... 100% 1973/97 92,828 21.0(7) 13
Maitland Forum.......................................... 100% 1985/96 266,060 99.9 16
2601 Maitland Center Parkway............................ 100% 1982 10,342 100.0 1
2603 Maitland Center Parkway............................ 100% 1982 10,704 81.7 2
2605 Maitland Center Parkway............................ 100% 1982 38,564 100.0 5
--------- ----- ---
Market Subtotal/Weighted Average............................................... 775,682 90.0% 73
--------- ----- ---
Consolidated Total/Weighted Average for all Properties................................ 3,393,603 92.4% 358
========= ===
<CAPTION>
ANNUALIZED NET
PERCENTAGE OF ESCALATED RENT EFFECTIVE RENT
ESCALATED PORTFOLIO PER LEASED PER LEASED
MARKET/PROPERTY RENT(2) ESCALATED RENT(2) SQUARE FOOT(2) SQUARE FOOT(3)
----------------------------------------------------------- ----------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
METROPOLITAN NEW YORK CITY MARKET
Manhattan Market
Tower 45................................................ $20,890,000 27.8% $47.14 $31.48
286 Madison Avenue...................................... 2,451,000 3.3 23.08 20.42
290 Madison Avenue...................................... 1,057,000 1.4 27.44 24.98
292 Madison Avenue...................................... 5,212,000 6.9 28.20 25.33
100 Wall Street......................................... 11,222,000 14.9 27.57 24.95
Long Island Market
120 Mineola Boulevard................................... 2,458,000 3.3 26.74 19.18
----------- ----- ------ ------
Market Subtotal/Weighted Average.................... $43,290,000 57.6% $34.04 $26.35
----------- ----- ------ ------
ARIZONA MARKETS
Metropolitan Phoenix Market
Corporate Center Building 10010-30...................... $ 2,947,000 3.9% $15.62 $14.39
Corporate Center Building 10040......................... 380,000 0.5 16.41 15.07
Corporate Center Building 10050......................... 708,000 0.9 16.70 15.15
Corporate Center Building 10210......................... 706,000 0.9 15.65 14.50
Corporate Center Building 10220......................... 422,000 0.6 17.49 15.14
Corporate Center Building 9630(5)....................... 2,386,000 3.2 18.33 15.95
2800 North Central(6)................................... 5,291,000 7.0 16.24 14.11
Century Plaza........................................... 2,408,000 3.2 13.01 10.82
Metropolitan Tucson Market
5151 East Broadway...................................... $ 3,269,000 4.3% $16.15 $11.19
----------- ----- ------ ------
Market Subtotal/Weighted Average.................... $18,517,000 24.6% $15.87 $13.30
----------- ----- ------ ------
METROPOLITAN ORLANDO MARKET
One Orlando Center...................................... $ 8,154,000 10.8% $22.94 $21.46
5750 Major Boulevard.................................... 298,000 0.4 15.29 5.99
Maitland Forum.......................................... 4,140,000 5.5 15.58 13.69
2601 Maitland Center Parkway............................ 158,000 0.2 15.28 13.43
2603 Maitland Center Parkway............................ 114,000 0.2 13.04 8.80
2605 Maitland Center Parkway............................ 538,000 0.7 13.95 12.10
----------- ----- ------ ------
Market Subtotal/Weighted Average.................... $13,402,000 17.8% $19.20 $16.20
----------- ----- ------ ------
Consolidated Total/Weighted Average for all Properties..... $75,209,000 100.0% $23.98 $19.11
=========== ===== ====== ======
</TABLE>
------------------
(1) Data do not include years in which tenant improvements were made to the
Properties.
(2) Escalated Rent represents the annualized monthly Base Rent in effect
(after giving effect to any contractual increases in monthly Base Rent
that have occurred up to August 31, 1997) plus estimated annualized
monthly tenant pass-throughs of increases in operating and other expenses
(but excluding electricity costs paid by tenants) under each lease
executed as of August 31, 1997, or, if such monthly rent has been reduced
by a rent concession, the monthly rent that would have been in effect at
such date in the absence of such concession. Base Rent represents the
fixed base rental amount paid by a tenant under the terms of the related
lease agreement, which amount generally does not include payments on
account of real estate taxes, operating expense escalations and utility
charges.
(3) Annualized Net Effective Rent per Leased Square Foot represents the Base
Rent for the month of August 1997 under each lease executed as of August
31, 1997, presented on a straight-line basis in accordance with GAAP,
taking into account the amortization of tenant improvement costs and
leasing commissions, if any paid or payable by the Company during such
period, annualized.
(4) In 1996 the Company completed certain mechanical upgrades with respect to
this Property.
(5) Includes two free-standing restaurants adjacent to the Property which
account for, in the aggregate, 17,000 rentable square feet (100% of which
is leased).
(6) Data are presented without proration on account of the Company's partial
ownership interest. The Company's interest in the cash flow from this
Property increases to up to 27.5% if certain performance criteria are
achieved. See "The Properties -- Submarket and Property
Information -- Description of Uptown Phoenix Submarket Property."
(7) Such percentage would have been 74.5% if all space that was leased as of
August 31, 1997, but was not yet occupied, had been included in that
percentage.
76
<PAGE> 86
DEVELOPMENT PARCELS
At the completion of the Offering, the Company will own or have an option
to acquire four parcels of land which can support an aggregate of approximately
2.2 million square feet of development. Some of this land requires zoning or
other regulatory approvals prior to development. The following chart provides
additional information with respect to undeveloped land parcels.
<TABLE>
<CAPTION>
DEVELOPABLE
OWNERSHIP SQUARE
LAND/LOCATION ACREAGE STATUS FEET
- --------------------------------------------------- ------- -------------- -----------
<S> <C> <C> <C>
One Orlando Center Land Parcel
Orlando, Florida................................. 3.6 optioned(1) 800,000(2)
5151 East Broadway Land Parcel
Tucson, Arizona.................................. (2) owned 220,000
Corporate Center Land Parcel
Phoenix, Arizona................................. (3) owned 150,000
Phoenix Land Parcel
Phoenix, Arizona................................. 43.2 optioned(4) 1,000,000
---- ---------
Total.............................................. 46.8 2,170,000
==== =========
</TABLE>
- ---------------
(1) Certain Primary Contributors have granted to the Company an option (at no
cost) to acquire from such Primary Contributors this development parcel for
approximately $3.8 million (75% of the appraised value of the land as of May
9, 1997), which equates to approximately $4.75 per buildable square foot.
Pursuant to the Company's Bylaws, the Company is authorized to exercise this
option only if (i)(a) a majority of Independent Directors approve the
exercise of such option and (b) the individual building(s) to be built on
property is at least 50% preleased prior to commencement of construction, or
(ii) in the event the individual building(s) to be built on the property is
less than 50% preleased, the Board of Directors unanimously approves the
exercise of such option. See "-- Land Parcel Options and -- Development
Parcels."
(2) Includes 395,000 square feet currently zoned and approved for retail and
hotel development.
(3) These parcels are currently part of the parking lot relating to this
Property. In the event these parcels are developed by the Company,
additional parking spaces would need to be constructed.
(4) The Company will acquire this option from certain Primary Contributors at no
cost. Pursuant to the option, the Company will directly or indirectly
acquire the right to purchase this land for approximately $10.3 million from
an unaffiliated third party. Pursuant to the Company's Bylaws, the Company
is authorized to execute this option only if the Independent Directors
unanimously approve the exercise thereof. See "The Properties -- Land Parcel
Options."
TENANTS
The Properties are leased to over 350 tenants which are engaged in a
variety of businesses, including financial services, health care services,
accounting, law, education, architecture, engineering, electronics, and precious
metals. The following table sets forth information regarding the Company's
leases with its 20 largest tenants, based on rentable square feet, as of August
31, 1997. The Company's largest tenant, American Express, accounted for 5.52% of
the Company's total Escalated Rent and 8.07% of aggregate leased square feet. In
addition, the Company's 10 largest tenants at the Properties (based on rentable
square feet as of August 31, 1997) collectively accounted for approximately
28.9% of the Company's total portfolio Escalated Rent and 27.5% of the Company's
rentable square feet, and have a weighted average remaining lease term of
approximately five years. If the Company were to lose any one or more of such
tenants, or any one or more of such tenants were to declare bankruptcy,
experience a downturn in its business or fail to make rental payments
77
<PAGE> 87
when due, there could be a material adverse affect on the Company's ability to
make distributions to stockholders.
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF AGGREGATE
REMAINING AGGREGATE AGGREGATE PORTFOLIO
NUMBER LEASE TERM RENTABLE LEASED ANNUAL ANNUAL
TENANT(1) OF LEASES IN MONTHS SQUARE FEET SQUARE FEET ESCALATED RENT ESCALATED RENT
- --------------------------------------- --------- ---------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
American Express....................... 8 54 252,626 8.07% $ 4,154,000 5.52%
Veterans Administration -- GSA(2)...... 5 30 100,279 3.20 1,534,000 2.04
Credit Suisse.......................... 1 29 95,310 3.04 2,870,000 3.82
Waterhouse Securities, Inc............. 1 79 94,358 3.01 2,340,000 3.11
TBWA Advertising, Inc. ................ 2 86 70,791 2.26 2,122,000 2.82
First Union Bank....................... 2 64 69,364 2.22 2,388,000 3.18
U.S. West Communications, Inc. ........ 3 32 65,583 2.09 1,174,000 1.56
D.E. Shaw & Co., L.P. ................. 1 113 63,871 2.04 2,310,000 3.07
Swiss America Corporation.............. 1 29 61,461 1.96 1,851,000 2.46
Honor Technologies, Inc. a/k/a
Southeast Switch, Inc. .............. 1 69 59,609 1.90 907,000 1.21
Arizona Department of Economic
Security............................. 7 40 58,240 1.86 758,000 1.01
The Equitable Life Assurance Society of
the United States.................... 3 42 56,815 1.81 1,683,000 2.24
United Healthcare Services, Inc. ...... 2 54 56,649 1.81 984,000 1.31
ITT Educational Services, Inc. ........ 2 66 56,437 1.80 888,000 1.18
Florida Power Corporation.............. 1 49 52,622 1.68 816,000 1.08
Brown, Raysman & Millstein............. 1 93 38,237 1.22 1,987,000 2.64
King & Spalding........................ 2 100 35,874 1.15 1,671,000 2.22
Southwest Catholic Health Network, Inc.
d/b/a MercyCare...................... 1 41 35,648 1.14 473,000 0.63
MCI Telecommunications Corporation..... 1 105 34,230 1.09 746,000 0.99
Bryan Cave, McPheeters & McRoberts..... 1 89 31,954 1.02 669,000 .89
--
--- --------- ----- ----------- -----
Total/Weighted Average(3)...... 46 59 1,389,958 44.39% $ 32,326,000 42.98%
== ========= ===== =========== =====
</TABLE>
- ---------------
(1) Actual tenant may be an affiliate or subsidiary of specified tenant.
(2) Under federal law, these leases may be terminated or renegotiated by the
lessee under certain circumstances. See "Risk Factors -- The Company's
Performance and Value are Subject to Risks Associated with the Real Estate
Industry -- Loss of Major Tenants Could Adversely Affect the Company's Cash
Flow."
(3) Weighted average calculation with respect to remaining lease term is based
on aggregate rentable square footage leased by each tenant.
78
<PAGE> 88
LEASE DISTRIBUTIONS
The following table sets forth information relating to the distribution of
the Company's leases, based on rentable square feet under lease, as of August
31, 1997:
<TABLE>
<CAPTION>
PERCENT OF PERCENTAGE OF
AGGREGATE AGGREGATE
PERCENT PORTFOLIO ANNUAL PORTFOLIO
SQUARE FEET NUMBER OF ALL TOTAL LEASED LEASED ESCALATED ANNUAL
UNDER LEASE OF LEASES LEASES SQUARE FEET SQUARE FEET RENT ESCALATED RENT
- --------------------------------------- --------- ------- ------------ ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
2,500 or less.......................... 135 37.70% 210,687 6.73% $ 4,396,304 5.85%
2,501-5,000............................ 63 17.60 251,576 8.03 5,593,296 7.43
5,001-7,500............................ 63 17.60 407,396 13.01 8,695,020 11.56
7,501-10,000........................... 19 5.31 176,177 5.63 4,912,000 6.53
10,001-20,000.......................... 47 13.13 697,744 22.28 17,114,676 22.76
20,001-40,000.......................... 19 5.31 522,231 16.68 13,776,144 18.32
40,001+................................ 12 3.35 865,308 27.64 20,721,528 27.55
--- ------ --------- ------ ----------- ------
Tota1(1)...................... 358 100.00% 3,131,119 100.00%(2) $ 75,208,968 100.00%
=== ====== ========= ====== =========== ======
</TABLE>
- ---------------
(1) Excludes 5,704 square feet (or .18% of total leased square feet) with
respect to the leases in place as compared to the net rentable area at the
Properties.
(2) Reconciliation of total net rentable square footage is as follows:
<TABLE>
<CAPTION>
SQUARE FOOTAGE PERCENTAGE OF TOTAL
-------------- -------------------
<S> <C> <C>
Square footage occupied by tenants..................... 3,131,119 92.27%
Square footage used for management offices and building
use, and remeasurement adjustments................... 5,704 .17
Square footage vacant.................................. 256,780 7.57
--------- -----
Total net rentable square footage............ 3,393,603 100.0%
========= =====
</TABLE>
LEASE EXPIRATIONS -- PORTFOLIO TOTAL
The following table sets forth a summary schedule of the lease expirations
for the Properties for leases in place as of August 31,1997, assuming that none
of the tenants exercise renewal options or termination rights, if any, at or
prior to the scheduled expirations:
<TABLE>
<CAPTION>
PERCENTAGE OF
ANNUAL ANNUAL
SQUARE ESCALATED ESCALATED
NUMBER OF FOOTAGE OF PERCENTAGE OF RENT OF RENT OF
YEAR OF LEASES EXPIRING TOTAL LEASED EXPIRING EXPIRING
LEASE EXPIRATION EXPIRING LEASES SQUARE FEET LEASES ($000S) LEASES
- ----------------------------------- --------- ---------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
1997............................... 26 62,292 1.99% $ 970 1.29%
1998............................... 48 198,782 6.34 4,193 5.57
1999............................... 57 371,732 11.85 7,430 9.88
2000............................... 46 322,546 10.28 8,400 11.17
2001............................... 48 420,684 13.41 8,679 11.54
2002............................... 53 690,179 22.00 14,763 19.63
2003............................... 15 227,921 7.27 4,156 5.53
2004............................... 20 202,369 6.45 7,434 9.88
2005............................... 22 313,527 10.00 10,956 14.57
2006............................... 8 148,807 4.74 3,318 4.28
2007............................... 6 128,166 4.09 3,813 5.07
2008............................... 1 3,250 0.10 142 0.19
2009............................... 2 16,310 0.52 397 0.53
2010............................... 6 24,554 0.78 658 0.88
--- --------- ----- ------- ------
Total.................... 358 3,131,119(1) 99.82%(1) $ 75,209 100.00%
=== ========= ===== ======= ======
</TABLE>
- ---------------
(1) Excludes an aggregate of 5,704 square feet (or .18% of total leased square
feet) with respect to four management offices occupied by the Company.
79
<PAGE> 89
LEASE EXPIRATIONS -- PROPERTY BY PROPERTY
The following table sets forth detailed lease expiration information for
each of the Properties for leases in place as of August 31, 1997, for each of
the 10 years beginning January 1, 1997, assuming that none of the tenants
exercise renewal options or termination rights, if any, at or prior to the
scheduled expirations. As of August 31, 1997, the weighted average remaining
lease term (based on square footage) for the portfolio was 4.82 years:
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997 1998 1999 2000 2001 2002
- -------------------------------------------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
TOWER 45
Square Footage of Expiring Leases................. 0 0 37,439 11,858 63,572 50,684
Percentage of Total Leased Sq. Ft................. -- 0.0% 8.4% 2.7% 14.3% 11.4%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $1,793,160 $ 682,680 $2,475,300 $ 2,260,116
Percentage of Total Annual Escalated Rent(1)...... -- 0.0% 1.1% 0.4% 1.6% 1.4%
Number of Leases Expiring......................... 0 0 7 1 3 7
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ -- $ -- $ 47.90 $ 57.57 $ 38.94 $ 44.59
Company Quoted Rental Rate Per Sq. Ft.(2)(3)...... $ 38.00
286 MADISON AVENUE
Square Footage of Expiring Leases................. 3,734 5,119 8,468 2,400 27,386 23,821
Percentage of Total Leased Sq. Ft................. 3.5% 4.8% 8.0% 2.3% 25.8% 22.4%
Annual Escalated Rent of Expiring Leases(1)....... $ 93,720 $ 137,868 $ 252,348 $ 48,972 $ 561,744 $ 550,956
Percentage of Total Annual Escalated Rent(1)...... 0.7% 1.0% 1.8% 0.3% 4.0% 3.9%
Number of Leases Expiring......................... 2 3 3 3 10 8
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 25.10 $ 26.93 $ 29.80 $ 20.41 $ 20.51 $ 23.13
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 23.00
290 MADISON AVENUE
Square Footage of Expiring Leases................. 0 15,966 0 5,322 0 5,322
Percentage of Total Leased Sq. Ft................. -- 41.5% -- 13.8% -- 13.8%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 454,992 $ 0 $ 155,148 $ 0 $ 121,836
Percentage of Total Annual Escalated Rent(1)...... -- 9.4% -- 3.2% -- 2.5%
Number of Leases Expiring......................... 0 1 0 1 0 1
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- $ 28.50 -- $ 29.15 -- $ 22.89
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 23.00
292 MADISON AVENUE
Square Footage of Expiring Leases................. 10,113 14,484 0 24,597 15,765 13,503
Percentage of Total Leased Sq. Ft................. 5.5% 7.8% -- 13.3% 8.5% 7.3%
Annual Escalated Rent of Expiring Leases(1)....... $ 228,036 $ 426,780 $ 0 $ 678,120 $ 400,968 $ 255,756
Percentage of Total Annual Escalated Rent(1)...... 0.6% 1.2% -- 1.9% 1.1% 0.7%
Number of Leases Expiring......................... 1 3 0 4 2 2
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 22.55 $ 29.47 -- $ 27.57 $ 25.43 $ 18.94
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 25.00
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 BEYOND TOTAL
- -------------------------------------------------- ---------- ---------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
TOWER 45
Square Footage of Expiring Leases................. 6,756 76,888 108,219 0 87,697 443,114
Percentage of Total Leased Sq. Ft................. 1.5% 17.4% 24.4% -- 19.8% 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 222,888 $4,737,120 $ 5,554,476 $ 0 $3,135,348 --
Percentage of Total Annual Escalated Rent(1)...... 0.1% 3.0% 3.5% -- 2.0% --
Number of Leases Expiring......................... 1 5 6 0 4 34
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 32.99 $ 61.61 $ 51.33 -- $ 35.75 --
Company Quoted Rental Rate Per Sq. Ft.(2)(3)......
286 MADISON AVENUE
Square Footage of Expiring Leases................. 10,116 9,366 13,149 0 2,600 106,159
Percentage of Total Leased Sq. Ft................. 9.5% 8.8% 12.4% -- 2.4% 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 242,004 $ 197,052 $ 311,892 $ 0 $ 53,952 --
Percentage of Total Annual Escalated Rent(1)...... 1.7% 1.4% 2.2% -- 0.4% --
Number of Leases Expiring......................... 2 3 4 0 1 39
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 23.92 $ 21.04 $ 23.72 -- $ 20.75 --
Company Quoted Rental Rate Per Sq. Ft.(3).........
290 MADISON AVENUE
Square Footage of Expiring Leases................. 0 11,902 0 0 0 38,512
Percentage of Total Leased Sq. Ft................. -- 30.9% -- -- -- 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 324,840 $ 0 $ 0 $ 0 --
Percentage of Total Annual Escalated Rent(1)...... -- 6.7% -- -- -- --
Number of Leases Expiring......................... 0 1 0 0 0 4
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- $ 27.29 -- -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3).........
292 MADISON AVENUE
Square Footage of Expiring Leases................. 18,325 10,113 71,714 -- 6,307 184,921
Percentage of Total Leased Sq. Ft................. 9.9% 5.5% 38.8% -- 3.4% 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 563,184 $ 220,872 $ 2,187,996 $ 0 $ 250,080 --
Percentage of Total Annual Escalated Rent(1)...... 1.6% 0.6% 6.1% -- 0.7% --
Number of Leases Expiring......................... 3 1 2 0 2 20
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 30.73 $ 21.84 $ 30.51 -- $ 39.65 --
Company Quoted Rental Rate Per Sq. Ft.(3).........
</TABLE>
80
<PAGE> 90
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997 1998 1999 2000 2001 2002
- -------------------------------------------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
100 WALL STREET
Square Footage of Expiring Leases................. 0 35,372 1,603 156,771 0 62,159
Percentage of Total Leased Sq. Ft................. -- 8.7% 0.4% 38.5% -- 15.3%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $1,116,240 $ 49,560 $4,721,172 $ 0 $ 1,546,896
Percentage of Total Annual Escalated Rent(1)...... -- 1.6% 0.1% 6.9% -- 2.3%
Number of Leases Expiring......................... 0 2 1 2 0 1
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- $ 31.56 $ 30.92 $ 30.12 $ 24.89
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 27.00
120 MINEOLA BOULEVARD
Square Footage of Expiring Leases................. 0 6,786 34,950 5,470 4,401 4,439
Percentage of Total Leased Sq. Ft. ............... -- 7.4% 38.0% 6.0% 4.8% 4.8%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 152,388 $1,058,592 $ 120,384 $ 116,712 $ 96,900
Percentage of Total Annual Escalated Rent(1)...... -- 1.2% 8.7% 1.0% 1.0% 0.8%
Number of Leases Expiring......................... 0 1 6 1 2 1
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- $ 22.46 $ 30.29 $ 22.01 $ 26.52 $ 21.83
Company Quoted Rental Rate Per Sq. Ft.(3) ........ $ 23.00
CORPORATE CENTER BUILDING 10010-30
Square Footage of Expiring Leases................. 0 0 0 15,069 0 168,896
Percentage of Total Leased Sq. Ft. ............... -- -- -- 8.0% -- 89.5%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 0 $ 288,876 $ 0 $ 2,650,764
Percentage of Total Annual Escalated Rent(1)...... -- -- -- 1.7% -- 15.4%
Number of Leases Expiring......................... 0 0 0 1 0 1
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- -- $ 19.17 -- $ 15.69
Company Quoted Rental Rate Per Sq. Ft.(3) ........ $ 17.75
CORPORATE CENTER BUILDING 10040
Square Footage of Expiring Leases................. 1,305 11,865 3,255 0 2,769 0
Percentage of Total Leased Sq. Ft. ............... 5.6% 51.2% 14.1% -- 12.0% --
Annual Escalated Rent of Expiring Leases(1)....... $ 20,316 $ 209,712 $ 63,060 $ 0 $ 53,208 $ 0
Percentage of Total Annual Escalated Rent(1)...... 1.7% 18.0% 5.4% -- 4.6% --
Number of Leases Expiring......................... 1 3 3 0 2 0
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 15.57 $ 17.67 $ 19.37 -- $ 19.22 --
Company Quoted Rental Rate Per Sq. Ft.(3) ........ $ 17.75
CORPORATE CENTER BUILDING 10050
Square Footage of Expiring Leases................. 3,426 10,027 14,132 6,619 5,383 2,811
Percentage of Total Leased Sq. Ft. ............... 8.1% 23.6% 33.3% 15.6% 12.7% 6.6%
Annual Escalated Rent of Expiring Leases(1)....... $ 51,576 $ 159,036 $ 235,572 $ 118,128 $ 94,896 $ 49,188
Percentage of Total Annual Escalated Rent(1)...... 2.2% 6.9% 10.2% 5.1% 4.1% 2.1%
Number of Leases Expiring......................... 2 3 3 2 1 1
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 15.05 $ 15.86 $ 16.67 $ 17.85 $ 17.63 $ 17.50
Company Quoted Rental Rate Per Sq. Ft.(3) ........ $ 17.75
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 BEYOND TOTAL
- -------------------------------------------------- ---------- ---------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
100 WALL STREET
Square Footage of Expiring Leases................. 0 7,041 50,122 77,601 16,442 407,111
Percentage of Total Leased Sq. Ft................. -- 1.7% 12.3% 19.1% 4.0% 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 214,524 $ 1,350,840 $1,805,304 $ 417,756 --
Percentage of Total Annual Escalated Rent(1)...... -- 0.3% 2.0% 2.7% 0.6% --
Number of Leases Expiring......................... 0 2 4 3 2 17
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 30.47 $ 26.95 $ 23.26 $ 25.41 --
Company Quoted Rental Rate Per Sq. Ft.(3).........
120 MINEOLA BOULEVARD
Square Footage of Expiring Leases................. 15,943 12,086 7,819 0 0 91,894
Percentage of Total Leased Sq. Ft. ............... 17.3% 13.2% 8.5% -- -- 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 390,600 $ 325,056 $ 196,896 0 0 --
Percentage of Total Annual Escalated Rent(1)...... 3.2% 2.7% 1.6% -- -- --
Number of Leases Expiring......................... 1 1 2 0 0 15
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 24.50 $ 26.90 $ 25.18 -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3) ........
CORPORATE CENTER BUILDING 10010-30
Square Footage of Expiring Leases................. 0 0 0 0 4,649 188,614
Percentage of Total Leased Sq. Ft. ............... -- -- -- -- 2.5% 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 0 $ 0 $ 6,972 --
Percentage of Total Annual Escalated Rent(1)...... -- -- -- -- 0.0% --
Number of Leases Expiring......................... 0 0 0 0 1 3
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- -- -- $ 1.50 --
Company Quoted Rental Rate Per Sq. Ft.(3) ........
CORPORATE CENTER BUILDING 10040
Square Footage of Expiring Leases................. 0 2,404 0 0 0 21,598
Percentage of Total Leased Sq. Ft. ............... -- 10.4% -- -- -- 93.3%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 34,068 $ 0 $ 0 $ 0 --
Percentage of Total Annual Escalated Rent(1)...... -- 2.9% -- -- -- --
Number of Leases Expiring......................... 0 1 0 0 0 10
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- $ 14.17 -- -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3) ........
CORPORATE CENTER BUILDING 10050
Square Footage of Expiring Leases................. 0 0 0 0 0 42,398
Percentage of Total Leased Sq. Ft. ............... -- -- -- -- -- 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 0 $ 0 $ 0 --
Percentage of Total Annual Escalated Rent(1)...... -- -- -- -- -- --
Number of Leases Expiring......................... 0 0 0 0 0 12
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- -- -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3) ........
</TABLE>
81
<PAGE> 91
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997 1998 1999 2000 2001 2002
- -------------------------------------------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
CORPORATE CENTER BUILDING 10210
Square Footage of Expiring Leases................. 0 0 21,454 0 16,826 6,820
Percentage of Total Leased Sq. Ft. ............... -- -- 47.6% -- 37.3% 15.1%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 290,148 $ 0 $ 294,396 $ 121,056
Percentage of Total Annual Escalated Rent(1)...... -- -- 9.5% -- 9.6% 3.9%
Number of Leases Expiring......................... 0 0 1 0 2 1
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- $ 13.52 -- $ 17.50 $ 17.75
Company Quoted Rental Rate Per Sq. Ft.(3) ........ $ 17.75
CORPORATE CENTER BUILDING 10220
Square Footage of Expiring Leases................. 0 0 0 0 24,128 0
Percentage of Total Leased Sq. Ft................. -- -- -- -- 100.0% --
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 0 $ 0 $ 421,536 $ 0
Percentage of Total Annual Escalated Rent(1)...... -- -- -- -- 20.0% --
Number of Leases Expiring......................... 0 0 0 0 1 0
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- -- -- $ 17.47 --
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 17.75
CORPORATE CENTER BUILDING 9630(4)
Square Footage of Expiring Leases................. 0 13,340 0 5,790 61,838 31,800
Percentage of Total Leased Sq. Ft................. -- 10.2% -- 4.4% 47.5% 24.4%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 223,860 $ 0 $ 105,912 $1,051,356 $ 532,164
Percentage of Total Annual Escalated Rent(1)...... -- 1.6% -- 0.7% 7.4% 3.7%
Number of Leases Expiring......................... 0 2 0 3 3 2
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- $ 16.78 $ 18.29 $ 17.00 $ 16.73
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 17.75
2800 NORTH CENTRAL(5)
Square Footage of Expiring Leases................. 9,850 26,267 72,105 0 65,034 63,859
Percentage of Total Leased Sq. Ft................. 3.0% 8.1% 22.1% -- 20.0% 19.6%
Annual Escalated Rent of Expiring Leases(1)....... $ 139,980 $ 386,400 $1,193,712 $ 0 $ 971,328 $ 1,100,376
Percentage of Total Annual Escalated Rent(1)...... 0.5% 1.4% 4.2% -- 3.4% 3.9%
Number of Leases Expiring......................... 5 9 6 0 4 9
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 14.21 $ 14.71 $ 16.56 -- $ 14.94 $ 17.23
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 17.50
CENTURY PLAZA
Square Footage of Expiring Leases................. 1,300 18,063 120,693 12,096 3,227 26,647
Percentage of Total Leased Sq. Ft................. 0.7% 9.8% 65.2% 6.5% 1.7% 14.4%
Annual Escalated Rent of Expiring Leases(1)....... $ 14,892 $ 242,148 $1,539,540 $ 149,400 $ 42,360 $ 378,240
Percentage of Total Annual Escalated Rent(1)...... 0.2% 2.8% 18.0% 1.8% 0.5% 4.4%
Number of Leases Expiring......................... 1 7 11 7 2 2
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 11.46 $ 13.41 $ 12.76 $ 12.35 $ 13.13 $ 14.19
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 16.50
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 BEYOND TOTAL
- -------------------------------------------------- ---------- ---------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
CORPORATE CENTER BUILDING 10210
Square Footage of Expiring Leases................. 0 0 0 0 0 45,100
Percentage of Total Leased Sq. Ft. ............... -- -- -- -- -- 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 0 $ 0 $ 0 --
Percentage of Total Annual Escalated Rent(1)...... -- -- -- -- -- --
Number of Leases Expiring......................... 0 0 0 0 0 4
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- -- -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3) ........
CORPORATE CENTER BUILDING 10220
Square Footage of Expiring Leases................. 0 0 0 0 0 24,128
Percentage of Total Leased Sq. Ft................. -- -- -- -- -- 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 0 $ 0 $ 0 --
Percentage of Total Annual Escalated Rent(1)...... -- -- -- -- -- --
Number of Leases Expiring......................... 0 0 0 0 0 1
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- -- -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3).........
CORPORATE CENTER BUILDING 9630(4)
Square Footage of Expiring Leases................. 0 396 0 8,000 9,000 130,164
Percentage of Total Leased Sq. Ft................. -- 0.3% -- 6.1% 6.9% 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 5,928 $ 0 $ 264,372 $ 202,368 --
Percentage of Total Annual Escalated Rent(1)...... -- 0.0% -- 1.9% 1.4% --
Number of Leases Expiring......................... 0 1 0 1 1 13
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- $ 14.97 -- $ 33.05 $ 22.49 --
Company Quoted Rental Rate Per Sq. Ft.(3).........
2800 NORTH CENTRAL(5)
Square Footage of Expiring Leases................. 17,829 37,486 31,954 0 0 324,384
Percentage of Total Leased Sq. Ft................. 5.5% 11.5% 9.8% -- -- 99.6%
Annual Escalated Rent of Expiring Leases(1)....... $ 250,440 $ 580,056 $ 668,604 $ 0 $ 0 --
Percentage of Total Annual Escalated Rent(1)...... 0.9% 2.0% 2.4% -- -- --
Number of Leases Expiring......................... 1 2 1 0 0 37
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 14.05 $ 15.47 $ 20.92 -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3).........
CENTURY PLAZA
Square Footage of Expiring Leases................. 0 2,97 9 0 0 0 185,005
Percentage of Total Leased Sq. Ft................. -- 1.6% -- -- -- 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 41,892 $ 0 $ 0 $ 0 --
Percentage of Total Annual Escalated Rent(1)...... -- 0.5% -- -- -- --
Number of Leases Expiring......................... 0 1 0 0 0 31
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- $ 14.06 -- -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3).........
</TABLE>
82
<PAGE> 92
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997 1998 1999 2000 2001 2002
- -------------------------------------------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
5151 EAST BROADWAY
Square Footage of Expiring Leases................. 5,209 17,443 11,689 25,831 33,162 59,407
Percentage of Total Leased Sq. Ft................. 2.6% 8.6% 5.8% 12.8% 16.4% 29.4%
Annual Escalated Rent of Expiring Leases(1)....... $ 40,980 $ 287,316 $ 197,004 $ 439,164 $ 561,840 $ 980,844
Percentage of Total Annual Escalated Rent(1)...... 0.2% 1.6% 1.1% 2.4% 3.1% 5.5%
Number of Leases Expiring......................... 3 5 6 9 10 8
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 7.87 $ 16.47 $ 16.85 $ 17.00 $ 16.94 $ 16.51
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 16.50
ONE ORLANDO CENTER
Square Footage of Expiring Leases................. 1,727 378 26,133 29,699 24,954 142,967
Percentage of Total Leased Sq. Ft. ............... 0.5% 0.1% 7.4% 8.4% 7.0% 40.2%
Annual Escalated Rent of Expiring Leases(1)....... $ 41,076 $ 4,452 $ 492,780 $ 565,704 $ 503,316 $ 3,739,920
Percentage of Total Annual Escalated Rent(1)...... 0.1% 0.0% 0.9% 1.0% 0.9% 6.8%
Number of Leases Expiring......................... 1 2 5 8 4 7
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 23.78 $ 11.78 $ 18.86 $ 19.05 $ 20.17 $ 26.16
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 21.00
5750 MAJOR BOULEVARD
Square Footage of Expiring Leases................. 5,954 2,495 3,709 0 0 0
Percentage of Total Leased Sq. Ft. ............... 30.6% 12.8% 19.0% -- -- --
Annual Escalated Rent of Expiring Leases(1)....... $ 83,748 $ 32,436 $ 54,036 0 0 0
Percentage of Total Annual Escalated Rent(1)...... 4.9% 1.9% 3.1% -- -- --
Number of Leases Expiring......................... 9 2 1 0 0 0
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 14.07 $ 13.00 $ 14.57 -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 18.75
MAITLAND FORUM
Square Footage of Expiring Leases................. 19,674 8,649 1,532 5,840 72,239 11,676
Percentage of Total Leased Sq. Ft. ............... 7.4% 3.3% 0.6% 2.2% 27.2% 4.4%
Annual Escalated Rent of Expiring Leases(1)....... $ 255,768 $ 139,536 $ 24,516 $ 104,064 $1,129,716 $ 166,488
Percentage of Total Annual Escalated Rent(1)...... 1.0% 0.6% 0.1% 0.4% 4.6% 0.7%
Number of Leases Expiring......................... 1 3 1 2 2 1
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 13.00 $ 16.13 $ 16.00 $ 17.82 $ 15.64 $ 14.26
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 17.00
2601 MAITLAND CENTER PARKWAY
Square Footage of Expiring Leases................. 0 10,342 0 0 0 0
Percentage of Total Leased Sq. Ft. ............... -- 100.0% -- -- -- --
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 157,548 $ 0 $ 0 $ 0 $ 0
Percentage of Total Annual Escalated Rent(1)...... -- 50.0% -- -- -- --
Number of Leases Expiring......................... 0 1 0 0 0 0
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- $ 15.23 -- -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3)......... $ 15.50
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 BEYOND TOTAL
- -------------------------------------------------- ---------- ---------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
5151 EAST BROADWAY
Square Footage of Expiring Leases................. 30,118 0 0 18,577 0 201,436
Percentage of Total Leased Sq. Ft................. 14.9% -- -- 9.2% -- 99.5%
Annual Escalated Rent of Expiring Leases(1)....... $ 433,356 $ 0 $ 0 $ 328,548 $ 0 --
Percentage of Total Annual Escalated Rent(1)...... 2.4% -- -- 1.8% -- --
Number of Leases Expiring......................... 2 0 0 2 0 45
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 14.39 -- -- $ 17.69 -- --
Company Quoted Rental Rate Per Sq. Ft.(3).........
ONE ORLANDO CENTER
Square Footage of Expiring Leases................. 1,842 31,708 30,400 25,541 38,271 353,620
Percentage of Total Leased Sq. Ft. ............... 0.5% 8.9% 8.6% 7.2% 10.8% 99.5%
Annual Escalated Rent of Expiring Leases(1)....... $ 35,460 $ 752,604 $ 683,700 $ 519,828 $ 815,604 --
Percentage of Total Annual Escalated Rent(1)...... 0.1% 1.4% 1.2% 0.9% 1.5% --
Number of Leases Expiring......................... 1 2 2 1 3 36
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 19.25 $ 23.74 $ 22.49 $ 20.35 $ 21.31 --
Company Quoted Rental Rate Per Sq. Ft.(3).........
5750 MAJOR BOULEVARD
Square Footage of Expiring Leases................. 0 0 0 0 7,314 19,472
Percentage of Total Leased Sq. Ft. ............... -- -- -- -- 37.6% 100.0%
Annual Escalated Rent of Expiring Leases(1)....... 0 0 0 0 $ 127,992 0
Percentage of Total Annual Escalated Rent(1)...... -- -- -- -- 7.4% --
Number of Leases Expiring......................... 0 0 0 0 1 13
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- -- -- $ 17.50 --
Company Quoted Rental Rate Per Sq. Ft.(3).........
MAITLAND FORUM
Square Footage of Expiring Leases................. 126,992 0 150 19,088 0 265,840
Percentage of Total Leased Sq. Ft. ............... 47.8% -- 0.1% 7.2% -- 100%
Annual Escalated Rent of Expiring Leases(1)....... $2,018,196 $ 0 $ 1,608 $ 299,880 $ 0 --
Percentage of Total Annual Escalated Rent(1)...... 8.1% -- 0.0% 1.2% -- --
Number of Leases Expiring......................... 4 0 1 1 -- 16
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 15.89 -- $ 10.72 $ 15.71 -- --
Company Quoted Rental Rate Per Sq. Ft.(3).........
2601 MAITLAND CENTER PARKWAY
Square Footage of Expiring Leases................. 0 0 0 0 0 10,342
Percentage of Total Leased Sq. Ft. ............... -- -- -- -- -- 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 0 $ 0 $ 0 --
Percentage of Total Annual Escalated Rent(1)...... -- -- -- -- -- --
Number of Leases Expiring......................... 0 0 0 0 0 1
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- -- -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3).........
</TABLE>
83
<PAGE> 93
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997 1998 1999 2000 2001 2002
- -------------------------------------------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
2603 MAITLAND PARKWAY
Square Footage of Expiring Leases................. 0 0 8,743 0 0 0
Percentage of Total Leased Sq. Ft. ............... -- -- 100% -- -- --
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 113,976 $ 0 $ 0 $ 0
Percentage of Total Annual Escalated Rent(1)...... -- -- 33.3% -- -- --
Number of Leases Expiring......................... 0 0 2 0 0 0
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- $ 13.04 -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3) ........ $ 15.50
2605 MAITLAND PARKWAY
Square Footage of Expiring Leases................. 0 2,185 5,827 15,184 0 15,368
Percentage of Total Leased Sq. Ft. ............... -- 5.7% 15.1% 39.4% -- 39.9%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 32,820 $ 71,952 $ 222,288 $ 0 $ 211,308
Percentage of Total Annual Escalated Rent(1)...... -- 1.3% 3.0% 9.1% -- 8.7%
Number of Leases Expiring......................... -- 1 1 2 0 1
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- $ 15.02 $ 12.35 $ 14.64 -- $ 13.75
Company Quoted Rental Rate Per Sq. Ft.(3) ........ $ 15.50
PORTFOLIO TOTALS/WEIGHTED AVG.
Square Footage of Expiring Leases(6) ............. 62,292 198,782 371,732 322,546 420,684 690,179
Percentage of Total Leased Sq. Ft. ............... 2.0% 6.3% 11.9% 10.3% 13.4% 22.0%
Annual Escalated Rent of Expiring Leases(1)....... $ 970,092 $4,192,824 $7,429,956 $8,400,012 $8,678,676 $14,762,808
Percentage of Total Annual Escalated Rent(1)...... 0.20% 0.88% 1.57% 1.77% 1.83% 3.11%
Number of Leases Expiring......................... 26 48 57 46 48 53
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 15.57 $ 21.09 $ 19.99 $ 26.04 $ 20.63 $ 21.39
Weighted Average Company Quoted Rental Rate Per
Sq. Ft.(3) ...................................... $ 22.51
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 BEYOND TOTAL
- -------------------------------------------------- ---------- ---------- ----------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
2603 MAITLAND PARKWAY
Square Footage of Expiring Leases................. 0 0 0 0 0 8,743
Percentage of Total Leased Sq. Ft. ............... -- -- -- -- -- 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 0 $ 0 $ 0 0
Percentage of Total Annual Escalated Rent(1)...... -- -- -- -- -- --
Number of Leases Expiring......................... 0 0 0 0 0 2
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- -- -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3) ........
2605 MAITLAND PARKWAY
Square Footage of Expiring Leases................. 0 0 0 0 0 38,564
Percentage of Total Leased Sq. Ft. ............... -- -- -- -- -- 100%
Annual Escalated Rent of Expiring Leases(1)....... $ 0 $ 0 $ 0 $ 0 $ 0 0
Percentage of Total Annual Escalated Rent(1)...... -- -- -- -- -- --
Number of Leases Expiring......................... 0 0 0 0 0 5
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ -- -- -- -- -- --
Company Quoted Rental Rate Per Sq. Ft.(3) ........
PORTFOLIO TOTALS/WEIGHTED AVG.
Square Footage of Expiring Leases(6) ............. 227,921 202,369 313,527 148,807 172,280 3,131,119
Percentage of Total Leased Sq. Ft. ............... 7.3% 6.5% 10.0% 4.7% 5.5% 99.8%(6)
Annual Escalated Rent of Expiring Leases(1)....... $4,156,128 $7,434,012 $10,956,012 $3,217,932 $5,010,072 --
Percentage of Total Annual Escalated Rent(1)...... 0.88% 1.57% 2.31% 0.68% 1.1% --
Number of Leases Expiring......................... 15 20 22 8 15 358
Escalated Rent Per Sq. Ft. of Expiring
Leases(1)........................................ $ 18.23 $ 36.73 $ 34.94 $ 21.62 $ 29.08 --
Weighted Average Company Quoted Rental Rate Per
Sq. Ft.(3) ......................................
</TABLE>
- ---------------
(1) Represents Escalated Rent as of August 31, 1997.
(2) Represents the weighted average of high-rise space, mid-rise space and
low-rise space present in the Property.
(3) Represents average rental rates per square foot quoted by the Company at the
Property as of August 31, 1997.
(4) Includes data with respect to two free-standing restaurants adjacent to this
Property, which account for, in the aggregate, annual escalated rent of
$466,000 pursuant to two leases which expire in 2006 ($264,000) and 2007
($202,000).
(5) Data presented without proration on account of the Company's partial
ownership interest.
(6) Excludes an aggregate of 5,704 square feet (or .18% of total leased square
feet) with respect to four management offices occupied by the Company.
84
<PAGE> 94
TENANT RETENTION AND EXPANSION
The Company believes that its relationship with tenants contributed in
large part to its success in attracting, expanding and retaining a high quality
and diverse tenant base. The Company strives to develop and maintain good
relationships with tenants through its active management style, its onsite and
regional professional leasing and management staff and its responsiveness to
individual tenants' needs.
Management believes that tenant satisfaction fosters long-term tenant
relationships and creates renewal and expansion opportunities which, in turn,
enhance the Company's ability to maintain and increase occupancy rates. The
Company's success in this area is demonstrated in part by the number of existing
tenants who have leased additional space to support their expansion needs within
the Company's portfolio. Examples include D.E. Shaw which expanded its space in
Tower 45 from 15,882 square feet to 63,871 square feet; Honor Technology's
expansion in Maitland Forum from 17,950 square feet to 59,609 square feet;
United Healthcare's expansion in One Orlando Center from 29,809 square feet to
39,284 square feet; and American Express has expanded in 10050 Corporate Center,
9630 Corporate Center and 10010-10030 Corporate Center by 11,147 square feet,
7,832 square feet, and 19,718 square feet, respectively, for a total expansion
in Corporate Center of 38,697 square feet since the Company's acquisition of the
Property. During 1995 and 1996, the Company expanded leased space for 20 tenants
by a total of over 200,000 square feet. In 1997 alone, five tenants expanded
their leased space by approximately 37,000 square feet. The development of
strong national tenant relationships has also led to tenant expansions in other
Company buildings. The Apollo Group has recently leased 18,944 square feet at
the 5750 Major Boulevard Property, in addition to its original lease position at
Maitland Forum. Similarly, Equitable Life (who currently occupies 44,081 square
feet in Tower 45 and 6,004 square feet in 2800 North Central Avenue) expanded to
5151 East Broadway, renting 6,730 square feet.
As part of its initial repositioning of a Property after an acquisition,
the Company frequently pursues a policy of replacing some existing tenants with
more creditworthy tenants with a higher probability of expansion and renewal.
While this may adversely affect tenant reduction rates in the early years of
Property ownership, management believes it is beneficial to the Company in the
long run. The Company's retention rate at its Properties typically continues to
increase as each Property is repositioned and stabilized. The Company's
experience is that the net present value of renewed leases substantially exceeds
the net present value of leases with new tenants. The Company expects this
difference to continue as demand outpaces supply.
HISTORICAL LEASE RENEWALS
The following table sets forth certain historical information regarding
tenants at the Properties(1):
<TABLE>
<CAPTION>
TOTAL/
JANUARY 1, WEIGHTED
1997 AVERAGE
TO JUNE 30, 1994 TO
1994 1995 1996 1997 JUNE 30, 1997
------ ------- ------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Number of leases expired during calendar
year......................................... 4 18 34 12 19
Number of lease renewals....................... 1 14 28 3 13
Percentage of leases renewed................... 25.00% 77.78% 82.35% 25.00% 67.65%
Aggregate rentable square footage of expiring
leases....................................... 11,199 129,750 297,306 42,973 137,494
Aggregate rentable square footage of lease
renewals..................................... 1,313 78,567 189,463 2,742 77,739
Percentage of expiring rentable square footage
renewed...................................... 11.72% 60.55% 63.73% 6.38% 56.54%(2)
</TABLE>
- ---------------
(1) Does not include (i) 2800 North Central Boulevard because the Company only
owns a 10% interest in this Property; (ii) Century Plaza and 100 Wall Street
because these Properties will be acquired simultaneously with the Closing;
and (iii) 5750 Major Boulevard which is a redevelopment property.
(2) The results include two extraordinary events which occurred in 1995 and 1996
at Maitland Forum. During 1995 and 1996, Metropolitan Life Insurance Company
vacated 54,870 rentable square feet due to a corporate merger and
consolidation of its health care unit, and Cincinnati Bell vacated 62,648
rentable square feet due to a relocation of space into a facility built to
suit their regional requirements. The Company believes these events to be
extraordinary and not indicative of normal operating results. If these
extraordinary events are excluded, the weighted average retention ratio
would have been 74.81%. Accordingly, the Company believes a 70% retention
ratio is more representative of future results.
85
<PAGE> 95
HISTORICAL TENANT IMPROVEMENTS AND LEASING COMMISSIONS
The following table sets forth certain historical information regarding
tenant improvement ("TI") and leasing commission ("LC") costs for tenants at the
Properties (other than the Century Plaza and 100 Wall Street Properties which
are being acquired from unaffiliated third parties concurrently with the
consummation of the Offering and the 2800 North Central Property because the
Company only holds a 10% interest in the Property) since the date of the
Company's acquisition thereof.
<TABLE>
<CAPTION>
SIX MONTHS TOTAL/
ENDED WEIGHTED
1994 1995 1996 JUNE 30, 1997 AVERAGE
---------- ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
RECURRING:
RENEWALS
Number of Leases....................... 1 14 28 3 46
Square Feet of Renewals................ 1,313 78,567 189,463 2,742 77,739
TI per square foot..................... $ 0 $ 5.31 $ 7.23 $ 0 $ 6.57
LC per square foot..................... 0 3.48 3.66 0.15 3.56
-------- ---------- ---------- ---------- ----------
Total TI and LC per square
foot.......................... $ 0 $ 8.79 $ 10.89 $ 0.15 $ 10.13
-------- ---------- ---------- ---------- ----------
Total TI and LC................. $ 0 $ 690,604 $2,063,252 $ 411 $ 787,496
======== ========== ========== ========== ==========
RE-TENANTED SPACE
Number of Leases....................... 8 9 15 18 50
Square Feet of Re-tenanted Space....... 51,354 55,691 173,742 102,401 109,482
TI per square foot..................... $ 15.38 $ 16.41 $ 10.10 $ 8.55 $ 11.31
LC per square foot..................... 1.45 3.06 2.30 3.91 2.73
-------- ---------- ---------- ---------- ----------
Total TI and LC per square
foot.......................... $ 16.83 $ 19.47 $ 12.40 $ 12.46 $ 14.04
-------- ---------- ---------- ---------- ----------
Total TI and LC................. $ 864,288 $1,084,304 $2,154,401 $ 1,275,916 $1,537,127
======== ========== ========== ========== ==========
NON-RECURRING(1):
NEW TENANTS
Number of Leases....................... 5 17 11 8 41
Square Feet of New Tenants............. 20,985 104,998 24,179 70,742 73,635
TI per square foot..................... $ 13.01 $ 17.54 $ 20.27 $ 21.28 $ 18.61
LC per square foot..................... 3.72 5.45 4.18 5.76 5.24
-------- ---------- ---------- ---------- ----------
Total TI and LC per square
foot.......................... $ 16.73 $ 22.99 $ 24.45 $ 27.04 $ 23.85
-------- ---------- ---------- ---------- ----------
Total TI and LC................. $ 351,079 $2,413,904 $ 591,177 1,912,864 $1,756,195
======== ========== ========== ========== ==========
SHELL SPACE NUMBER OF LEASES............. 0 2 4 0 6
Square Feet of Shell Space............. 0 12,859 24,077 0 12,312
TI per square foot..................... $ 0 $ 30.29 $ 33.55 $ 0 $ 32.41
LC per square foot..................... 0 7.30 6.23 0 6.60
-------- ---------- ---------- ---------- ----------
Total TI and LC per square
foot.......................... $ 0 $ 37.59 $ 39.78 $ 0 $ 39.01
-------- ---------- ---------- ---------- ----------
Total TI and LC................. $ 0 $ 483,370 $ 957,783 $ 0 $ 480,291
======== ========== ========== ========== ==========
TOTAL
Number of Leases....................... 14 42 58 29 143
Square Feet............................ 73,652 252,115 411,461 175,885 273,168
TI per square foot..................... $ 14.43 $ 14.13 $ 10.75 $ 13.54 $ 12.88
LC per square foot..................... 2.07 4.40 3.27 4.59 3.82
-------- ---------- ---------- ---------- ----------
Total TI and LC per square
foot.......................... $ 16.50 $ 18.53 $ 14.02 $ 18.13 $ 16.70
-------- ---------- ---------- ---------- ----------
Total TI and LC................. $1,215,258 $4,671,691 $5,768,683 $ 3,188,795 $4,561,906
======== ========== ========== ========== ==========
</TABLE>
- ---------------
(1) Represents specific non-recurring leasing costs, including tenant
improvements and leasing commissions associated with the following recently
acquired properties, which costs were incurred in connection with the
repositioning of those Properties: 286 Madison Avenue, 292 Madison Avenue,
One Orlando Center, and 5151 East Broadway. These non-recurring leasing
costs were identified and budgeted at the time of the acquisition of such
Properties by the Company.
86
<PAGE> 96
HISTORICAL CAPITAL EXPENDITURES
Recurring(1). The following table sets forth information relating to the
historical, recurring capital expenditures at the Properties (other than the
Century Plaza and 100 Wall Street Properties which are being acquired from
unaffiliated third parties concurrently with the consummation of the Offering):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
1994(1) 1995(1) 1996(1) JUNE 30, 1997
------- --------- --------- -------------
<S> <C> <C> <C> <C>
Number of Properties(2)........................ 1 4 16 2
Number of Square Feet.......................... 266,060 1,015,481 2,226,301 298,878
Recurring Capital Expenditures Incurred........ $2,937 $63,488 $286,318 $19,359
Weighted Average Recurring Capital Expenditures
per square foot(3)........................... $0.01 $0.06 $0.13 $0.07
Three-Year Weighted Average per square foot.... -- -- $0.10 --
</TABLE>
- ---------------
(1) Excludes data with respect to 2800 North Central because the Company only
holds a 10% interest in this Property.
(2) Represents the actual number of Properties for which capital expenditures
were incurred during the year.
(3) For those Properties owned less than a full year, computes the per square
foot amount by annualizing the capital expenditures amount to a pro forma
full year cost.
Non-recurring(1). The following table sets forth information relating to
the non-recurring capital costs at the Properties (other than the Century Plaza
and 100 Wall Street Properties which are being acquired from unaffiliated third
parties concurrently with the consummation of the Offering), which primarily
relate to major capital improvements such as lobby and elevator renovations, and
mechanical equipment improvements (e.g., new elevators and new chillers):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
1994(1) 1995(1) 1996(1) JUNE 30, 1997
------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Number of Properties(2)................... 2 5 16 6
Number of Square Feet..................... 325,670 849,883 2,081,457 1,612,243
Non-recurring Capital Expenditures
Incurred................................ $60,632 $1,899,145 $2,181,161 $235,460
Weighted Average Nonrecurring Capital
Expenditures per square foot(3)......... $.19 $2.23 $1.05 $.15
Three-Year Weighted Average per
square foot............................. -- -- $1.27 --
</TABLE>
- ---------------
(1) Excludes data with respect to the 2800 North Central Property because the
Company only holds a 10% interest in this Property.
(2) Represents the actual number of Properties for which such non-recurring
tenant-related capital costs were incurred during the year.
(3) For those Properties owned less than a full year, the per square foot amount
is computed by annualizing the capital expenditures amount to a pro forma
full year cost.
87
<PAGE> 97
SUBMARKET AND PROPERTY INFORMATION
The Properties are located in a number of office market sectors and
submarkets as outlined in the table below:
PROPERTY SUBMARKETS
PROPERTY STATISTICS
AT AUGUST 31, 1997
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
TOTAL OF
PORTFOLIO PORTFOLIO
NUMBER OF RENTABLE RENTABLE ESCALATED ESCALATED
PROPERTIES SQUARE FEET SQUARE FEET RENT RENT
---------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Midtown Manhattan Market
Grand Central North Submarket...... 3 337,412 9.94% $ 8,719,116 11.59%
Times Square Submarket............. 1 443,114 13.06 20,890,380 27.78
Downtown Manhattan Market
Financial Submarket................ 1 458,848 13.52 11,222,292 14.92
Long Island Market
Central Nassau County Submarket.... 1 100,810 2.97 2,457,528 3.27
Metropolitan Orlando, Florida Market
Maitland Center Submarket.......... 4 325,670 9.60 4,949,664 6.58
Southwest Orlando Submarket........ 1 92,828 2.74 298,212 0.40
Downtown Orlando Submarket......... 1 357,184 10.53 8,154,444 10.84
Metropolitan Phoenix, Arizona Market
Northwest Phoenix Submarket........ 6 453,559 13.37 7,548,468 10.04
Uptown Phoenix Submarket........... 2 577,692 17.02 7,699,368 10.24
Metropolitan Tucson, Arizona Market
Tucson East Submarket.............. 1 246,486 7.26 3,269,052 4.35
--
--------- ----- ----------- -----
Total...................... 21 3,393,603 100.00% $75,208,524 100.00%
== ========= ===== =========== =====
</TABLE>
Times Square Submarket
The Times Square submarket contains approximately 21 million square feet of
office space and accounts for approximately 11.3% of the midtown Manhattan
office market's inventory. Approximately 60% of the office space in the Times
Square submarket consists of Class A office space (approximately 12.6 million
square feet). According to Landauer, the current direct vacancy rate for Class A
office space in this submarket decreased from 19.3% in 1992 to 3.8% in 1996. The
availability rate for all classes of space in the Times Square submarket
declined from 16.6% in 1992 to 7.0% in 1996, with 3.7 million square feet
absorbed while there were almost no additions to the inventory supply. Further
highlighting Times Square's resurgence, a 1.5 million square foot office
building is under construction and is already substantially preleased to two
tenants. The positive impact of supply reductions on rent levels lagged behind
absorption but is now becoming evident; in 1992 average asking rents for Class A
space in this submarket were $38.76 before falling during the recession in the
early 1990s to $30.60 per square foot in 1993. Since 1993 the average asking
rental rate for Class A space in this submarket has risen to $33.45 per square
foot as of June 30, 1997. During the first six months of 1997, the Class A
direct vacancy rate in the Times Square submarket increased slightly from 3.8%
to 4.1%, and there was negative net absorption of approximately 463,000 square
feet.
Description of Times Square Submarket Property
Tower 45 (New York, New York). Tower 45 is a 40-story Class A office tower
located in midtown Manhattan. The building was completed in 1989 and contains
4,383 square feet of retail space along 45th Street between Sixth and Seventh
Avenues (as well as 100 square feet of retail space within the lobby), 438,631
square feet of office space (not including 3,080 square feet of storage space)
on floors two through 40 and an on-site 47-space parking garage consisting of
9,730 square feet. The exterior is composed of ironspot brick. The building's
entrance includes an open air atrium 175 feet high. As of August 31, 1997, this
Property
88
<PAGE> 98
was 100% leased and the annualized Escalated Rent was $47.14 per leased square
foot as compared to an average market rental rate, as of that date, of $38.00
per leased square foot. Major tenants include D.E. Shaw & Co., L.P., a
securities trading and financial services company (63,871 rentable square feet),
Equitable Life Assurance Society of the United States (44,081 rentable square
feet), NEC Business Communications Systems (East), Inc., an international
telecommunications company (15,200 rentable square feet), U.S. Government,
General Services Agency (11,386 rentable square feet), King & Spalding, a
national law firm (35,574 rentable square feet), Shell Mining Company, a mining
and exploration company (11,858 rentable square feet), Brown Raysman, Milstein,
Felder & Steiner LLP, a national law firm (38,237 rentable square feet).
Grand Central North Submarket
The Grand Central North submarket is one of the largest submarkets in the
Manhattan office market, containing approximately 60.8 million square feet of
office space and accounting for approximately 32.8% of the midtown Manhattan
office market's inventory. According to Landauer, absorption in the Grand
Central North submarket from 1992 through 1996 was approximately 2.9 million
square feet.
Occupancy of Class B space increased 10.3% during this same 1992 through
1996 period, including 4.3% from 1995 to 1996 alone. The direct vacancy rate in
the submarket declined from 13.1% in 1992 to 12.0% in 1996; the Class B direct
vacancy rate declined from 13.1% in 1992 to 10.3% in 1996. Until recently, rent
increases have lagged behind the positive impact of supply reductions but are
now becoming evident; in 1992 the average asking rents in the submarket were
$32.65 per square foot before falling to $31.71 per square foot during the
recession in 1993 and then moderately increasing to $36.19 per square foot in
1996; Class B average asking rents were $27.63 per square foot in 1992, $27.04
per square foot in 1993 and $28.33 per square foot in 1996. During the first six
months of 1997, the overall direct vacancy rate in Grand Central North submarket
decreased from 12.0% to 10.1%, asking rents decreased from $36.19 per square
foot to $34.51 per square foot and there was net absorption of approximately 1.4
million square feet. There was no new construction in this submarket during the
first six months of 1997.
Description of Grand Central North Submarket Properties
286 Madison Avenue (New York, New York). 286 Madison Avenue is a 23-story
Class B high-rise office building located on the southwest corner of Madison
Avenue and 40th Street in midtown Manhattan. The building was built in 1918 and
contains 111,999 rentable square feet. The building is located within walking
distance from Grand Central Station and the Port Authority Terminal and offers
tenants the ability to establish a full floor presence due to the small floor
plates. The building was most recently renovated in 1996 to upgrade certain
mechanical and operating systems at a total cost of approximately $650,000. As
of August 31, 1997, this Property was 94.8% leased and the annualized Escalated
Rent was $23.08 per leased square foot as compared to a market rental rate, as
of that date, of $23.00 per leased square foot.
290 Madison Avenue (New York, New York). 290 Madison Avenue is a six-story
Class B office building located on Madison Avenue between 40th and 41st Streets
in midtown Manhattan. The building was built in 1950 and contains 38,512
rentable square feet. Similar to 286 Madison Avenue described above, the
building is located within walking distance from Grand Central Station and the
Port Authority Terminal, offering tenants easy access to commuting facilities.
The building was most recently renovated to upgrade certain of its mechanical
and operating systems at a total cost of approximately $93,000. As of August 31,
1997 the building was 100% leased and the annualized Escalated Rent was $27.44
per leased square foot as compared to a market rental rate, as of that date, of
$23.00 per leased square foot.
292 Madison Avenue (New York, New York). 292 Madison Avenue is a 25-story
Class B office building located on the northwest corner of Madison Avenue and
41st Street in midtown Manhattan. The building was built in 1920 and contains
186,901 rentable square feet. The Property is conveniently located to centers of
mass transit which offers tenants a desirable location. It also holds benefits
for prospective and existing tenants to establish full floor identity. As of
August 31, 1997, this Property was 98.9% leased and the annualized Escalated
Rent was $28.20 per leased square foot as compared to a market rental rate, as
of that date, of
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$25.00 per leased square foot. The major tenant is TBWA Advertising, Inc., a
national advertising firm ("TBWA"), under a lease which expires on December 31,
2005 and which is guaranteed by Ketchum Communications, Inc. (an affiliate of
Omnicom, Inc.). TBWA occupies 70,791 rentable square feet and recently invested
nearly approximately $4.0 million in tenant improvements in the building.
Madison Avenue Property Redevelopment Strategy. The Company has adopted a
redevelopment strategy in midtown Manhattan, which is designed to reposition
these three older Properties with a view toward realizing increases in rental
rates. In July 1995, the Company acquired the three Madison Avenue Properties
for an aggregate purchase price of $30 million, or approximately $90 per square
foot. The Company believes this purchase price represented an approximately 75%
discount to replacement cost. These three Properties have the advantage of
occupying an entire blockfront in a prime midtown Manhattan location which
provides existing tenants with a presence near all the amenities offered by
midtown Manhattan at a competitive Escalated Rent of $26.99 per square foot as
of June 30, 1997, as compared to a midtown Manhattan average market rental rate
of $34.73 per square foot. The Company believes that the current high occupancy
rate at these Properties (98.2% as of June 30, 1997) reflects the attractiveness
of the affordability of this office space. While other potential purchasers of
these Properties may have viewed the age and relatively low market rental rates
of the Properties as negatives, as a result of its turnaround philosophy, the
Company viewed these Properties as excellent candidates to implement its
property repositioning strategy.
The Company's Madison Avenue redevelopment strategy is spearheaded by an
approximately $5.2 million comprehensive capital improvement program, which the
Company intends to fund through working capital or finance through the Line of
Credit, and which includes (i) a physical combination of the three Properties
into one address by creating a common, upgraded lobby, refacing the Properties'
exteriors with a common granite facade and installing new storefronts and
awnings to first floor frontage; (ii) modernization of the Properties'
elevators; (iii) replacement of certain windows with vinyl clad thermal pane,
awning type windows; and (iv) improvements to common corridors and restrooms.
The Company believes that this redevelopment strategy will significantly enhance
the Properties' image and permit it to exploit their prime location and
prestigious Madison Avenue address to close the gap between existing rental
rates at the Properties and current Class A market rental rates. The Company
expects to implement its Madison Avenue redevelopment strategy in 1999 in
anticipation of future lease rollovers that will allow the Company to capture
rental growth resulting from the repositioning of the Properties. There can be
no assurance that this redevelopment program will be implemented.
Downtown Manhattan Financial Submarket
The Financial submarket, consisting of the World Trade, Financial and
Insurance districts, contains approximately 97.3 million square feet of office
space and accounts for approximately 76% of the downtown Manhattan office
market's inventory. Approximately 61% of the office space in the Financial
submarket consists of Class A office space (approximately 59.8 million square
feet). According to Landauer, the current direct vacancy rate for Class A office
space in this submarket decreased from 16.4% in 1992 to 14.7% in 1996. The
availability rate for all classes of space in the Financial submarket declined
from 18.5% in 1992 to 17.0% in 1996, with 4.0 million square feet absorbed while
at the same time there were almost no additions to the inventory supply. The
positive impact of supply reductions on rent levels lagged behind absorption; in
1992 average asking rents for Class A space in this submarket were $34.22 before
falling during the mid-1990s to $29.72 per square foot in 1996. The average
asking rental rate for Class A space in this submarket is $29.38 per square foot
as of June 30, 1997. During the first six months of 1997, the Class A direct
vacancy rate in the Financial submarket decreased from 14.7% to 12.2% and there
was a positive net absorption of approximately 1.4 million square feet.
Description of Downtown Manhattan Financial Submarket Property
100 Wall Street (New York, New York)
100 Wall Street is a twenty-nine-story, 458,848 square foot Class A
building located in downtown Manhattan. The building was designed by Emory Roth
& Sons, P.C. and completed in 1969. In 1994 the
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building underwent an extensive modernization program and was the recipient of
the 1994 Builders Owners and Managers Association (BOMA) award for
modernization/restoration. As of August 31, 1997, this Property was 88.7% leased
and the annualized Escalated Rent was $27.57 per leased square foot as compared
to an average market rental rate as of that date of $27.00 per leased square
foot. Major tenants include Credit Suisse an international bank and financial
institution (95,310 rentable square feet), Waterhouse Securities, Inc., a
national securities firm (94,358 rentable square feet), Swiss America
Corporation an international bank and financial institution (61,461 rentable
square feet) and MCI Telecommunications Corporation, an international
telecommunications company (34,250 rentable square feet).
Central Nassau County Submarket
The Central Nassau County Submarket contains approximately 1.9 million
square feet of space and accounts for 10.7% of the Long Island office market's
inventory. According to Landauer, the direct vacancy rate in the Central Nassau
County submarket decreased from 17.0% in 1992 to 10.9% in 1996, including a
significant 3.5% decrease from 1995 to 1996 alone. The availability rate in the
submarket declined from 17.0% in 1992 to 10.9% in 1996, with 200,000 square feet
absorbed while no square feet were added to the supply. In 1992 weighted average
asking rents in the submarket were $24.45 per square foot and in 1996 they were
$24.19. During the first six months of 1997, the vacancy rate in this submarket
decreased further to 9.7%, there was net absorption of 130,000 square feet and
average asking rental rates increased to $24.81 per square foot. There was no
new construction in this submarket during the first six months of 1997.
Description of Central Nassau County Submarket Property
120 Mineola Boulevard (Mineola, New York). 120 Mineola Boulevard is
comprised of both a six-story Class A office building with an accompanying
on-site enclosed, multi-level parking facility which accommodates approximately
415 vehicles. The building contains 100,810 rentable square feet and was
completed in 1984. The Property's location affords tenants and visitors easy
access to and from Manhattan and other parts of Long Island, via the Long Island
Railroad. Also, the Nassau County Government Seat is located just two blocks
from the building. The building's lobby was renovated in 1992 at a cost of
approximately $80,000. As of August 31, 1997, the building was 91.2% leased and
the annualized Escalated Rent was $26.74 per leased square foot as compared to a
market rental rate, as of that date, of $23.00 per leased square foot. The major
tenants are Kraft Foods, Inc., an international manufacturer and distributor of
retail goods (15,943 rentable square feet), U.S. Government, General Services
Agency (6,786 rentable square feet), and Winthrop University Hospital (22,281
rentable square feet).
Northwest Phoenix Submarket
Metropolitan Northwest Phoenix Office Submarket contains approximately 4.2
million square feet of space and accounts for approximately 9.4% of office
market inventory. According to Landauer, the vacancy rate in the Northwest
submarket decreased from 19.4% in 1992 to 13.8% in 1996. This decrease in
available space was due to an absorption of approximately 250,000 square feet
with no new space added to the supply. However, approximately 108,000 square
feet of pre-leased inventory was added to this submarket in 1997. The positive
impact of supply reductions has resulted in an increase in asking rents from
$12.00 per square foot in 1992 to $13.50 per square foot in 1996. During the
first six months of 1997, the vacancy rate in this submarket increased to 14.2%,
there was net absorption of 32,000 square feet and asking rents increased to
$14.00 per square foot. There are 108,000 square feet under construction in this
submarket during the first six months of 1997.
Description of Northwest Phoenix Submarket Properties
Corporate Center Properties (Phoenix, Arizona). The Corporate Center
Properties include six multi-story Class A office buildings containing an
aggregate of 453,559 square feet, including two freestanding restaurants
(individually, each building contains the following amounts of square footage:
(i) Building 10010-30: 188,614 rentable square feet; (ii) Building 10040: 23,155
square feet; (iii) Building 10050: 42,398 square feet; (iv) Building 10210:
45,100 square feet; (v) Building 10220: 24,128 square feet; (vi) Building
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9630: 113,164 square feet; and (vii) two restaurants: 17,000 square feet). The
Corporate Center Properties are located in close proximity to five major hotels,
over 40 restaurants, five financial institutions, Arizona State University West
Campus and Metrocenter, one of the largest regional shopping malls in the
southwest. There is also a 63-acre city park with a variety of recreational
facilities located directly east of the Corporate Center Properties and adjacent
to the Property is a major conference center containing a state of the art video
conferencing center, meeting rooms, and auditoriums. Most buildings feature
upgraded finishes such as rosewood solid core entry doors, marble flooring in
the lobby's wood paneled elevators, marbled drinking fountains, plush carpeting
and glass lobby entrances. In addition, all buildings share 1,971 parking
spaces. As of August 31, 1997, the Corporate Center Properties were leased in
the following percentages: (i) Building 10010-30: 100% leased; (ii) Building
10040: 100.0% leased; (iii) Building 10050: 100% leased; (iv) Building 10210:
100% leased; (v) Building 10220: 100% leased; and (vi) Building 9630: 100%
leased, and the annualized Escalated Rent and the market rental rate for such
period were as follows: (i) Building 10010-30: $15.62 per leased square foot as
compared to a market rental rate, as of that date, of $17.75 per leased square
foot; (ii) Building 10040: $16.41 per leased square foot as compared to a market
rental rate, as of that date, of $17.75 per leased square foot; (iii) Building
10050: $16.70 per leased square foot as compared to a market rental rate, as of
that date, of $17.75 per leased square foot; (iv) Building 10210: $15.65 per
leased square foot as compared to a market rental rate, as of that date, of
$17.75 per leased square foot; (v) Building 10220: $17.49 per leased square foot
as compared to a market rental rate, as of that date, of $17.75 per leased
square foot; and (vi) Building 9630: $18.33 per leased square foot as compared
to a market rental rate, as of that date, of $17.75 per leased square foot. The
major tenants at the Corporate Center Properties are as follows: (i) Building
10010-30: American Express which occupies an aggregate of 183,965 square feet;
(ii) Building 10040: Toyota Motor Credit Corporation, a national lending
institution, which occupies an aggregate of 10,384 square feet; (iii) Building
10050: American Express, Insurers Administrative Corporation, a national
insurance company and Amica Mutual Insurance Company, a national insurance
company, which occupy an aggregate of 11,147, 8,796 and 5,663 square feet,
respectively; (iv) Building 10210: Insurers Administrative Corporation, a
national insurance company, Principal Mutual Life Insurance Company, a national
insurance company, and Gary A. Blake dba Farmers Insurance Exchange, a regional
insurance company, which occupy an aggregate of 21,454, 14,603 and 6,820 square
feet, respectively; (v) Building 10220: U.S. West Communications, Inc., an
international communications conglomerate, which occupies an aggregate of 24,128
square feet; and (vi) Building 9630: American Express, Hartford Fire Insurance
Company, a national insurance company, General Motors Acceptance Corporation dba
GMAC, a national lending institution, Employers Mutual Casualty Company, a
national insurance company, St. Paul Fire & Marine Insurance Company, a national
insurance company, and Crawford & Company, an consulting firm, which occupy an
aggregate of 37,717, 18,615, 23,625, 10,281, 7,271 and 6,068, respectively.
American Express occupies an aggregate of 232,829 square feet in the Corporate
Center Properties and has recently expanded its rentable square footage on three
separate occasions. The majority of the space leased by American Express is
leased through 2002.
Uptown Phoenix Submarket
The Uptown Phoenix submarket contains approximately 10.3 million square
feet of office space and accounts for approximately 26.9% of the Phoenix
metropolitan area office market's inventory. According to Landauer, the vacancy
rate in the Uptown Phoenix submarket declined from 26.8% in 1992 to 13.0% in
1996, with approximately 1.3 million square feet absorbed while no new space was
added to the supply. The positive impact of supply reductions has resulted in an
increase in asking rents from $14.20 per square foot in 1992 to $15.00 per
square foot in 1996. During the first six months of 1997, the vacancy rate in
this submarket decreased further to 11.6%, there was net absorption of 175,000
square feet and asking rents increased to $15.50 per square foot. There was no
new construction in this submarket during the first six months of 1997.
Description of Uptown Phoenix Submarket Property
2800 North Central (Phoenix, Arizona). 2800 North Central is a 20-story
Class A office tower located in midtown Phoenix, which the Company, in a joint
venture with an affiliate of Carlyle, acquired in May 1996. The building also
features an ancillary two-story 7,000 square foot pavilion offering retail space
which is
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adjacent to a six-level parking garage which includes 1,083 parking spaces. The
building was completed in December, 1987, and contains 357,923 rentable square
feet. The Property interior consists of multi-tenant office space finished to
the tenant's specifications. The major tenants are AT&T Communications, Inc., an
international telecommunications company (22,459 rentable square feet), U.S.
West Communications, Inc., an international communications company (37,486
rentable square feet), Bryan Cave, McPheeters & McRoberts, a national law firm
(31,954 square feet), and Southwest Catholic Health Network, Inc. d/b/a
MercyCare, a regional not-for-profit healthcare organization (35,648 rentable
square feet). The multi-story lobby is finished with imported marble and granite
on the walls and floors with extensive copper accent treatments. As of August
31, 1997, this Property was 91.0% leased and the annualized Escalated Rent was
$16.24 per leased square foot as compared to a market rental rate, as of that
date, of $17.50 per leased square foot.
The 2800 North Central Property is owned in a joint venture with an
affiliate of Carlyle in which the Company owns a 1.01% general partner interest
and a 8.99% limited partner interest, as well as certain promote interests that
permit the Company's interest to increase to up to an aggregate 10.3%, 11.5%,
and 27.5% interest, respectively, in the event the partners therein realize a
rate of return in any given year in excess of 12% but less than 15%, in excess
of 15% but less than 20%, and in excess of 20%, respectively.
Under the partnership agreement (the "2800 Partnership Agreement") of the
partnership that owns the 2800 North Central Property, certain significant
partnership actions require the approval of an affiliate of Carlyle, including
(i) the sale or other disposition of the Property, (ii) the financing or
refinancing of the Property, (iii) the undertaking of any redevelopment or
improvements to the Property, (iv) the approval of any operating or capital
budget, or business plan, and (v) determining the amount and timing of
distributable funds to partners. See "Lack of Control Over Property Owned
Through Partnerships and Joint Ventures Could Result in Decisions Inconsistent
with the Company's Objectives." In addition, under the 2800 Partnership
Agreement, each of the Company and an affiliate of Carlyle have the certain
"buy/sell" rights to provide the other with a notice setting forth the terms,
based upon an all cash sale, which the proposing partner would accept in
connection with the sale of the Property by the partnership. Upon receiving any
such notice, the other partner has 60 days to either: (a) authorize the
proposing partner to attempt to sell the Property on substantially the same
terms as set forth in the proposing partner's notice or (b) purchase the
proposing partner's interest in the partnership at the proposing partner's
stated price. The failure of any purchasing partner to make the down payment
required under the partnership agreement within 60 days of receiving the
proposing partner's notice is deemed an authorization to the proposing partner
to attempt to sell the Property as described above.
Century Plaza Property (Phoenix, Arizona). The Century Plaza Property is a
15-story Class B office building located two and one-half miles west of downtown
Phoenix along the Central Avenue corridor. The building was built in 1974 and
contains 219,769 rentable square feet with parking for 600 vehicles. As of
August 31, 1997, this property was 84.2% leased and the annualized Escalated
Rental was $13.01 per leased square foot as compared to a market rental rate as
of such date of $16.50 per leased square foot. The major tenants are Veterans
Administration -- GSA, a U.S. governmental agency (90,873 square feet) and
Arizona Department of Economic Security (58,240 square feet).
Tucson Eastside Submarket
The Tucson Eastside submarket contains approximately 3.5 million square
feet of office space and accounts for approximately 34% of the Metropolitan
Tucson office market's inventory. The direct vacancy rate in the Tucson Eastside
submarket decreased from 20.8% in 1992 to only 10.2% in 1996. This vacancy rate
has further declined to approximately 7.0% as of June 30, 1997. During the
1992-1996 period, no new speculative space was added to the submarket's
inventory. Largely as a result of the limited amount of space, average asking
rents in the Tucson Eastside submarket have increased from $13.50 in 1992 to
$17.58 as of June 30, 1997. According to Landauer, there is currently a low
supply of Class A space in the Tucson Eastside submarket which is expected to
remain among the most competitive submarkets in the Tucson office market.
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Description of Tucson Eastside Submarket Property
5151 East Broadway (Tucson, Arizona). 5151 East Broadway is the largest
office building in Tucson, Arizona and is located in the heart of Tucson's
business and financial corridor. 5151 East Broadway is a 17-story Class A
high-rise office building which contains 246,486 rentable square feet and
includes 1,283 parking spaces. In 1995 and 1996, the building underwent an
extensive capital improvement program which included plaza and common area
upgrades and extensive improvements to the interior mechanical systems, at a
cost of approximately $2.75 million. The Company considers the building to be
one of the most desirable office projects in the Tucson market. As of August 31,
1997, this Property was 82.1% leased and the annualized Escalated Rent was
$16.15 per leased square foot as compared to a market rental rate as of that
date of $16.50 per leased square foot. The major tenants are The Winters Company
a regional engineering firm (25,800 rentable square feet), U.S. Home
Corporation, a national home builder (15,358 rentable square feet), Dean Witter
Reynolds, Inc., an international bank and financial institution (12,900 square
feet), Allstate Insurance Company a national insurance company (12,524 square
feet), Tucson Realty & Trust Company a local commercial real estate concern
(7,801 rentable square feet), and Equitable Life, an international insurance and
financial services company (6,730 rentable square feet).
Downtown Orlando Submarket
The Downtown Orlando submarket of the Orlando Metropolitan office market
contains 5.3 million square feet of space and accounts for approximately 25% of
the Orlando Metropolitan office market's inventory. The Downtown Orlando
submarket has absorbed over 675,000 square feet of office space since 1992,
including approximately 335,000 square feet in 1996 (representing approximately
31% of the overall absorption that occurred in the Orlando office market during
that year). During this same 1992-1996 period, only 80,000 square feet were
added to the supply. As a result, the vacancy rate in this submarket for the
year ended December 31, 1996 was 7.8%. Landauer reports that the strength of
this submarket is partly explained by the increasing attractiveness of downtown
Orlando and the critical mass of office space now located in this submarket.
Average rental rates have steadily risen to $16.75 per square foot in 1996 from
$14.45 per square foot in 1992. During the first six months of 1997, the vacancy
rate in this submarket decreased further to 7.9%, net absorption was
approximately 118,000 square feet and asking rents have increased to $20.35 per
square foot. There was no new construction in this submarket during the six
months quarter of 1997.
Description of Downtown Orlando Submarket Property
One Orlando Center (Orlando, Florida). One Orlando Center is a modern
19-story Class A granite and glass office tower that is easily visible on the
Orlando skyline with its unique neon lighting. The Property is located four
blocks north of the Orlando central business district and is two blocks from the
new downtown courthouse complex. One Orlando Center was built in 1989 and
contains 357,184 rentable square feet with parking for 1,386 vehicles. The
vacant parcel adjacent to the current parking structure was upgraded in 1996 by
relandscaping the entire area into a park-like setting at a cost of
approximately $125,000. As of August 31, 1997, this property was 99.5% leased
and the annualized Escalated Rent was $22.94 per leased square foot as compared
to a market rental rate, as of that date, of $21.00 per leased square foot. The
major tenants at the Property are First Union Bank a national bank (69,363
square feet), American Express an international financial institution (13,387
square feet), United Healthcare Services, Inc., a national healthcare provider
(39,240 square feet)and Hansen, Lind & Meyer, a national architectual and
engineering firm (30,000 square feet).
Southwest Orlando Submarket
The Southwest Orlando submarket contains approximately 1.2 million square
feet of office space and accounts for approximately 5% of the Orlando office
market's inventory. According to Landauer, the availability rate in the
Southwest Orlando submarket increased from 17.2% in 1992 to 22.4% in 1996, with
the new supply of space in the submarket remaining relatively constant during
such period. As a result, the vacancy rate in this submarket for the year ended
December 31, 1996 was 22.4%, 14.1% above the average for the entire Orlando
office market, as compared to a vacancy rate of 17.2% in 1992. During the first
six months
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of 1997, the vacancy rate in this submarket decreased considerably to 8.0%,
while net absorption totaled approximately 155,500 square feet. Asking rental
rates in the submarket increased from $13.03 per square foot in 1992 to $14.48
per square foot at June 30, 1997.
Description of Southwest Orlando Submarket Property
5750 Major Boulevard (Orlando, Florida). 5750 Major Boulevard is a
five-story Class B office building which is located directly across from
Universal Studios in Orlando, Florida. 5750 Major Boulevard was built in 1973
and contains 92,828 rentable square feet and 340 parking spaces. The Property is
currently undergoing an approximately $1.8 million capital improvement program,
which the Company intends to fund with working capital or through borrowings
under the Line of Credit, and which is expected to be completed in January 1998.
The Company believes the capital improvement program will reposition this
Property into a Class A property, attracting higher quality tenants and
corresponding market rental rates. As of August 31, 1997, this Property was
21.0% leased and the annualized Escalated Rent was $15.29 per leased square foot
as compared to a market rental rate, as of that date, of $18.75 per leased
square foot. The Property would be 74.5% leased if all space that was leased as
of August 31, 1997, but was not yet occupied, had been included in the
percentage leased. Concurrent with the capital improvement program, a focused
and aggressive leasing program has been implemented to attract creditworthy
tenants, and to restructure and consolidate existing leases at market rents. The
Company has recently signed leases with Sverdrup Facilities, Inc., a national
engineering and architectural firm, for 37,888 net rentable square feet, Apollo
Group Inc. a national educational services company for 18,944 net rentable
square feet, and Thruput Systems, Inc., a local computer software developer, for
7,314 net rentable square feet; and expects such tenants to occupy its leased
space during the remainder of 1997.
Maitland Center Submarket
The Maitland Center submarket contains approximately 3.5 million square
feet of office space and accounts for approximately 16% of the Orlando office
market's inventory. According to Landauer, the availability rate in the Maitland
Center submarket declined from 16.0% in 1992 to 3.7% in 1996, with 429,800
square feet absorbed while no additional space was added to the supply. As a
result, the vacancy rate in this submarket for the year ended December 31, 1996
was 3.7%, 4.6% below the average for the entire Orlando office market. The
positive impact of supply reductions on rent levels lagged behind absorption but
is now becoming evident; during 1992 asking rents were approximately $15.50 per
square foot before decreasing to approximately $14.99 per square foot in 1993
and remaining stagnant at that level through 1995 and then moderately increasing
and reaching $15.51 per square foot at the end of 1996. During the first six
months of 1997, the vacancy rate in this submarket increased to 13.4%,
approximately 208,000 square feet were under construction, and there was
negative net absorption of 22,962 square feet. In addition, asking rents
increased from $15.51 at December 31, 1996 to $17.58 at June 30, 1997.
Description of Maitland Center Submarket Properties
Maitland Forum (Maitland, Florida). Maitland Forum is a four-story Class A
office building located within Maitland Center, which is Central Florida's
largest office complex, off Interstate 4, and is in close proximity to downtown
Orlando. The Maitland Forum Property was built in 1985 and contains 266,060
rentable square feet and includes 944 parking spaces. As of August 31, 1997 this
Property was 99.9% leased and the annualized Escalated Rent was $15.58 per
leased square foot as compared to a market rental rate, as of that date, of
$17.00 per leased square foot. The major tenants at this Property are Honor
Technologies, Inc., a national banking services company (59,609 square feet),
Florida Power Corporation, a regional public utility (the utility company)
(52,622 rentable square feet), ITT Educational Services, Inc., a national
educational services company (34,422 rentable square feet), and Reliance
Insurance Company, a national insurance company (19,674 rentable square feet).
Maitland West Properties (Maitland, Florida). Maitland West is comprised
of three Class B office buildings; one three-story office building which
contains 38,564 square feet and two free standing grade-level buildings
containing 21,046 square feet. All three buildings share 249 parking spaces.
Maitland West I is also located within Maitland Center, Central Florida's
largest office complex, off Interstate 4, and is in close
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proximity to downtown Orlando. As of August 31, 1997, the Maitland West
Properties were leased in the following percentages: (i) 2601 Maitland Center
Parkway: 100% leased; (ii) 2603 Maitland Center Parkway: 81.7% leased; and (iii)
2605 Maitland Center Parkway: 100% leased, and the annualized Escalated Rent and
the market rate as of that date were as follows: (i) 2601 Maitland Center
Parkway: $15.28 per leased square foot as compared to a market rental rate, as
of that date, of $15.50 per leased square foot; (ii) 2603 Maitland Center
Parkway: $13.04 per leased square foot as compared to a market rental rate, as
of that date, of $15.50 per leased square foot; and (iii) 2605 Maitland Center
Parkway: $13.95 per leased square foot as compared to a market rental rate, as
of that date, of $15.50 per leased square foot. The major tenants at the
Maitland West Properties are as follows: (i) 2601 Maitland Center Parkway: P.
Allen & Associates, a local insurance company, which occupies an aggregate of
10,342 square feet; (ii) 2603 Maitland Center Parkway: CCL Consultants, Inc., a
regional consulting practice, and Blazer Financial Services, Inc., a national
financial services company, which occupy an aggregate of 5,693 and 3,050 square
feet, respectively; and (iii) 2605 Maitland Center Parkway: Health Plans of
America, Inc., a regional health insurance company, Community Care Network,
Inc., a national health insurance company, FJW Enterprises Inc., a regional
restaurant chain, Systems One Services, Inc., a national personnel services firm
and General Electric Corporation, an international financial services company,
which occupy an aggregate of 15,368, 12,568, 5,827, 2,616 and 2,185 square feet,
respectively.
DEVELOPMENT PARCELS
5151 East Broadway. Upon consummation of the Offering, the Company will
hold additional development rights to develop 220,000 square feet which is
currently on the Tucson city counsel's agenda for planning and zoning approval.
Pursuant to the Company's preliminary development plan, the 220,000 square feet
will consist of a 150,000 square feet mid-rise office building and a 70,000
square foot expansion of the single-story portion of the site. The Company
estimates that the cost to complete such development will be approximately $30
million, which the Company intends to fund with working capital or through
project financing. There can be no assurance that such development will take
place.
Corporate Center. Upon consummation of the Offering, the Company will hold
additional development rights to develop approximately 150,000 square feet on an
existing parking lot. In addition, the Company intends to expand its parking
facilities by adding a one level parking structure. The Company estimates that
the cost to complete such development will be approximately $15 million, which
the Company intends to fund with working capital or through project financing.
There can be no assurance that such development will take place.
LAND PARCEL OPTIONS
Phoenix Land Parcel. The Company will acquire, at no cost, an option held
by certain Primary Contributors that will provide the Company with the right to
acquire from an unaffiliated third party for approximately $10.3 million,
approximately 43 acres of undeveloped land in Phoenix that can support 1.0
million square feet of development. The Black Canyon is the only interstate
freeway providing north access out of Phoenix. The 101 Loop Freeway has been
completed, going eastward, to the Black Canyon, and from the southeast, north
and west, reaches to Thomas and Pima Roads. When fully completed, it will form a
complete loop around Phoenix. Site plans call for up to 1 million square feet of
office space development. Within a 30-minute drive from the site is the Deer
Valley Airport (private planes) and the Sky Harbor International Airport. As of
August 31, 1997, the Company had advanced approximately $250,000 for preliminary
development work relating to this land. The right to acquire the land expires on
September 30, 1997, subject to two one-month extensions that each require the
payment of a $100,000 extension fee. Pursuant to the Company's Bylaws, the
Company is authorized to exercise this option only if the Independent Directors
unanimously approve the exercise of such option.
One Orlando Center Land Parcel. The Company holds a five-year option from
certain Primary Contributors to acquire certain additional properties and
development rights relating to an approved master plan filed with the City of
Orlando for the further development of One Orlando Center. These development
rights include approximately 800,000 square feet of space including a second
405,000 square foot office tower,
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a 300-room hotel, 60 residential units, and 100,000 square feet of retail space.
The Company estimates the cost to complete such development to be approximately
$150 million. The exercise price of the option is $3.8 million (75% of the
appraised value of the land as of May 9, 1997), which equates to approximately
$4.75 per buildable square foot. Pursuant to the Company's Bylaws, the Company
is authorized to exercise this option only if (a) a majority of Independent
Directors approve the exercise of such option and (b) the individual building(s)
to be built on the property is at least 50% preleased prior to commencement of
construction, or in the event the individual building(s) to be built on the
property is less than 50% preleased, the Board of Directors unanimously approves
the exercise of such option.
The exercise of these options by the Company is subject to a number of
contingencies, including the completion of due diligence, completion of the
Company's analysis of the development opportunity and the receipt of appropriate
Board approval and, therefore, are not deemed probable.
AIR RIGHTS AND GROUND LEASE AGREEMENTS
Tower 45. The Company is the tenant under a lease providing it with air
rights for 124,000 square feet of development at a theater adjacent to the Tower
45 Property. The lease expires in November 2236 and currently provides for
annual lease payments of approximately $575,000 per year. As of August 31, 1997,
the Company has the right to acquire the site for approximately $11 million.
This price increases through the expiration of the option on October 31, 2001,
at a rate of 50% of the percentage increase in the consumer price index as
defined in the lease (which equates to a purchase price of approximately $13
million as of August 31, 1997).
120 Mineola Boulevard. The Company is the tenant under a lease for a
parking garage. The lease expires in October 2013, subject to the Company's
right to extend the term pursuant to two 30-year renewal options. The lease
provides for a current annual lease payment of $33,000, increasing to $46,500 in
2001.
DEPRECIATION OF SIGNIFICANT PROPERTIES
The Tower 45, One Orlando Center and 100 Wall Street Properties
(collectively, the "Significant Properties") are deemed "significant" because
they each accounted for more than 10% of the Company's gross revenues for its
last fiscal year and the book value of such Significant Properties amounted to
10% or more of the Company's total assets for such period. For federal income
tax purposes, the basis, net of accumulated depreciation, in the Tower 45 and
One Orlando Center Properties aggregated approximately $133 million at June 30,
1997. Similar data for the 100 Wall Street Property is not available because the
Company did not own the Property during that period (and will not own it until
the closing of the Offering). The real property associated with those
Significant Properties (other than land) generally will be depreciated for
federal income tax purposes over 40 years using the straight line method. For
financial reporting purposes, the Significant Properties are recorded at their
historical cost and are depreciated using the straight line method over their
estimated useful lives, typically 40 years. The federal tax basis on the Tower
45 Property equals approximately $18 million for the land and approximately
$55.5 million for the building. The federal tax basis on the One Orlando Center
Property equals approximately $6.1 million for the land and approximately $53.4
million for the building. Depreciation on these Properties is computed on the
straight line method at a rate of 2.5% and the life claimed with respect to the
buildings is 40 years.
REAL ESTATE TAXES ON SIGNIFICANT PROPERTIES
The 1996 annual real estate taxes paid on the Tower 45 Property were
approximately $3.7 million. The New York City real estate tax rate is $10.402
per each $100 of assessed value. The 1996 annual real estate taxes paid on the
One Orlando Center Property were $758,000. The Orlando real estate tax rate is
$22.4557 per each $1,000 of assessed value. The 1996 annual real estate taxes
paid on the 100 Wall Street Property were approximately $2.35 million. The New
York City real estate tax rate is $10.402 per each $100 of assessed value.
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OCCUPANCY, EFFECTIVE RENT AND OTHER DATA AT SIGNIFICANT PROPERTIES
The following table sets forth year-end occupancy of and Net Effective Rent
at the Significant Properties for 1992 through 1996.
<TABLE>
<CAPTION>
OCCUPANCY AT DECEMBER 31, NET EFFECTIVE RENT
-------------------------------------- ------------------------------------------------
SIGNIFICANT PROPERTIES 1992 1993 1994 1995 1996 1992 1993 1994 1995 1996
- --------------------------- ---- ---- ---- ---- ---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tower 45................... 94.8% 96.0% 99.8% 99.1% 99.3% $36.11 $34.74 $33.20 $26.38 $32.53
One Orlando Center......... (1) 68% 75% 99.1% 99.3% (1) (1) $19.50 $20.02 $19.95
100 Wall Street............ 82.2% 70.9% 80.1% 82.9% 95.5% (1) (1) (1) (1) (1)
</TABLE>
- ---------------
(1) Data not available because the Company did not own the Property during the
applicable period.
Information with respect to significant tenants at the Significant
Properties and the markets in which they are located is set forth under
"-- Submarket and Property Information -- Times Square Submarket and --
Description of Times Square Submarket Property (Tower 45), -- Downtown Orlando
Submarket and -- Description of Downtown Orlando Submarket Property (One Orlando
Center), and -- Downtown Manhattan Financial Submarket and -- Description of
Downtown Manhattan Financial Submarket Property (100 Wall Street)." See also
"Risk Factors -- Impact of Competition on Occupancy Levels, Rent Charged,
Acquisitions and Management Services."
EXCLUDED PROPERTIES
Tower Equities will retain certain assets and liabilities which will not be
transferred to the Company in the Formation Transactions. These assets, the
Excluded Properties, consist entirely of interests in seven retail shopping
center properties containing an aggregate of 800,000 rentable square feet. The
Excluded Properties were excluded from the Company because they were
inconsistent with the Company's investment objectives. The executive officers of
the Company will each devote substantially all their business time to the
day-to-day operations of the Company. Such officers are not expected to devote
any significant part of their business time to Tower Equities' continued
operations relating to the Excluded Properties. In addition, the members of
Tower Equities that hold interests in the Excluded Properties will enter into
management agreements with the Management Company with respect to operation of
such properties that will provide for the payment of a market rate property
management fee, as well as applicable leasing commissions.
MORTGAGE INDEBTEDNESS REMAINING FOLLOWING THE OFFERING
Upon the closing of the Offering, the Company will have total consolidated
mortgage indebtedness ("Mortgage Debt") of approximately $131.7 million
(including its pro rata share of Joint Venture Debt), representing approximately
24.5% of the Company's Total Market Capitalization. Approximately $72.0 million
of the Mortgage Debt will consist of the Term Loan. The proceeds of the initial
borrowing under the Term Loan will be used to fund a portion of the Company's
acquisition of interests in the Properties. The remainder of the Mortgage Debt
will consist of prior indebtedness of the Tower Predecessor including $35.0
million relating to the Tower 45 Property. The Company will have the right to
prepay, commencing 40 days following the Offering and prior to maturity, the
$35.0 million of mortgage indebtedness that will be secured by the Tower 45
Property following the consummation of the Offering. If the Company determines
to prepay the loan prior to maturity, the Company is positioned to finance such
prepayment by drawing upon the remaining $35.0 million of available borrowing
capacity under the Term Loan. The following table sets forth certain information
regarding the remaining mortgage indebtedness immediately after the closing of
the Offering.
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MORTGAGE INDEBTEDNESS REMAINING FOLLOWING THE OFFERING
<TABLE>
<CAPTION>
ANNUAL
INTEREST MATURITY --------------
PROPERTY(IES) RATE AMORTIZATION DATE
- ----------------------------- PRINCIPAL ------- ------------ ---------------------- (IN THOUSANDS)
AMOUNT
--------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Corporate Center
Properties................. $ 21,000 7.55% None (1) January 1, 2006 $ 1,586
Corporate Center
Properties................. 1,000 8.37% 25 years January 1, 2006 96
One Orlando Center, 286, 290
and 292 Madison Avenue
Properties................. 72,000 (2) None (3) (4) 5,004
Tower 45(5).................. 35,000 LIBOR + None December 31, 1998 2,433
1.75%
2800 North Central(6)........ 2,658 9.41% None May 31, 1999(7) $ 240
----------- ---- ----------
Total/Weighted
Average........... $131,658 7.11% October 1, 2003(8) $ 9,359
=========== ==== ==========
</TABLE>
- ---------------
(1) Commencing in February 1998, monthly payments will include principal based
on a 25-year amortization schedule until the maturity date.
(2) The Term Loan will bear interest at a fixed rate equal to .9% in excess of
seven-year United States Treasury Notes at the closing of the Offering. The
seven-year Treasury note rate of 6.05% as of September 18, 1997 was used for
the calculation of the weighted average rate in the table above. The
Company's borrowing capacity under the Term Loan will be approximately $107
million.
(3) After the first two years that this loan is outstanding, monthly payments
will include principal based on a 28-year amortization schedule until the
maturity date.
(4) This loan will mature seven years after the consummation of the Offering.
(5) This loan is prepayable prior to maturity without premium or penalty. The
Company expects to have borrowing capacity under the Term Loan in an amount
that would be sufficient to prepay the Tower 45 loan prior to maturity. The
interest rate on the Term Loan was used for the calculation of the weighted
average rate in the table above. If the Term Loan is so used to prepay the
Tower 45 loan, the Tower 45 Property will secure the Term Loan and the three
Madison Avenue Properties will become unencumbered.
(6) Represents the Company's share of Joint Venture Debt relating to this
Property, in which the Company holds a 10% unconsolidated equity interest.
The lender holds a right to certain participation payments upon the
occurrence of certain events, including certain sales, maturity,
refinancing, or other disposition of the underlying property.
(7) Subject to certain conditions, the borrower under this loan may extend the
maturity date to May 31, 2000.
(8) The Company's remaining mortgage debt will have a weighted average maturity
of six years. For this calculation it is assumed that the $72.0 million Term
Loan matures in October 2004.
ASSUMED DEFERRED TAX LIABILITY
In connection with the Formation Transactions, the Company will assume
approximately $13 million of deferred taxes relating to the Tower 45 Property
which have accrued since 1988 under New York City's Industrial Commercial
Incentive Program (the "ICIP"). Under the ICIP, which was established to provide
incentives to developers and redevelopers of property in New York City, the
Company will be obligated to pay deferred taxes aggregating approximately $13
million in equal installments over a 10-year period, commencing in July 1998.
Interest does not accrue on the deferred taxes. The Company believes that, based
on current tenant contractual recoveries in respect of the ICIP deferred tax
liability, over the 10-year payment period it will be able to recover
approximately $2.5 million (or 19.2%) of the Company's total liability in
respect thereof.
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LINE OF CREDIT
Neither the Company's Bylaws nor its Charter will limit the amount of
indebtedness the Company may incur. To ensure the Company has sufficient
liquidity to conduct its operations, including to finance its acquisition of
additional office properties, to refinance existing indebtedness and for general
working capital requirements, the Company has obtained a commitment from Merrill
Lynch Capital Corporation for the $200 million Line of Credit. The Line of
Credit will be used primarily to finance the acquisition of, and investment in,
office properties, to refinance existing indebtedness, and for general working
capital needs. The Line of Credit will be unsecured and will have a three-year
term which will commence upon or shortly after the closing of the Offering.
While the Line of Credit permits borrowings up to $200 million, the Operating
Partnership's total outstanding indebtedness including aggregate advances under
the Line of Credit, is expected to be limited to 55% of the Total Value (as
defined below) during the first year of the term of the Line of Credit and 50%
of the Total Value thereafter. "Total Value" shall mean Cash Flow (as defined
below) capitalized at 9.5% plus (i) 100% of out-of-pocket costs for assets under
development (subject to a maximum of 10% of Total Value), and (ii) 100% of cash
and cash equivalents (excluding restricted deposits). "Cash Flow" shall mean the
sum of (a) Funds from Operations, (adjusted for non-recurring items and non-cash
revenue, including, without limitation, the effect of straight-lining the rents
pursuant to GAAP) and (b) interest expense. Outside of the Line of Credit, the
Company and the Operating Partnership may not incur secured indebtedness which
exceeds 40% of the Total Value during the first year of the term of the Line of
Credit and 35% thereafter. Recourse indebtedness of the Company and the
Operating Partnership, exclusive of the Line of Credit, shall not exceed 5% of
Total Value. Neither the Company nor the Operating Partnership shall make any
distributions in a quarter which, when added to all distributions made during
the immediately preceding three quarters exceeds 95% of Funds from Operations.
Borrowings under the Line of Credit are expected to bear interest at a variable
rate equal to (subject to certain exceptions): (x) LIBOR plus 125 basis points
if the Operating Partnership's total outstanding indebtedness is less than 30%
of Total Value; (y) LIBOR plus 137.5 basis points if the Operating Partnership's
total outstanding indebtedness is greater than or equal to 30% of Total Value
but less than 45% of Total Value; and (z) LIBOR plus 162.5 basis points if the
Operating Partnership's total outstanding indebtedness is greater than or equal
to 45% of Total Value but less than 55% of Total Value; in each case, calculated
based on interest periods of one, two, three or six months at the option of the
Operating Partnership. Economic conditions could result in higher interest
rates, which could increase debt service requirements on borrowings under the
Line of Credit and which could, in turn, reduce the amount of Cash Available for
Distribution. See "Risk Factors -- Changes in Policies, Such as the Company's
Debt Policy, without Stockholder Approval Could Adversely Affect the Company."
The Company will pay a loan fee of approximately $1.0 million upon the closing
of the Line of Credit. The closing of the Line of Credit is subject to the
satisfaction of customary conditions, including the negotiation and execution of
customary loan documents. Accordingly, there can be no assurance that the Line
of Credit will close on the terms set forth in its commitment with Merrill Lynch
Capital Corporation.
INSURANCE
The Operating Partnership will carry comprehensive liability, fire,
extended coverage and rental loss insurance covering all of the Properties, with
policy specifications and insured limits which the Company believes are adequate
and appropriate under the circumstances. There are, however, certain types of
losses that are not generally insured because they are either uninsurable or not
economically feasible to insure. Should an uninsured loss or a loss in excess of
insured limits occur, the Company could lose its capital invested in the
Property, as well as the anticipated future revenues from the Property and, in
the case of debt which is with recourse to the Company, would remain obligated
for any mortgage debt or other financial obligations related to the Property.
Any such loss would adversely affect the Company. Moreover, the Company will
generally be liable for any unsatisfied obligations other than non-recourse
obligations. Company management believes that the Properties are adequately
insured. No assurance can be given that material losses in excess of insurance
proceeds will not occur in the future. See "Risk Factors -- The Company's
Performance and Value are Subject to Risks Associated with the Real Estate
Industry -- Uninsured Losses Could Adversely Affect the Company's Cash Flow."
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state, and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous
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or toxic substances on, under or in such property. Such laws often impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. In addition, the presence of
hazardous or toxic substances, or the failure to remediate such property
properly, may adversely affect the owner's ability to borrow using such real
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances may also be liable for the costs of removal or
remediation of hazardous substances at the disposal or treatment facility,
whether or not such facility is or ever was owned or operated by such person. In
connection with the ownership (direct or indirect), operation, management and
development of real properties, the Company may be considered an owner or
operator of such properties or as having arranged for the disposal or treatment
of hazardous or toxic substances and, therefore, potentially liable for removal
or remediation costs, as well as certain other related costs, including
governmental fines and injuries to persons and property. Certain environmental
laws and common law principles could be used to impose liability for release of
and exposure to hazardous substances, including ACMs into the air, and third
parties may seek recovery from owners or operators of real properties for
personal injury or property damage associated with exposure to released
hazardous substances, including ACMs. As the owner of the Properties, the
Company may be potentially liable for any such costs.
The Company engaged an independent consulting firm to perform Phase I ESAs,
or updates on ESAs performed within the last 12 months, on all of the
Properties. The purpose of Phase I ESAs is to identify potential sources of
contamination for which the Company may be responsible and to assess the status
of environmental regulatory compliance. For a number of the Properties, the
Phase I ESAs referenced prior Phase II ESAs obtained on such Properties. Phase
II ESAs generally involve more invasive procedures than Phase I ESAs, such as
soil sampling and testing or the installation and monitoring of groundwater
wells. The ESAs have not revealed any environmental condition, liability or
compliance concern that the Company believes would have a material adverse
affect on the Company's business, assets or results of operations, nor is the
Company aware of any such condition, liability or concern. See "Risk
Factors -- The Company's Performance and Value are Subject to Risks Associated
with the Real Estate Industry -- Liability for Environmental Matters Could
Adversely Affect the Company's Financial Condition."
COMPETITION
The Company may be competing with other owners and developers that have
greater resources and more experience than the Company. Additionally, the number
of competitive properties in any particular market in which the Company's
Properties are located could have a material adverse effect on both the
Company's ability to lease space at the Properties or any newly acquired
property and on the rents charged at the Properties. The Company believes its
major competitors are local real estate companies in its markets that specialize
in the redevelopment and development of office buildings and (i) in the New York
City office market; SL Green Realty Corp., (ii) in the Metropolitan Orlando
office market; Highwoods Properties, Inc., and (iii) in the Metropolitan Phoenix
office market; Prentiss Properties Trust and CarrAmerica Realty Corporation. The
Company believes that the Offering, the Line of Credit and its access as a
public company to the capital markets to raise funds during periods when
conventional sources of financing may be unavailable or prohibitively expensive
will provide the Company with substantial competitive advantages. Further, the
Company believes that the number of real estate developers has decreased as a
result of the recessionary market conditions and tight credit markets during the
early 1990s as well as the reluctance on the part of more conventional financing
sources to fund development and acquisition projects.
EMPLOYEES
Upon consummation of the Offering and the Formation Transactions, the
Company will employ approximately 70 persons including five executive officers.
LEGAL PROCEEDINGS
As a result of its acquisition of the Properties, the Company will become a
successor party-in-interest to certain legal proceedings arising in the ordinary
course of business of Tower Equities. The Company does not expect that these
proceedings, in the aggregate, will have a material adverse effect on the
Company.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the Company will be expanded immediately
following the consummation of the Offering to include the director nominees
named below, each of whom has been nominated for election and consented to
serve. Upon election of the director nominees, there will be a majority of
directors who are Independent Directors. Pursuant to the Charter, the Board of
Directors is divided into three classes of directors. The initial terms of the
first, second and third classes will expire in 1998, 1999 and 2000,
respectively. Beginning in 1998, directors of each class will be chosen for
three-year terms upon the expiration of their current terms and each year one
class of directors will be elected by the stockholders. The Company believes
that classification of the Board of Directors will help to assure the continuity
and stability of the Company's business strategies and policies as determined by
the Board of Directors. Holders of shares of Common Stock will have no right to
cumulative voting in the election of directors. Consequently, at each annual
meeting of stockholders, the holders of a majority of the shares of Common Stock
will be able to elect all of the successors of the class of directors whose
terms expire at that meeting.
The following table sets forth certain information with respect to the
directors, director nominees and executive officers of the Company immediately
following the consummation of the Offering.
<TABLE>
<CAPTION>
TERM
NAME AGE POSITION EXPIRATION
- ------------------------------------ --- ------------------------------------ ----------
<S> <C> <C> <C>
Lawrence H. Feldman................. 43 Chairman of the Board, Chief 2000
Executive Officer and President
Robert L. Cox....................... 36 Executive Vice President and Chief 1999
Operating Officer and Director
Nominee
Joseph D. Kasman.................... 39 Senior Vice President, Chief
Financial Officer and Treasurer
Eric S. Reimer...................... 38 Vice President -- Leasing
Reuben Friedberg.................... 71 Vice President -- Finance
Stephen B. Siegel................... 53 Director Nominee 2000
Esko I. Korhonen.................... 42 Director Nominee 1998
Robert M. Adams..................... 56 Director Nominee 1998
Richard M. Wisely................... 52 Director Nominee 1998
Lester S. Garfinkel................. 43 Director 1999
</TABLE>
The following is a biographical summary of each of the directors, director
nominees and executive officers of the Company:
Directors and Executive Officers
LAWRENCE H. FELDMAN. Mr. Feldman serves as Chairman of the Board, Chief
Executive Officer and President of the Company. Since March 1990, Mr. Feldman
served as President and Chief Executive Officer of Tower Equities and prior
thereto was employed by Tower Equities for approximately 17 years. Mr. Feldman
is the Chairman emeritus and founder of the Midtown West Association, an
association of owners, merchants and tenants in the West 44th to 45th Street
area which has combined with the city to improve security and the physical
condition of the area. He is also a member of Associated Builders & Owners of
Greater New York, the Real Estate Board of New York and NAREIT. Mr. Feldman
graduated from Windham College in 1976 with a business degree.
ROBERT L. COX. Mr. Cox serves as Executive Vice President, Chief Operating
Officer and Director Nominee of the Company. Since December 1995, Mr. Cox served
as Senior Vice President -- Construction of Tower Equities and prior to that, he
served as Vice President -- Construction of Tower Equities from 1989 to November
1995 where his main responsibilities included supervising all of Tower
Equities's construction projects. Before joining Tower Equities, Mr. Cox was
Chairman of Cox Building Concepts, a national construction management company
specializing in the construction of high-rise office buildings. He is
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currently a member of Building Owners and Management Association and the
National Contractor's Register. Mr. Cox graduated from Florida State University
in 1983 with a Bachelor of Arts in Architecture.
JOSEPH D. KASMAN. Mr. Kasman serves as Senior Vice President, Chief
Financial Officer and Treasurer of the Company. Since February 1996, he was
employed by Tower Equities where he administered real estate related
acquisitions. Prior to that, he was a Vice President of Acquisitions for Quantum
Realty Fund from September 1993 to January 1996, where he was responsible for
real estate transactions including acquisitions, joint ventures and
securitizations. Before his employment at Quantum Realty Fund, Mr. Kasman was a
Vice President of Finance with Olympia & York. Mr. Kasman graduated from State
University of New York at Buffalo in 1979 with a Bachelor of Science degree in
Civil Engineering and City University of New York in 1983 with a Masters in
Business Administration degree.
ERIC S. REIMER. Mr. Reimer serves as Vice President -- Leasing of the
Company. Since 1987, he was employed at Tower Equities where his
responsibilities included overseeing all leasing activity in the Tower Equities'
portfolio throughout the United States. Prior to joining Tower Equities, he was
the Vice President of Leasing for Rostenberg-Doern in New York's Westchester
County and Connecticut's Fairfield County where he specialized in tenant
representation. He is a member of Building Owners and Management Association and
Industrial Office Real Estate Brokers Association. Mr. Reimer graduated from the
University of Vermont in 1981 with a Bachelor of Arts degree.
REUBEN FRIEDBERG. Mr. Friedberg serves as Vice President -- Finance of the
Company. Since 1992, he served as Vice President -- Finance of Tower Equities.
Prior to joining Tower Equities, Mr. Friedberg was the controller of other firms
in the real estate and construction industry. Mr. Friedberg graduated from
Baruch College in 1948 with a Bachelor of Business Administration degree and has
been a Certified Public Accountant in the State of New York since 1957.
STEPHEN B. SIEGEL. Mr. Siegel serves as President and Chief Executive
Officer of Insignia Commercial Group, Inc. He was named to this position
following the acquisition of Edward S. Gordon Company by Insignia Financial
Group in 1996. Mr. Siegel continues as President of Insignia/Edward S. Gordon
Co., a post he has held since 1992. From 1988 to 1992, Mr. Siegel was President
of Chubb Realty, a real estate development subsidiary of The Chubb Corporation.
Prior to that, he was employed by Cushman & Wakefield, Inc. for 27 years, rising
to the position of Chief Executive Officer. Mr. Siegel serves on the advisory
board of Wharton Business School's Real Estate Center and New York University's
Real Estate Council, and is a director of Liberty Property Trust.
ESKO I. KORHONEN. Mr. Korhonen is a principal of Carlyle Realty, L.P., an
affiliate of Carlyle, a Washington, D.C. based merchant banking firm, and since
April, 1995, he has been part of a group that is responsible for coordinating
the firm's real estate acquisitions. From 1991 to April, 1995, Mr. Korhonen was
Vice President of ING Real Estate, a subsidiary of the Netherlands based ING
Groep N.V., a financial services company ("ING"), where he directed acquisition
and asset management activities for ING's North American real estate portfolio.
From 1988 to 1991, Mr. Korhonen was a partner and regional manager at Richard
Ellis Inc., an investment advisory firm, where he acted as a principal-side
advisor to foreign and domestic institutional investors for the acquisition and
asset management of North American real estate. Mr. Korhonen began his real
estate career in 1983 as a developer with the Trammell Crow Company in Houston,
Texas. Mr. Korhonen graduated in 1977 with a B.A. from Colgate University and an
M.B.A. in 1983 from The J.L. Kellogg Graduate School of Business at Northwestern
University.
ROBERT M. ADAMS. Mr. Adams currently serves as Director, New Business
Development at Keefe, Bruyette & Woods, Inc., an investment banking firm ("Keefe
Bruyette") and served as President of Adams Financial Services, Inc. from June
1995 to April 1996. Prior to that, Mr. Adams was a co-founder and Managing
Director of Adams Cohen & Associates, Inc. and Adams Cohen Securities Inc. from
1984 to May 1995. Prior to that, he was a Senior Vice President of E.F. Hutton &
Co. in the Corporate Finance Department, was a General Partner of Loeb Rhoades &
Co. and was a Second Vice President at Chase Manhattan Bank, N.A. Mr. Adams
graduated from Brown University in 1963 with a Bachelor of Arts in Economics
degree and the Wharton School of Finance and Commerce, University of
Pennsylvania in 1967 with a Masters in Business Administration degree with a
concentration in Finance.
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RICHARD M. WISELY. Mr. Wisely currently serves as Chairman of the Board
and Chief Executive Officer of LungCheck Inc., a highly specialized diagnostic
laboratory and lung cancer research facility that he co-founded in 1996. From
1990 until his retirement in August 1995, Mr. Wisely served as Sr. Vice
President and Chief Operating Officer of Rexall Sundown, Inc., a publicly-traded
vitamin and over-the-counter pharmaceutical manufacturer. Prior to joining
Rexall Sundown as the Sr. Vice President of Operations in 1985, Mr. Wisely had
spent 17 years with Dart Industries, principally with the former Rexall Drug
Company of St. Louis; his last position there was Vice President of Operations.
LESTER S. GARFINKEL. Mr. Garfinkel has been a partner in the public
accounting firm of Reminick, Aarons & Company, LLP since October 1996, where he
is in charge of the firm's quality control and professional standards. Prior to
joining the firm, he managed his family's investment portfolio from March 1996
to September 1996. Prior to that, Mr. Garfinkel was a principal at Feldman Radin
& Company (no affiliation with Tower Equities or Lawrence H. Feldman
personally), a public accounting firm, from April 1995 to March 1996. Prior to
joining Feldman Radin & Company, he was a partner at Weber, Lipshie & Co., an
international public accounting firm, from January 1980 to June 1994, where his
clients, among others, were residential, commercial and shopping center
developers and owner operators. He has been a Certified Public Accountant in the
State of New York since 1979, and he is a member of the American Institute of
Certified Public Accountants and the New York State Society of Certified Public
Accountants where he has served on technical and public relations committees.
MANAGING DIRECTORS AND OTHER KEY EMPLOYEES
The following is a biographical summary of each of the managing directors
of Tower Equities' primary markets and other key employees:
SCOTT JENSEN. Mr. Jensen serves as the Managing Director -- Southwest
Region of the Company. Since December 1995, he served as Regional Vice President
of Leasing at Tower Equities. Prior to that, Mr. Jensen was an office
leasing/sales specialist at Grubb & Ellis from 1983 to November 1995, where he
received several productivity-based awards. Mr. Jensen graduated from the
University of Arizona in 1980 with a Bachelor of Science degree in Finance and
Real Estate.
CLIFFORD L. STEIN. Mr. Stein serves as Managing Director -- Southeast
Region of the Company. Prior to joining the Company, he founded and was a
principal of Properties Atlantic since 1987. Properties Atlantic is a tenant
representation firm which has developed a client list which includes many
"Fortune 500" companies and is currently one of the largest brokerage firms in
Orlando. Mr. Stein is a former Commissioner of the Community Redevelopment
Agency of Altamonte Springs and is a member of the Florida Chamber of Commerce
and the Economic Development Commission of Mid-Florida. Mr. Stein graduated from
the University of Central Florida in 1981 with a Bachelor of Arts degree.
JAMES A. COWAN. Mr. Cowan serves as Vice President-Acquisitions of the
Company. Prior to joining the Company, he served as an Associate of Victor
Capital Group, L.P. from March 1995 to April 1997 where he specialized in the
acquisition and restructuring of sub-performing mortgage debt. Prior to that,
Mr. Cowan was an Associate of Quantum Realty Fund (from March 1994 to February
1995) and a consultant of the Realty Consulting Group of Deloitte & Touche LLP
(from March 1993 to February 1994). Mr. Cowan graduated from Villanova
University in 1989 with a Bachelor of Science degree in Business Administration
and New York University in 1996 with a Masters of Science degree in Real Estate.
THOMAS WOODWARD. Mr. Woodward serves as Controller of the Company. He
served as Controller of Tower Equities since October 1995. Prior to joining
Tower Equities, he served as the Controller of Century 21 from January 1992 to
September 1995. Prior to that, Mr. Woodward was the Controller for Newmark &
Co., Coldwell Banker, and Sutton & Edwards and he has over 23 years of
accounting and financial reporting experience in the real estate industry. Mr.
Woodward graduated from Brooklyn College in 1973 with a Bachelor of Science
degree in Accounting and Economics.
JAMES BOURG. Mr. Bourg serves as the Vice President of Development and
Acquisitions-Southwest Region of the Company. Prior to joining the Company, he
served as the Vice President of Development &
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Acquisitions-Southwest Region of Tower Equities. Prior to that, Mr. Bourg was a
Real Estate Investment Sales Specialist at Grubb & Ellis with emphasis on
financial and real estate evaluation for institutional sellers and he has over
16 years of real estate experience. Mr. Bourg graduated from California State
Polytechnic University in 1978 with a Bachelor of Science degree in accounting.
Mr. Bourg has been a Certified Public Accountant in the State of Arizona since
1980.
KLAUS P. HILGERS. Mr. Hilgers serves as Vice President-Corporate
Development of the Company. He is responsible for the systems, controls,
standard operating procedures, discipline, automation and training of staff in
order to better manage the Company's growth with maximum efficiency. Prior to
joining Tower Equities, from 1978 to April 1997 he was President of Epoch
Consultant's Inc., a management consulting firm specializing in organizational
development and training for such companies as Anadigics Inc., Weyerhaeuser,
Honeywell, RCA & AT&T. Mr. Hilgers graduated from Rider College in 1969 with a
Bachelor of Arts degree in Political Science and from Montclair State University
in 1974 with a Masters degree in Sociology.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. Promptly following the completion of the Offering, the
Board of Directors will establish an Audit Committee. The Audit Committee will
consist of two or more Independent Directors. The Audit Committee will make
recommendations concerning the engagement of independent public accountants,
review with the independent public accountants the scope and results of the
audit engagement, approve professional services provided by the independent
public accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees, and review the
adequacy of the Company's internal accounting controls.
Compensation Committee. Promptly following the completion of the Offering,
the Board of Directors will establish a Compensation Committee. The Compensation
Committee will determine and establish compensation levels for the Company's
executive officers and administer the Company's 1997 Stock Incentive Plan (the
"1997 Plan") and the Company's Directors' Plan (the "Directors' Plan"). The
Compensation Committee will consist of two or more Independent Directors.
The Company may from time to time form other committees as circumstances
warrant. Such committees will have authority and responsibility as delegated by
the Board of Directors.
COMPENSATION OF DIRECTORS
In connection with the Offering, each Independent Director will be granted
nonqualified options to purchase 20,000 shares of Common Stock at the initial
public offering price per share that vest in five annual installments commencing
on the first anniversary of the date of grant. Any Independent Director who
ceases to be a director will forfeit the right to receive any options not
previously vested. See "-- Stock Option and Restricted Stock Plans -- Directors'
Plan." Independent Directors of the Company will not otherwise initially receive
any fees for their service on the Board of Directors or a committee thereof.
Directors who are employees of the Company will not receive any additional
compensation for their service on the Board of Directors or a committee thereof.
BOARD OBSERVATION RIGHTS
In connection with the Formation Transactions and the Concurrent Private
Placements, the Company has granted to each of MSAM and DRA Realty Advisors
("DRA") the right to have a representative observe the meetings of the Board of
Directors and its committees. These Board observation rights terminate at any
time such party holds less than 60% of the Common Stock acquired by them in such
transactions.
EXECUTIVE COMPENSATION
The following table sets forth the annual base salary rates and other
compensation expected to be paid during the Company's fiscal year ending
December 31, 1997, to the Company's Chief Executive Officer and the four other
most highly compensated executive officers of the Company (the "Named Executive
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Officers"). Information for 1996 is not presented because the Company had no
operations during such period and the Named Executive Officers were employed by
other affiliated entities, as well as Tower Equities and certain members of the
Tower Predecessor.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION SALARY(1) AWARDS AND OPTIONS(2)
- ------------------------------------------------------------ ------------ ---------------------
<S> <C> <C>
Lawrence H. Feldman
Chairman of the Board, Chief Executive Officer and
President................................................. $175,000 201,000
Robert L. Cox
Executive Vice President, Chief Operating Officer......... $150,000 201,000
Joseph D. Kasman
Senior Vice President, Chief Financial Officer............ $150,000 110,000
Eric S. Reimer
Vice President -- Leasing................................. $150,000 68,000
Reuben Friedberg
Vice President -- Finance................................. $107,000 31,000
</TABLE>
- ---------------
(1) Amounts given are annualized projections for fiscal year 1997 which ends
December 31, 1997. Does not include bonuses that may be paid to the above
individuals. See "-- Incentive Compensation."
(2) Upon the effective date of the Offering, options to purchase a total of
875,000 shares of Common Stock will be granted to executive officers and
employees of the Company under the 1997 Plan at an exercise price equal to
the Offering Price. All options vest over three years (i.e., one-third of
each executive's options will vest and be exercisable on the first, second
and third anniversaries, respectively, of the consummation of the Offering).
See "-- Stock Option and Restricted Stock Plans -- 1997 Plan."
The executive officers, including Mr. Feldman, receive health insurance
benefits which do not exceed 10% of their respective salaries. These benefits
are also provided to all other employees of the Company.
OPTION GRANTS IN FISCAL YEAR 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES PERCENT OF TOTAL COMMON SHARE PRICE
UNDERLYING OPTIONS TO BE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE PRICE OPTION TERM(1)
TO BE EMPLOYEES IN PER COMMON ----------------------
NAME GRANTED(2) FISCAL YEAR SHARE(3) EXPIRATION DATE 5%(4) 10%(5)
- ---------------------- ---------- ---------------- -------------- ------------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lawrence H. Feldman... 201,000 20.6% $25.00 (6) $3,160,195 $8,008,556
Robert L. Cox......... 201,000 20.6% $25.00 (6) $3,160,195 $8,008,556
Joseph D. Kasman...... 110,000 11.2% $25.00 (6) $1,729,460 $4,382,792
Eric S. Reimer........ 68,000 7.0% $25.00 (6) $1,069,121 $2,709,362
Reuben Friedberg...... 31,000 3.2% $25.00 (6) $ 487,320 $1,235,040
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
these amounts are the hypothetical gains or "option spreads" that would
exist for the respective options based on assumed rates of annual compound
share price appreciation of 5% and 10% from the date the options were
granted over the full option term. No gain to the optionee is possible
without an increase in the price of the Common Stock, which would benefit
all stockholders.
(2) All options are granted at the fair market value of the shares of Common
Stock at the date of grant. Options granted are for a term of not more than
ten years from the date of grant and vest in three equal annual installments
(rounded to the nearest whole share of Common Stock) over three years.
(3) Based on the assumed Offering Price. The exercise price per share will be
equal to the Offering Price.
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(4) An annual compound share price appreciation of 5% from the Offering price of
$25.00 per Common Share yields a price of $40.72 per Common Share.
(5) An annual compound share price appreciation of 10% from the Offering price
of $25.00 per Common Share yields a price of $64.84 per Common Share.
(6) The expiration date of the options is the ten year anniversary of the
closing of the Offering.
EMPLOYMENT AGREEMENTS
The Company will enter into an employment agreement with Mr. Lawrence H.
Feldman pursuant to which Mr. Feldman will serve as Chairman of the Board, Chief
Executive Officer and President of the Company for a term of three years,
subject, in certain circumstances to automatic one-year extensions, at an
initial annual base compensation of $175,000 (subject to any increases in base
compensation approved by the Compensation Committee). In addition, the Company
will enter into employment agreements with Messrs. Cox and Kasman, pursuant to
which Mr. Cox will serve as Executive Vice President and Chief Operating
Officer, and Mr. Kasman will serve as Senior Vice President and Chief Financial
Officer, each for a term of three years, subject, in certain circumstances in
the case of Mr. Cox, to automatic one-year extensions, at an annual base
compensation of $150,000 (subject to any increases in base compensation approved
by the Compensation Committee). In addition to base salary, each such executive
officer will be entitled under his employment agreement to receive annual
performance-based compensation as determined by the Compensation Committee. Upon
termination of an officer's employment agreement other than for cause, or by
such officer for "good reason" (as such term is defined in each officer's
employment agreement) each of such officers will be entitled to receive
severance benefits in an amount equal to the greater of (i) the aggregate of all
compensation due such officer during the balance of the term of the employment
agreement or (ii) 2.99 times (or, after the second anniversary of the date of
the agreement, 1.99 times) the "base amount" as determined in the Code, in each
case, payable within 30 days of each such officer's termination. In the case of
an officer's death or disability, salary is continued for a twelve-month period.
In addition, such employment agreements will provide for the grant of the
options and the stock awards described under "-- Stock Option and Restricted
Stock Plans -- 1997 Plan" below. Pursuant to the employment agreements, such
options are subject to vesting, but will vest upon an officer's death or
disability or a change in control of the Company.
As part of their employment agreements, each of Messrs. Feldman, Cox, and
Kasman will be bound by a noncompetition covenant with the Company which will
prohibit them from engaging in (i) the acquisition, renovation management or
leasing of any office properties in the New York, Orlando, and Phoenix/Tucson
metropolitan areas, and (ii) any active or passive investment in or reasonably
relating to the acquisition, renovation, management or leasing of office
properties in the New York, Orlando, and Phoenix/Tucson metropolitan areas for a
period of one year following the date of such executive's termination (the
"Noncompetition Period"), unless such termination was without cause or was made
by the officer with good reason. In the event of the termination of Messrs.
Feldman, Cox, or Kasman's employment by the Company without cause, or by the
officer for good reason, these agreements will not prohibit the related officer
from engaging in competitive activities, but, during the Noncompetition Period,
will prohibit the related officer from (a) soliciting any employee of the
Company to leave his or her job and (b) soliciting any client or identified
potential client of the Company during the Noncompetition Period. See "Risk
Factors -- The Company Relies on Key Personnel Whose Continued Service is Not
Guaranteed."
INCENTIVE COMPENSATION
The Company may award incentive compensation to employees of the Company
and its subsidiaries, including incentive awards under the 1997 Plan that may be
earned on the attainment of performance objectives stated with respect to
criteria described above or other performance-related criteria. The Compensation
Committee may, in its discretion, approve bonuses to executive officers and
certain other officers and key employees if the Company achieves Company-wide,
regional and/or business unit performance objectives determined by it each year.
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STOCK OPTION AND RESTRICTED STOCK PLANS
Prior to the Offering, the Board of Directors will adopt, and the sole
stockholder of the Company will approve, the 1997 Plan and the Directors' Plan
for the purposes of (i) attracting and retaining employees, directors, and other
service providers with ability and initiative; (ii) providing incentives to
those deemed important to the success of the Company and related entities; and
(iii) aligning the interests of these individuals with the interests of the
Company and its stockholders through opportunities for increased stock
ownership.
1997 Plan
The 1997 Plan will be administered by the Compensation Committee and
provide for the granting of stock options, restricted stock and performance
shares and incentive awards from time to time with respect to up to a number of
shares of Common Stock equal to 9.5% of the total number of issued and
outstanding shares of Common Stock (on a fully diluted basis assuming the
exchange of all OP Units for shares of Common Stock) to executive or other key
employees of the Company. Stock options may be granted in the form of "incentive
stock options" as defined in Section 422 of the Code, or non-statutory stock
options, and are exercisable for up to 10 years following the date of the grant.
The exercise price of each option will be set by the Compensation Committee;
provided, however, that the price per share must be equal to or greater than the
fair market value of the Common Stock on the grant date. Under the 1997 Plan,
participants may be permitted to transfer non-qualified stock options to certain
family members or trusts for the benefit of family members, provided the
participant does not receive any consideration for the transfer.
Awards granted to officers under the 1997 Plan will be qualified under Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
The 1997 Plan also permits the Company to issue incentive awards,
performance shares or shares of restricted stock to participants upon such terms
and conditions as shall be determined by the Compensation Committee in its sole
discretion.
Certain Federal Income Tax Consequences Relating to Options. In general, a
Participant will not recognize taxable income upon the grant or exercise of an
Incentive Stock Option ("ISO"). However, upon the exercise of an ISO, the excess
of the fair market value of the shares received on the date of exercise over the
exercise price of the shares will be treated as an adjustment to alternative
minimum taxable income. When a Participant disposes of shares acquired by
exercise of an ISO, the Participant's gain (the difference between the sale
proceeds and the price paid by the Participant for the shares) upon the
disposition will be taxed as capital gain, provided the Participant (i) does not
dispose of the shares within two years after the date of grant nor within one
year after the date of exercise, and (ii) exercises the option while an employee
of the Company or of an affiliate of the Company or within three months after
termination of employment for reasons other than death or disability. If the
first condition is not met, the Participant generally will realize ordinary
income in the year of the disqualifying disposition. If the second condition is
not met, the Participant generally will recognize ordinary income upon exercise
of the option.
In general, a Participant who receives a nonqualified stock option will
recognize no income at the time of the grant of the option. Upon exercise of a
nonqualified stock option, a Participant will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option. Special timing rules may apply
to a Participant who is subject to Section 16(a) of the Exchange Act.
The Company will be entitled to claim a federal income tax deduction on
account of the exercise of a nonqualified option. The amount of the deduction
will be equal to the ordinary income recognized by the Participant. The employer
will not be entitled to a federal income tax deduction on account of the grant
of any option or the exercise of an ISO. The employer may claim a federal income
tax deduction on account of certain disqualifying dispositions of Common Stock
acquired upon the exercise of an ISO.
Section 162(m) of the Code places a limitation of $1,000,000 on the amount
of compensation payable to each of the named executive officers that the Company
may deduct for federal income tax purposes. The limit
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does not apply to certain performance-based compensation paid under a plan that
meets the requirements of the Code and regulations promulgated thereunder. While
the 1997 Plan generally complies with the requirements for performance-based
compensation, stock awards granted under the 1997 Plan will not satisfy those
requirements.
Certain Federal Income Tax Consequences Relating to Options. In general, a
Participant will not recognize taxable income upon the grant or exercise of an
Incentive Stock Option ("ISO"). However, upon the exercise of an ISO, the excess
of the fair market value of the shares received on the date of exercise over the
exercise price of the shares will be treated as an adjustment to alternative
minimum taxable income. When a Participant disposes of shares acquired by
exercise of an ISO, the Participant's gain (the difference between the sale
proceeds and the price paid by the Participant for the shares) upon the
disposition will be taxed as capital gain, provided the Participant (i) does not
dispose of the shares within two years after the date of grant nor within one
year after the date of exercise, and (ii) exercises the option while an employee
of the Company or of an affiliate of the Company or within three months after
termination of employment for reasons other than death or disability. If the
first condition is not met, the Participant generally will realize ordinary
income in the year of the disqualifying disposition. If the second condition is
not met, the Participant generally will recognize ordinary income upon exercise
of the option.
In general, a Participant who receives a nonqualified stock option will
recognize no income at the time of the grant of the option. Upon exercise of a
nonqualified stock option, a Participant will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option. Special timing rules may apply
to a Participant who is subject to Section 16(a) of the Exchange Act.
The Company will be entitled to claim a federal income tax deduction on
account of the exercise of a nonqualified option. The amount of the deduction
will be equal to the ordinary income recognized by the Participant. The employer
will not be entitled to a federal income tax deduction on account of the grant
of any option or the exercise of an ISO. The employer may claim a federal income
tax deduction on account of certain disqualifying dispositions of Common Stock
acquired upon the exercise of an ISO.
Section 162(m) of the Code places a limitation of $1,000,000 on the amount
of compensation payable to each of the named executive officers that the Company
may deduct for federal income tax purposes. The limit does not apply to certain
performance-based compensation paid under a plan that meets the requirements of
the Code and regulations promulgated thereunder. While the 1997 Plan generally
complies with the requirements for performance-based compensation, stock awards
granted under the 1997 Plan will not satisfy those requirements.
Directors' Plan
A maximum of 200,000 shares of Common Stock will be issuable under the
Directors' Plan. The Directors' Plan will provide for the grant of options to
purchase Common Stock. No director who is an employee of the Company is eligible
to participate in the Directors' Plan.
The Directors' Plan will provide that each eligible director who is a
member of the Board of Directors as of the date that the registration statement
relating to the Offering is declared effective by the Securities and Exchange
Commission (the "Commission") will be awarded nonqualified options to purchase
20,000 shares of Common Stock on that date (each such director, a "Founding
Director"). Each eligible director who is not a Founding Director (a
"Non-Founding Director") will receive nonqualified options to purchase 20,000
shares of Common Stock on the date of the meeting of the Company's stockholders
at which the Non-Founding Director is first elected to the Board of Directors.
The options granted to Founding Directors upon effectiveness of the registration
statement relating to the Offering will have an exercise price equal to the
initial public offering price and will vest in five annual installments
beginning on the first anniversary of the date of grant, subject to the
Director's continuous service through such vesting date. The exercise price of
options under future grants will be 100% of the fair market value of the Common
Stock on the date of grant and will vest in the same manner. Options granted
under the Directors' Plan will be exercisable for ten years
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from the date of grant. Upon termination of service as a director, options which
have not vested will be forfeited and vested options may be exercised until they
expire.
Certain Federal Income Tax Consequences Relating to Options. Generally, an
eligible director does not recognize any taxable income, and the Company is not
entitled to a deduction upon the grant of an option. Upon the exercise of an
option, the eligible director recognizes ordinary income equal to the excess of
the fair market value of the shares acquired over the option exercise price, if
any. Special rules may apply as a result of Section 16 of the Exchange Act. The
Company is generally entitled to a deduction equal to the compensation taxable
to the eligible director as ordinary income. Eligible directors may be subject
to backup withholding requirements for federal income tax.
Certain Federal Income Tax Consequences Relating to Options. Generally, an
eligible director does not recognize any taxable income, and the Company is not
entitled to a deduction upon the grant of an option. Upon the exercise of an
option, the eligible director recognizes ordinary income equal to the excess of
the fair market value of the shares acquired over the option exercise price, if
any. Special rules may apply as a result of Section 16 of the Exchange Act. The
Company is generally entitled to a deduction equal to the compensation taxable
to the eligible director as ordinary income. Eligible directors may be subject
to backup withholding requirements for federal income tax.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter of the
Company contains such a provision which eliminates such liability to the maximum
extent permitted by Maryland law.
The Charter authorizes the Company, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise from and against any
claim or liability to which such person may become subject or which such person
may incur by reason of his or her status as a present or former director or
office of the Company. The Bylaws of the Company obligate it, to the maximum
extent permitted by Maryland law, to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer who is made a party to the proceeding by
reason of his service in that capacity or (b) any individual who, while a
director of the Company and at the request of the Company, serves or has served
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a director, officer,
partner or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.
The Charter and Bylaws also permit the Company to indemnify and advance expenses
to any person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.
The MGCL requires a Maryland corporation (unless its charter provides
otherwise, which the Company's Charter does not) to indemnify a director or
officer who has been successful, on the merits or otherwise, in the defense of
any proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a Maryland corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and
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deliberate dishonesty, (b) the director or officer actually received an improper
personal benefit in money, property or services or (c) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. However, under the MGCL, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or in any proceeding in which the director was adjudged
to be liable on the basis that personal benefit was improperly received, unless
in either case a court orders indemnification and then only for expenses. In
addition, the MGCL permits a corporation to advance reasonable expenses to a
director or officer upon the corporation's receipt of (a) a written affirmation
by the director or officer of his good faith belief that he has met the standard
of conduct necessary for indemnification by the corporation and (b) a written
undertaking by or on his behalf to repay the amount paid or reimbursed by the
corporation if it shall ultimately be determined that the standard of conduct
was not met. Indemnification under the provisions of the MGCL is not deemed
exclusive of any other rights, by indemnification or otherwise, to which an
officer or director may be entitled under the Company's Charter or Bylaws,
resolutions of stockholders or directors, contract or otherwise. However, it is
the position of the Commission that indemnification of directors and officers
for liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"), is against public policy and is unenforceable pursuant to
Section 14 of the Securities Act.
The Company also has purchased and maintains insurance on behalf of all of
its directors and executive officers against liability asserted against or
incurred by them in their official capacities with the Company, whether or not
the Company is required or has the power to indemnify them against the same
liability.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with each of its
executive officers and directors. The indemnification agreements require, among
other matters, that the Company indemnify its executive officers and directors
to the fullest extent permitted by law and advance to the executive officers and
directors all related expenses, subject to reimbursement if it is subsequently
determined that indemnification is not permitted. Under the agreements, the
Company must also indemnify and advance all expenses incurred by executive
officers and directors seeking to enforce their rights under the indemnification
agreements and may cover executive officers and directors under the Company's
directors' and officers' liability insurance. Although the form of
indemnification agreement offers substantially the same scope of coverage
afforded by law, it provides greater assurance to directors and executive
officers that indemnification will be available, because, as a contract, it
cannot be modified unilaterally in the future by the Board of Directors or the
stockholders to eliminate the rights it provides.
FORMATION AND STRUCTURE OF THE COMPANY
The Company was formed to continue and expand the commercial real estate
business of Tower Equities and to acquire the interests in the 21 Properties.
Prior to or simultaneously with the closing of the Offering, the Company will
engage in the Formation Transactions described below which are designed to
consolidate the ownership of the Properties, Tower Equities' property management
and leasing business, and Properties Atlantic's tenant/landlord representation
business (which, prior to the Offering, was controlled and operated by Clifford
L. Stein, Managing Director-Southeast Region, of the Company) in the Company, to
facilitate the Offering and the Concurrent Private Placements, and to enable the
Company to qualify as a REIT commencing with the taxable year ending December
31, 1997. The Formation Transactions are as follows:
- The Company will sell 11,515,000 shares of Common Stock in the Offering
and 1,200,000 shares of Common Stock in the Concurrent Private Placements
(800,000 to the Morgan Stanley Investors and 400,000 to the Carlyle
Funds). All the net proceeds to the Company from the Offering and the
Concurrent Private Placements will be contributed to the Operating
Partnership. Following such contributions and the other contributions set
forth below, the Company's interest in the Operating Partnership will
increase to approximately 90.3%. The Company is the sole general partner
of the Operating Partnership and will own a 1% general partner interest
in the Operating Partnership and an approximate 89.3% limited partnership
interest in the Operating Partnership.
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- The Company has acquired or will acquire, directly or indirectly, a 100%
interest in each of the Properties (other than the 2800 North Central
Property) and the ground lease encumbering the Maitland Forum Property
for an aggregate of 1,128,160 shares of restricted Common Stock,
1,583,640 OP Units, approximately $118.7 million in cash, and the
assumption of approximately $244.6 million in mortgage indebtedness and
approximately $13 million of non-interest-bearing deferred tax
liabilities payable over 10 years, as follows:
- The Operating Partnership has acquired or will acquire directly or
indirectly from the Primary Contributors interests in each of the
Properties (including an interest in the Maitland Forum ground lease),
two parcels of land adjacent to two of the Properties which can
support 370,000 square feet of development, and substantially all the
assets of the assets of Tower Equities and Properties Atlantic
management companies in exchange for 1,509,490 OP Units (valued at
approximately $37.7 million based on the Offering Price); and
- The Company will acquire from persons other than the Primary
Contributors, directly or indirectly, debt, equity and fee interests
in the Properties (including an interest in the Maitland Forum ground
lease) in exchange for 1,128,160 shares of restricted Common Stock
(valued at approximately $48.7 million based on the Offering Price),
74,150 OP Units (valued at approximately $1.9 million based on the
Offering Price) and $118.7 million in cash.
- The Operating Partnership is expected to enter into the $107 million
seven-year Term Loan with Merrill Lynch Credit Corporation and will
borrow approximately $72 million under such facility at the closing of
the Offering.
- The Operating Partnership will utilize $246.5 million of the net proceeds
of the Offering, the Concurrent Private Placements and the Term Loan to
repay mortgage indebtedness (including $1.9 million of prepayment
penalties) encumbering the Properties and the Property Partnerships
concurrent with the closing of the Offering. See "The
Properties -- Mortgage Indebtedness Remaining Following the Offering."
- The Tower Equities and Properties Atlantic management and leasing
companies (that are owned entirely by the Primary Contributors) have
contributed or will contribute substantially all of the assets of such
companies to the Operating Partnership and the Operating Partnership
will, in turn, recontribute such assets to the Management Company in
exchange for 100% of the non-voting common stock and 5% of the voting
common stock in the Management Company (which collectively is entitled to
receive approximately 95% of the dividends). This structure is designed
to assist the Company in maintaining its status as a REIT.
- The Company will issue 886,200 shares of restricted Common Stock in
exchange for the cancellation of indebtedness outstanding under the MSAM
Notes.
- The Management Company and certain Primary Contributors that hold
interests in the Excluded Properties will enter into management
agreements with respect to each of the Excluded Properties. Four of the
Excluded Properties are controlled by certain Primary Contributors and
have non-cancellable management contracts (except upon a sale of such
property). The remaining three properties are under management contracts
which may be terminated upon payment of two years of management fees or
upon a sale of such property. In consideration for the services to be
provided under the management agreements, the Management Company will
receive market rate property and construction management fees, as well as
applicable leasing commissions.
- The Operating Partnership will acquire, at no cost, an option held by
certain Primary Contributors that will provide the Operating Partnership
with the right to acquire from an unaffiliated third party for
approximately $10.3 million the Phoenix Land Parcel which contains
approximately 43 acres of undeveloped land in Phoenix that can support
1.0 million square feet of office development. In addition, the Operating
Partnership will acquire from certain Primary Contributors for no
additional consideration an option to acquire for approximately $3.8
million (approximately $4.75 per buildable square foot) (75% of the
appraised value of the land as of May 9, 1997) the One Orlando Center
Land
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Parcel that can support approximately 800,000 square feet of development.
See "The Properties -- Land Parcel Options."
- The Company will establish the three-year $200 million unsecured
revolving Line of Credit at or shortly after the closing of the Offering,
which will be used primarily to finance the acquisition of, and
investment in, office properties, to refinance existing indebtedness, and
for general working capital needs.
- The Company will pay to an affiliate of Carlyle $925,000 in consideration
of obtaining the consent to the transfer of an interest in the 2800 North
Central Avenue Property to the Company.
- As part of the Formation Transactions, the Company acquired certain
interests in the Property Partnerships from the Primary Contributors and
certain third parties. Certain of the interests in three of the Property
Partnerships were acquired from Edward Feldman pursuant to a bankruptcy
proceeding under Chapter 7 of United States Bankruptcy Code. In
conjunction with the transfer of those interests to the Company, the
Company entered into a court-approved settlement agreement whereby the
Company has obtained a release of all potential claims of the bankruptcy
trustee and any creditor of the bankruptcy estate relating directly or
indirectly to the Company in exchange for a cash payment of $2.0 million.
Accordingly, the Company believes that this bankruptcy proceeding will
have no impact on Company operations. Edward Feldman, the father of
Lawrence H. Feldman, served as President of Tower Equities until December
1990, at which time he retired at age 70. Edward Feldman served as a
consultant to Tower Equities from the date of his retirement until March
1997.
EFFECTS OF THE FORMATION TRANSACTIONS
As a result of the Formation Transactions, including the Offering, (i) the
Operating Partnership will directly or indirectly own all of the Properties and
the two development parcels by virtue of the Operating Partnership's acquisition
of substantially all of the assets of Tower Equities, the Property interests and
other assets contributed by the Primary Contributors and the Continuing
Investors, (ii) the Company will be the sole General Partner of the Operating
Partnership and will hold directly or indirectly approximately 90.3% of the OP
Units and the remaining OP Units will be held by the Primary Contributors and
the Continuing Investors, (iii) immediately following the completion of the
Offering and the Concurrent Private Placements, purchasers of Common Stock in
the Offering will hold approximately 70.9% of the equity of the Company, the
purchasers of Common Stock in the Concurrent Private Placements (the Morgan
Stanley Investors and the Carlyle Funds) will hold approximately 7.4% of the
equity of the Company, recipients of other restricted shares of Common Stock
will hold approximately 12.0% of the equity of the Company, the Primary
Contributors will directly or indirectly hold approximately 9.3% of the
consolidated equity of the Company, and the other Continuing Investors will
directly or indirectly hold approximately .4% of the equity of the Company, and
(iv) the Company, through the Operating Partnership, will own 100% of the
non-voting common stock of the Management Company and 5% of the common stock
(entitling it to receive approximately 95% of the dividends paid by the
Management Company on its capital stock) and Lawrence H. Feldman will own the
remaining 95% of the common stock of the Management Company (entitling him to
receive approximately 5% of the dividends paid by the Management Company on its
capital stock). See "Risk Factors -- Conflicts of Interest in the Formation
Transactions; Substantial Benefits to Related Parties," "-- Benefits to Related
Parties," "Principal Stockholders," and "Partnership Agreement -- Exchange
Rights."
DETERMINATION AND VALUATION OF OWNERSHIP INTERESTS
The Company's percentage interest in the Operating Partnership was
determined based upon the percentage of estimated Cash Available for
Distribution required to pay estimated cash distributions resulting in an annual
distribution rate equal to approximately 6.75% of the Offering Price. The
ownership interest in the Operating Partnership allocated to the Company is
equal to this percentage of estimated Cash Available for Distribution and the
remaining interest in the Operating Partnership will be allocated to the Primary
Contributors and Continuing Investors receiving OP Units in the Formation
Transactions. The parameters and
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assumptions used in deriving the estimated Cash Available for Distribution are
described under "Distributions."
The Company did not obtain an opinion as to the fairness of the allocation
of shares to the purchasers in the Offering. In addition, other than as
described below, there was no independent valuation of the management and
leasing business or of the services, goodwill and other intangibles contributed
to the Company. The initial public offering price will be determined based upon
the estimated Cash Available for Distribution and the factors discussed under
"Underwriting," rather than a property-by-property valuation based on historical
cost or current market value. This methodology has been used because management
believes it is appropriate to value the Company as an ongoing business rather
than with a view to values that could be obtained from a liquidation of the
Company or of individual properties owned by the Company.
CERTAIN ESTIMATE OF VALUE
An appraisal of the fair market value of the Maitland Forum Property (the
"Appraised Property") dated May 9, 1997 was prepared by Robert A. Stanger & Co.,
Inc. ("Stanger"). Stanger was selected by the Company based on the Company's
knowledge of Stanger and its expertise in real property valuations. The
appraisal was delivered for the limited purpose of valuing the ground lease
relating to the Maitland Forum Property in connection with the acquisition of an
interest in such ground lease.
In preparing the appraisal, Stanger performed a site inspection, reviewed
local real estate market conditions, reviewed the current rent roll for the
Property, and conducted local market inquiries.
Stanger valued the Maitland Forum Property using the sales comparison, and
income capitalization approaches. Stanger placed principal reliance on the
income capitalization approach. In applying this approach, Stanger projected the
10-year discounted cash flow of the Maitland Forum Property. Stanger gave
secondary consideration to the sales comparison approach (analysis of transfers
of comparable properties) in support of its final conclusions.
Based on information contained in the appraisal, Stanger provided to the
Company an estimate of the value of the Property. In preparing its estimate,
which was based upon business, economic, real estate market and other
conditions, Stanger concluded that the value of the Property as estimated using
a 10-year discounted cash flow analysis ranged from $24.0 million to
approximately $26.7 million.
The Stanger estimate of the value of the Maitland Forum Property was not
intended to and did not value the Company or the Company's interest in the
Property and the Company cautions prospective investors against attaching undue
significance to these estimates. In addition, the estimate does not reflect the
effect of the reduction of debt on the Property and the reduction of the
interest rate on certain remaining debt, nor does it reflect any benefits to the
Company of owning a portfolio of properties and an ongoing business rather than
a single property owned by a single purpose partnership.
BENEFITS TO RELATED PARTIES
Certain affiliates of the Company, including the Primary Contributors, will
realize certain material benefits as a result of the Offering and the Formation
Transactions.
- The Primary Contributors will receive a total of 1,509,490 OP Units
(including their pro rata share of the OP Units that will be issued to
certain Property Partnerships) in consideration for their interests in
the Properties, certain development parcels, and the Tower Equities and
Properties Atlantic management and leasing businesses, in connection with
the Formation Transactions. These OP Units (representing approximately
9.3% of the equity interests in the Company on a consolidated basis) will
have a total value of approximately $37.7 million based on the Offering
Price, compared to a deficiency in net tangible book value of the assets
contributed to the Operating Partnership by the Primary Contributors of
approximately $75.5 million) and will be exchangeable, commencing one
year following completion of the Offering, for cash or, at the Company's
option, shares of Common Stock on a one-for-one basis. These OP Units
will subject to certain limited exceptions, be subject to certain
restrictions on transfer for a two year period following the consummation
of the Offering without the
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consent of the Representatives. See "Underwriting." The Company believes
that the net tangible book value of the individual assets contributed to
the Operating Partnership by the Primary Contributors (which reflects the
historical cost of such assets less accumulated depreciation) is less
than the aggregate current market value of such assets.
- Messrs. Feldman and Cox will each serve as a director and officer of the
Company, Messrs. Adams and Wisely will serve as directors of the Company,
and Messrs. Feldman, Cox, and Kasman will enter into employment
agreements with the Company. See "Management -- Employment Agreements."
- The Company will grant to Messrs. Feldman, Cox, Kasman, Reimer,
Friedberg, and the five members of the Board of Directors of the Company
who are not employees or affiliates of the Company, options to purchase
an aggregate of 711,000 shares of Common Stock under the Company's 1997
Incentive Plan and 1997 Directors Plans at the Offering Price, subject to
certain vesting requirements. See "Management -- Stock Option and
Restricted Stock Plans -- 1997 Plan."
- The Formation Transactions may provide the Primary Contributors with
increased liquidity and, until the disposition of certain assets
contributed to the Company, with continued deferral of the taxable gain
associated with those assets.
Additional information concerning benefits to executive officers, directors
and significant stockholders of the Company is set forth under "Certain
Relationships and Transactions."
TRANSFER OF PROPERTIES
The Company's interest in the Properties will be acquired pursuant to
various agreements, the forms of which will be filed as exhibits to the
Registration Statement, of which this Prospectus forms a part. These
acquisitions are subject to all of the terms and conditions of such agreements.
The Company will assume all obligations relating to the Properties that may
arise after the transfer.
The agreements effecting the transfer of the assets or direct or indirect
interest of the partners and other holders of equity in the entities selling the
Properties will contain representations and warranties from each such person
concerning title to the interests being transferred and the absence of liens or
other encumbrances thereon. Certain of the Primary Contributors have agreed to
make additional representations with respect to the Company and the Properties
concerning the operation of such Properties, environmental matters and other
representations and warranties customarily found in similar documents and also
have agreed to indemnify the Company against breaches of such representations
and warranties. In addition, the aggregate liability of those Primary
Contributors to the Company under the applicable supplemental representations,
warranties and indemnity agreement relating to the Properties is limited to the
initial value of the OP Units received by them in the Formation Transactions
(approximately $34.5 million based on the Offering Price). These representations
and warranties will survive the closing of the Offering for a period of one
year. See "Risk Factors -- Conflicts of Interest in the Business of the
Company -- Possible Less Vigorous Enforcement of Terms of Contribution and Other
Agreements by the Company."
CERTAIN RELATIONSHIPS AND TRANSACTIONS
FORMATION TRANSACTIONS
The terms of the acquisition of interests in the Properties and in Tower
Equities and Properties Atlantic by the Company and the Operating Partnership
are described under "Formation and Structure of the Company -- Effects of the
Formation Transactions and -- Benefits to Related Parties."
In connection with the Formation Transactions, the Operating Partnership
previously has acquired directly or indirectly from the bankruptcy estate of
Edward Feldman, the father of Lawrence H. Feldman, the Chairman, Chief Executive
Officer, and President of the Company, pursuant to his bankruptcy proceeding
interests in the partnerships that own, directly or indirectly, the Tower 45 and
120 Mineola Boulevard Properties, as well as his interests in the Maitland Forum
ground lease, in exchange for $1.7 million in cash.
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Edward Feldman received from the Company consulting fees of approximately
$132,000 for the year ended December 31, 1996 and fees of approximately $66,000
through March 31, 1997.
EXCHANGE RIGHTS
The Company will enter into the Partnership Agreement and the Exchange
Agreement (as defined and described under "Partnership Agreement -- Exchange
Rights") with the Limited Partners, including the Primary Contributors,
receiving OP Units. Among other things, the Exchange Agreement provides such
holders of OP Units the right to cause the Operating Partnership to exchange OP
Units for cash or, at the election of the Company, exchange such OP Units for
shares of Common Stock of the Company (on a one-for-one basis). See "Risk
Factors -- Conflicts of Interest in the Formation Transactions; Substantial
Benefits to Related Parties," "Formation and Structure of the
Company -- Benefits to Related Parties" and "Partnership Agreement -- Exchange
Rights."
REGISTRATION RIGHTS
For a description of certain registration rights held by the Primary
Contributors, the Morgan Stanley Investors, and the Carlyle Funds, see
"Partnership Agreement -- Registration Rights" and "Shares Available for Future
Sale -- Registration Rights."
EMPLOYMENT AGREEMENTS; AWARD OF OPTIONS
In connection with the formation of the Company, each of Messrs. Feldman,
Cox, and Kasman entered into three-year employment agreements with the Company.
See "Management -- Employment Agreements." In order to induce each such
executive to enter into such employment agreements, Messrs. Feldman, Cox, and
Kasman were granted options to purchase 201,000, 201,000 and 110,000 shares of
Common Stock, respectively, at the Offering Price. See "Management -- Executive
Compensation" and "-- 1997 Plan."
EXCLUDED PROPERTY MANAGEMENT AGREEMENTS
In connection with the Formation Transactions, certain Primary Contributors
that hold interests in the Excluded Properties will enter into management
agreements with the Management Company with respect to operation of such
properties. Four of the Excluded Properties are controlled by certain Primary
Contributors and have non-cancellable management contracts (except upon the sale
of such property). The remaining three properties are under management contracts
which may be terminated upon payment of two years of management fees or upon a
sale of such property. In consideration for the services to be provided under
the management agreements, the Management Company will receive market rate
property and construction management fees, as well as applicable leasing
commissions. See "The Properties -- Excluded Properties."
EXECUTIVE OFFICER AND DIRECTOR DISTRIBUTIONS AND FEES
The executive officers and directors of the Company have received
distributions and management fees from all of the Properties of approximately
$3,724,300 for the year ended December 31, 1996 and are expected to receive
distributions and management fees of approximately $3,071,000 for the year
ending December 31, 1997.
MISCELLANEOUS
The Company acquired its interest in One Orlando Center, the Corporate
Center Properties and the Madison Avenue Properties from certain affiliates of
DRA Advisors, Inc. for $23,120,000 of restricted Common Stock and $23,120,000 in
cash. See "Principal Stockholders."
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock (including Common Stock for which OP Units
are exchangeable) by (i) each director (and director nominee) of the Company,
(ii) each executive officer of the Company, (iii) all directors (and director
nominees) and executive officers of the Company as a group and (iv) each person
or entity which is expected to be the beneficial owner of 5% or more of the
outstanding shares of Common Stock immediately following the Offering. Except as
otherwise described below, all shares are owned directly and the indicated
person has sole voting and investment power. The extent to which the persons or
entities will hold OP Units, as opposed to shares of Common Stock, is set forth
in the footnotes below.
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND OP UNITS PERCENT PERCENT OF
BENEFICIALLY OF ALL ALL SHARES AND
NAME OF BENEFICIAL OWNER(1) OWNED SHARES(2) OP UNITS(3)
- --------------------------------------------------- ------------------ ---------- --------------
<S> <C> <C> <C>
Lawrence H. Feldman................................ 881,025 6.0% 5.4%
Robert L. Cox...................................... 106,723 * *
Joseph D. Kasman................................... 109,421 * *
Eric S. Reimer..................................... 78,722 * *
Reuben Friedberg................................... 30,119 * *
Lester S. Garfinkel(4)............................. -- -- --
Robert M. Adams(5)................................. 53,993 * *
Stephen B. Siegel(6)............................... -- -- --
Richard M. Wisely(7)............................... 38,000 * *
Esko I. Korhonen(8)(9)............................. 400,000 2.7 2.5
DRA Opportunity Fund(10)........................... 465,400 3.2 2.9
Office Invest Sub LLC(11).......................... 459,400 3.1 2.8
Morgan Stanley Asset Management Inc.(12)........... 1,686,200 11.5 10.4
All executive officers, directors and director
nominees as a group (10 persons)................. 1,698,003 11.6% 10.5%
</TABLE>
- ---------------
* Represents less than 1.0% of the class.
(1) Unless otherwise indicated, the business address of each person listed is
c/o Tower Realty Trust, Inc., 120 West 45th Street, New York, New York
10036.
(2) Assumes 14,664,360 shares of Common Stock outstanding immediately following
the Offering and the Concurrent Private Placements. Assumes that all OP
Units held by the person are exchanged for shares of Common Stock. The
total number of shares of Common Stock outstanding used in calculating this
percentage assumes that none of the OP Units held by other persons are
exchanged for shares of Common Stock.
(3) Assumes a total of 16,248,000 shares of Common Stock and OP Units
outstanding immediately following the Offering (14,664,360 shares of Common
Stock and 1,583,640 OP Units, which may be exchanged for cash or shares of
Common Stock under certain circumstances). Assumes that all OP Units held
by the person are exchanged for shares of Common Stock. The total number of
shares of Common Stock outstanding used in calculating this percentage
assumes that all of the OP Units held by other persons are exchanged for
shares of Common Stock.
(4) The business address for Mr. Garfinkel is Reminick, Aarons & Company LLP,
685 Third Avenue, New York, New York 10017-4037.
(5) The business address of Mr. Adams is Adams Financial Services, Inc., 13
South Bayless Avenue, Port Washington, New York 11050.
(6) The business address of Mr. Siegel is Insignia/Edward S. Gordon Co., 200
Park Avenue, 19th Floor, New York, New York 10166.
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(7) The business address of Mr. Wisely is LungCheck, Inc., 8255 East Raintree
Drive, Scottsdale, Arizona, 85260-2515.
(8) The business address of Mr. Korhonen is The Carlyle Group, 1001
Pennsylvania Avenue N.W., Suite 220 South, Washington, D.C. 20004-2505.
(9) Includes 400,000 shares of Common Stock to be purchased by the Carlyle
Funds in the Concurrent Private Placements, which may be deemed
beneficially to be owned by Mr. Korhonen as he is a principal of Carlyle
Realty, L.P., an affiliate of Carlyle.
(10) The business address of DRA Opportunity Fund is 1180 Avenue of the
Americas, New York, New York 10036.
(11) The business address of Office Invest Sub LLC is c/o DRA Advisors, Inc.,
1180 Avenue of the Americas, New York, New York 10036.
(12) MSAM, as investment adviser to the Morgan Stanley Investors, and Morgan
Stanley, Dean Witter, Discover & Co., as the owner of all the common stock
of MSAM, are deemed beneficially to own the shares of Common Stock
beneficially owned by the Morgan Stanley Investors. MSAM maintains its
principal office at 1221 Avenue of the Americas, New York, New York 10020
and Morgan Stanley, Dean Witter, Discover & Co. maintains its principal
office at 1585 Broadway, New York, New York 10036. MSAM disclaims
beneficial ownership of such shares of Common Stock.
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DESCRIPTION OF CAPITAL STOCK
The following summary description of (i) the capital stock of the Company
and (ii) certain provisions of Maryland law and of the Charter and Bylaws of the
Company does not purport to be complete and is subject to and qualified in its
entirety by reference to Maryland law, and to the Charter and Bylaws of the
Company, copies of which are exhibits to the Registration Statement of which
this Prospectus is a part.
GENERAL
Under its Charter, the Company has the authority to issue 150,000,000
shares of Common Stock, par value $0.01 per share, and 50,000,000 shares of
preferred stock, $0.01 par value per share (the "Preferred Stock"). Upon
completion of the Offering, 14,664,360 shares of Common Stock and no shares of
Preferred Stock will be issued and outstanding. Under Maryland law, stockholders
generally are not liable for a corporation's debts or obligations.
COMMON STOCK
All shares of Common Stock offered hereby will be duly authorized, fully
paid and nonassessable. Subject to the preferential rights of any other class or
series of stock and to the provisions of the Charter regarding the restrictions
on transfer of stock, holders of shares of Common Stock are entitled to receive
dividends on such stock if, as and when authorized and declared by the Board of
Directors of the Company out of assets legally available therefor and to share
ratably in the assets of the Company legally available for distribution to its
stockholders in the event of its liquidation, dissolution or winding up after
payment of or adequate provision for all known debts and liabilities of the
Company.
Subject to the provisions of the Charter regarding the restrictions on
transfer of stock, each outstanding share of Common Stock entitles the holder to
one vote on all matters submitted to a vote of stockholders, including the
election of directors and, except as provided with respect to any other class or
series of stock, the holders of such shares will possess exclusive voting power.
There is no cumulative voting in the election of directors, which means that the
holders of a majority of the outstanding shares of Common Stock can elect all of
the directors then standing for election and the holders of the remaining shares
will not be able to elect any directors.
Holders of shares of Common Stock have no preference, conversion, exchange,
sinking fund, redemption or appraisal rights and have no preemptive rights to
subscribe for any securities of the Company. Subject to the provisions of the
Charter regarding the restrictions on transfer of stock, shares of Common Stock
will have equal dividend, liquidation and other rights.
Under the MGCL, a Maryland corporation generally cannot dissolve, amend its
charter, merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be cast
on the matter) is set forth in the corporation's charter. The Charter does not
provide for a lesser percentage in such situations except that the provisions of
the Charter relating to authorized shares of stock and the classification and
reclassification of shares of Common Stock and Preferred Stock may be amended by
the affirmative vote of the holders of not less than a majority of the votes
entitled to be cast on the matter.
PREFERRED STOCK
The Charter authorizes the Board of Directors to classify any unissued
shares of Preferred Stock and to reclassify any previously classified but
unissued shares of any series, as authorized by the Board of Directors. Prior to
issuance of shares of each series, the Board is required by the MGCL and the
Charter of the Company to set, subject to the provisions of the Charter
regarding the restrictions on transfer of stock, the terms,
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preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions qualifications and terms or
conditions of redemption for each such series. Thus, the Board could authorize
the issuance of shares of Preferred Stock with terms and conditions which could
have the effect of delaying, deferring or preventing a transaction or a change
in control of the Company that might involve a premium price for holders of
Common Stock or otherwise be in their best interest. As of the date hereof, no
shares of Preferred Stock are outstanding and the Company has no present plans
to issue any Preferred Stock.
POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK
The Company believes that the power of the Board of Directors to issue
additional authorized but unissued shares of Common Stock or Preferred Stock and
to classify or reclassify unissued shares of Common Stock and Preferred Stock
and thereafter to cause the Company to issue such classified or reclassified
shares of stock will provide the Company with increased flexibility in
structuring possible future financings and acquisitions and in meeting other
needs which might arise. The additional classes or series, as well as the Common
Stock, will be available for issuance without further action by the Company's
stockholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which the Company's
securities may be listed or traded. Although the Board of Directors has no
intention at the present time of doing so, it could authorize the Company to
issue a class or series that could, depending upon the terms of such class or
series, delay, defer or prevent a transaction or a change in control of the
Company that might involve a premium price for holders of Common Stock or
otherwise be in their best interest.
RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code, it must meet certain
requirements concerning the ownership of its outstanding shares of stock.
Specifically, not more than 50.0% in value of the Company's outstanding shares
of stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities) during the last half of a
taxable year, and the shares of stock of the Company must be beneficially owned
by 100 or more persons during at least 335 days of a taxable year of twelve
months or a proportionate part of a shorter taxable year. These two requirements
do not apply until after the first taxable year for which the Company makes an
election to be taxed as a REIT. See "Federal Income Tax
Considerations -- Requirements for Qualification as a REIT."
Because the Board of Directors believes it is essential for the Company to
continue to qualify as a REIT, the Charter, subject to certain exceptions
described below, provides that no holder may own, or be deemed to own by virtue
of the attribution provisions of the Code, more than 9.8% of the number or value
of the outstanding shares of any class of capital stock of the Company
("Ownership Limitation") (subject to the Look-Through Ownership Limitation
applicable to certain stockholders, as described below). Certain types of
entities, such as pension trusts qualifying under section 401(a) of the Code,
mutual funds qualifying as regulated investment companies under section 851 of
the Code, and corporations, will be looked through for purposes of the "closely
held" test in section 856(h) of the Code. Subject to certain limited exceptions,
the Charter will allow such an entity under the Look-Through Ownership
Limitation to own up to 15.0% of the shares of any class or series of the
Company's stock, provided that such ownership does not cause any individual
beneficial owner of such entity to exceed the Ownership Limitation or otherwise
result in a violation of the tests described in clauses (ii), (iii) and (iv) of
the second sentence of the succeeding paragraph.
Any transfer of capital stock of the Company that would (i) result in any
person owning, directly or indirectly, capital stock of the Company in excess of
the Ownership Limitation or the Look-Through Ownership Limitation, if
applicable, (ii) result in Common Stock being owned by fewer than 100 persons
(determined without reference to any rules or attribution), (iii) result in the
Company being "closely held" within the meaning of section 856(h) of the Code,
or (iv) cause the Company to own, actually or constructively, 9.9% or more of
the ownership interests in a tenant of the Company's, the Operating
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Partnership's or a Subsidiary Partnership's real property, within the meaning of
section 856(d)(2)(B) of the Code, will be void ab initio, and the intended
transferee will acquire no rights in such shares of capital stock.
The ownership attribution rules under the Code are complex and may cause
shares owned actually or constructively by a group of related individuals and/or
entities to be owned constructively by one individual or entity. As a result,
the acquisition of less than 9.8% of the shares of Common Stock or any class or
series of Preferred Stock (or the acquisition of an interest in an entity that
owns, actually or constructively, shares of capital stock) by an individual or
entity, could nevertheless cause that individual or entity, or another
individual or entity, to own constructively in excess of 9.8% of the outstanding
shares of Common Stock or any class or series of Preferred Stock and thus
subject such shares to the Ownership Limitation (or the Look-Through Ownership
Limitation, if applicable). The Board of Directors may grant an exemption from
the Ownership Limit with respect to one or more persons who would not be treated
as "individuals" for purposes of the Code if it is satisfied, based upon the
advice of counsel or a ruling from the IRS or such other evidence satisfactory
to the Board, that such ownership will not cause any person who is an individual
to be treated as owning shares of capital stock in excess of the Ownership
Limit, applying the applicable constructive ownership rules, and will not
otherwise jeopardize the Company's status as a REIT. As a condition of such
waiver, the Board of Directors may require such undertakings or representations
from the applicant with respect to preserving the REIT status of the Company. In
addition, the Board of Directors may give a Look-Through Entity an exception to
the Look-Through Ownership Limit if the Look-Through Entity satisfies the Board
of Directors that such share ownership will not adversely affect the Company's
ability to qualify as a REIT.
If, notwithstanding the restrictions described above, and subject to
certain exceptions described herein, any purported transfer of Common Stock that
would (i) result in any person owning, directly or indirectly, shares of Common
Stock in excess of the Ownership Limitation (or the Look-Through Ownership
Limitation, if applicable), (ii) result in the shares of Common Stock being
owned by fewer than 100 persons (determined without reference to any rules of
attribution), (iii) result in the Company being "closely held" within the
meaning of section 856(h) of the Code, or (iv) cause the Company to own,
actually or constructively, 9.9% or more of the ownership interests in a tenant
of the Company's, the Operating Partnership's or a Subsidiary Partnership's real
property, within the meaning of section 856(d)(2)(B) of the Code, will be
designated as "Shares-in-Trust" and will be transferred automatically to a trust
(a "Trust"), effective on the day before the purported transfer of such shares
of Common Stock. The record holder of the shares of Common Stock that are
designated as Shares-in-Trust (the "Prohibited Owner") will be required to
submit such number of shares of Common Stock to the Company for registration in
the name of the trustee of the Trust (the "Trustee"). The Trustee will be
designated by the Company but will not be affiliated with the Company. The
beneficiary of the Trust (the "Beneficiary") will be one or more charitable
organizations named by the Company.
Shares-in-Trust will remain issued and outstanding shares of capital stock
and will be entitled to the same rights and privileges as all other shares of
the same class or series. The Trustee will receive all dividends and
distributions on the Shares-in-Trust and will hold such dividends or
distributions in trust for the benefit of the Beneficiary. The Trustee will vote
all Shares-in-Trust. The Trustee will designate a permitted transferee of the
Shares-in-Trust, provided that the permitted transferee (i) purchases such
Shares-in-Trust for valuable consideration and (ii) acquires such
Shares-in-Trust without such acquisition resulting in another transfer to
another Trust.
The Prohibited Owner with respect to Shares-in-Trust will be required to
repay to the Trustee the amount of any dividends or distributions received by
the Prohibited Owner (i) that are attributable to any Shares-in-Trust and (ii)
the record date of which was on or after the date that such shares become
Shares-in-Trust. Any vote taken by a Prohibited Owner prior to the Company's
discovery that the Shares-in-Trust were held in trust will be rescinded as void
ab initio and recast by the Trustee, in its sole and absolute discretion;
provided, however, that if the Company has already taken irreversible corporate
action based on such vote, then the Trustee shall not have the authority to
rescind and recast such vote. The Prohibited Owner generally will receive from
the Trustee the lesser of (i) the price per share such Prohibited Owner paid for
the shares of capital stock that were designated as Shares-in-Trust (or, in the
case of a gift or
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devise, the Market Price (as defined below) per share on the date of such
transfer) or (ii) the price per share received by the Trustee from the sale of
such Shares-in-Trust. Any amounts received by the Trustee in excess of the
amounts to be paid to the Prohibited Owner will be distributed to the
Beneficiary.
The Shares-in-Trust will be deemed to have been offered for sale to the
Company, or its designee, at a price per share equal to the lesser of (i) the
price per share in the transaction that created such Shares-in-Trust (or, in the
case of a gift or devise, the Market Price per share on the date of such
transfer) or (ii) the Market Price per share on the date that the Company, or
its designee, accepts such offer. Subject to the Trustee's ability to designate
a permitted transferee, the Company will have the right to accept such offer for
a period of 90 days after the later of (i) the date of the purported transfer
which resulted in the creation of such Shares-in-Trust or (ii) the date the
Company determines in good faith that a transfer resulting in such
Shares-in-Trust occurred.
"Market Price" on any date shall mean the average of the Closing Price for
the five consecutive Trading Days (as defined below) ending on such date. The
"Closing Price" on any date shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the NYSE or, if the shares of Common Stock are not listed
or admitted to trading on the NYSE, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, the last quoted price, or if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotations system that may then be in use or, if
the shares of Common Stock are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in the shares of Common Stock selected by the Board of
Directors. "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading is open for the transaction of business or, if the shares of Common
Stock are not listed or admitted to trading on any national securities exchange,
shall mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
Any person who acquires or attempts to acquire capital stock in violation
of the foregoing restrictions, or any person who owned shares of Capital Stock
that were transferred to a Trust, will be required (i) to give immediately
written notice to the Company of such event and (ii) to provide to the Company
such other information as the Company may request in order to determine the
effect, if any, of such transfer on the Company's status as a REIT.
All persons who own, directly or indirectly, more than 5.0% (or such lower
percentages as required pursuant to regulations under the Code) of the
outstanding shares of capital stock of the Company must, within 30 days after
January 1 of each year, provide to the Company a written statement or affidavit
stating (i) the name and address of such direct or indirect owner; (ii) the
number of shares of capital stock owned directly or indirectly; and (iii) a
description of how such shares are held. In addition, each direct or indirect
stockholder shall provide to the Company such additional information as the
Company may request in order to determine the effect, if any, of such ownership
the Company's status as a REIT and to ensure compliance with the Ownership
Limitation.
The Ownership Limitation (or the Look-Through Ownership Limitation, as
applicable) generally will not apply to the acquisition of shares of capital
stock by an underwriter that participates in a public offering of such shares.
All certificates representing shares of Common Stock will bear a legend
referring to the restrictions described above.
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The Ownership Limitation could have the effect of delaying, deferring or
preventing a takeover or other transaction in which holders of some, or a
majority of, shares of Common Stock might receive a premium from their shares of
Common Stock over the then prevailing market price or which such holders might
believe to be otherwise in their best interest.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
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CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE COMPANY'S
CHARTER AND BYLAWS
The following summary of certain provisions of Maryland law and the
Company's Charter and Bylaws does not purport to be complete and is subject to
and qualified in its entirety by reference to Maryland law and to the Company's
Charter and Bylaws, copies of which are exhibits to the Registration Statement
of which this Prospectus is a part.
The Charter and the Bylaws of the Company contain certain provisions that
could make more difficult the acquisition of the Company by means of a tender
offer, a proxy contest or otherwise. These provisions are expected to discourage
certain types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of the Company to negotiate first
with the Board of Directors. The Company believes that the benefits of these
provisions outweigh the potential disadvantages of discouraging such takeover
proposals because, among other things, negotiation of such takeover proposals
might result in an improvement of their terms.
NUMBER OF DIRECTORS; CLASSIFICATION OF THE BOARD OF DIRECTORS
The Charter and Bylaws provide that the number of directors will consist of
not less than three nor more than fifteen persons, as determined by the
affirmative vote of a majority of the members of the entire Board of Directors.
The Charter requires that at all times a majority of the directors shall be
Independent Directors, except that upon the death, removal, incapacity or
resignation of an Independent Director, such requirement shall not be applicable
for 60 days. Following the Offering, there will be seven directors, five of whom
will be Independent Directors. The holders of shares of Common Stock are
entitled to vote on the election or removal of directors, with each share
entitled to one vote. Any vacancy will be filled, at any regular meeting or at
any special meeting called for that purpose, by a majority of the remaining
directors, except that a vacancy resulting from an increase in the number of
directors must be filled by a majority of the entire Board of Directors.
Pursuant to the Charter, the Board of Directors is divided into three
classes of directors. The initial terms of the first, second and third classes
will expire in 1998, 1999, and 2000, respectively. As the term of each class
expires, directors in that class will be elected by the stockholders of the
Company for a term of three years and until their successors are duly elected
and qualify. Classification of the Board of Directors is intended to assure the
continuity and stability of the Company's business strategies and policies as
determined by the Board of Directors. Because holders of shares of Common Stock
will have no right to cumulative voting in the election of directors, at each
annual meeting of stockholders, the holders of a majority of the shares of
Common Stock will be able to elect all of the successors of the class of
directors whose terms expire at that meeting.
The classified board provision could have the effect of making the
replacement of incumbent directors more time consuming and difficult, which
could delay, defer or prevent an attempt by a third party to obtain control of
the Company or other transaction, even though such an attempt or other
transaction might be beneficial to the Company and its stockholders. At least
two annual meetings of stockholders, instead of one, will generally be required
to effect a change in a majority of the Board of Directors. Thus, the classified
board provision could increase the likelihood that incumbent directors will
retain their positions.
REMOVAL; FILLING VACANCIES
The Bylaws provide that any vacancies on the Board of Directors for any
cause other than an increase in the number of directors will be filled by the
affirmative vote of a majority of the remaining directors, even if such majority
is not sufficient to constitute a quorum. Any vacancy in the number of directors
created by an increase in the number of directors will be filled by the
affirmative vote of a majority of the entire Board of Directors. Any director so
elected shall hold office until the next annual meeting of stockholders and
until his successor is elected and qualifies. The Charter provides that
directors may be removed, with cause, only by the affirmative vote of the
holders of shares of at least a majority of the votes entitled to be cast in the
election of directors. This provision, when coupled with the provision of the
Bylaws authorizing the Board of Directors to
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fill vacant directorships, precludes stockholders from removing incumbent
directors except for cause and filling the vacancies created by such removal
with their own nominees.
See "Management -- Limitation of Liability and Indemnification" for a
description of the limitations on liability of directors and officers of the
Company and the provisions for indemnification of directors and executive
officers provided for under applicable Maryland law and the Charter.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns 10.0% or more of the voting
power of such corporation's shares or an affiliate of such corporation who, at
any time within the two-year period prior to the date in question, was the
beneficial owner of 10.0% or more of the voting power of the then-outstanding
voting stock of such corporation (an "Interested Stockholder") or an affiliate
thereof are prohibited for five years after the most recent date on which the
Interested Stockholder becomes an Interested Stockholder. Thereafter, any such
business combination must be recommended by the board of directors of such
corporation and approved by the affirmative vote of at least (a) 80.0% of the
votes entitled to be cast by holders of outstanding shares of voting stock of
such corporation and (b) two-thirds of the votes entitled to be cast by holders
of shares of such corporation other than shares held by the Interested
Stockholder with whom (or with whose affiliate) the business combination is to
be effected, unless, among other conditions, the corporation's stockholders
receive a minimum price (as defined in the MGCL) for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Stockholder for its shares. These provisions of the MGCL do not
apply, however, to business combinations that are approved or exempted by the
board of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder. The Company's Board of Directors
has resolved to opt out of the business combination provisions of the MGCL. See
"-- Control Share Acquisition Statute" below. There can be no assurance that the
Board of Directors will not opt into such provisions at any time in the future.
CONTROL SHARE ACQUISITION STATUTE
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares owned by the acquiror, by officers or by directors who are
employees of the corporation. "Control Shares" are voting shares which, if
aggregated with all other such shares previously acquired by the acquiror or in
respect of which the acquiror is able to exercise or direct the exercise of
voting power (except solely by virtue of a revocable proxy), would entitle the
acquiror to exercise voting power in electing directors within one of the
following ranges of voting power: (i) one-fifth or more but less than one-third;
(ii) one-third or more but less than a majority; or (iii) a majority or more of
all voting power. Control Shares do not include shares the acquiring person is
then entitled to vote as a result of having previously obtained stockholder
approval. A "control share acquisition" means the acquisition of control shares,
subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to the absence of
voting rights for the control shares, as of the date of the last control share
acquisition by the acquiror or of any meeting of stockholders at which the
voting rights of such shares are considered and not approved. If voting rights
for control shares are approved at
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a stockholders meeting and the acquiror becomes entitled to vote a majority of
the shares entitled to vote, all other stockholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of such
appraisal rights may not be less than the highest price per share paid by the
acquiror in the control share acquisition, and certain limitations and
restrictions otherwise applicable to the exercise of dissenters' rights do not
apply in the context of a control share acquisition.
The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation.
The Bylaws of the Company contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of the
Company's shares of Common Stock. There can be no assurance that such provision
will not be amended or eliminated at any time in the future.
AMENDMENT TO THE CHARTER
The Charter of the Company may be amended only by the Board of Directors in
accordance with Section 2-604 of the MGCL and the Charter and thereafter
approved by the stockholders. In addition to any other vote of the stockholders
that is required by applicable law, the affirmative vote of two-thirds of the
outstanding shares of the capital stock of the Company entitled to vote on such
amendment, voting together as a single class, and the affirmative vote of
two-thirds of the outstanding shares of each class entitled to vote thereon as a
class, is required to amend any provision of the Charter (except to amend any
provision of the Charter relating to the authority of the Company to issue
shares of its capital stock, only a majority rather than two-thirds is
required).
DISSOLUTION OF THE COMPANY
The dissolution of the Company must be approved by the affirmative vote of
the holders of shares entitled to cast not less than two-thirds of all of the
votes entitled to be cast on the matter.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The Bylaws of the Company provide that (a) with respect to an annual
meeting of stockholders, nominations of persons for election to the Board of
Directors and the proposal of business to be considered by stockholders may be
made only (i) pursuant to the Company's notice of the meeting; (ii) by the Board
of Directors; or (iii) by a stockholder who is entitled to vote at the meeting
and has complied with the advance notice procedures set forth in the Bylaws and
(b) with respect to special meetings of stockholders, only the business
specified in the Company's notice of meeting may be brought before the meeting
of stockholders and nominations of persons for election to the Board of
Directors may be made only (i) pursuant to the Company's notice of the meeting;
(ii) by the Board of Directors; or (iii) provided that the Board of Directors
has determined that directors shall be elected at such meeting, by a stockholder
who is entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the Bylaws.
MEETINGS OF STOCKHOLDERS
The Company's Bylaws provide that annual meetings of stockholders shall be
held on a date and at the time set by the Board of Directors during the month of
May each year (commencing in May 1998). Special meetings of the stockholders may
be called by (i) the President of the Company, (ii) the Chief Executive Officer
or (iii) the Board of Directors. As permitted by the MGCL, the Bylaws of the
Company provide that special meetings must be called by the Secretary of the
Company upon the written request of the holders of shares entitled to cast not
less than a majority of all votes entitled to be cast at the meeting.
OPERATIONS
The Company is generally prohibited by the Charter from holding any assets
or engaging in any activity that would cause the Company to fail to qualify as a
REIT.
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ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE CHARTER
AND BYLAWS
The business combination provisions, if the Board of Directors determines
to opt in to such provisions, and, if the applicable provision in the Bylaws is
rescinded, the control share acquisition provisions of the MGCL, the provisions
of the Charter on classification of the Board of Directors and removal of
directors and the advance notice provisions of the Bylaws could delay, defer or
prevent a transaction or a change in control of the Company that might involve a
premium price for holders of shares of Common Stock or otherwise be in their
best interest.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of the Company's policies with respect to
investment, disposition, financing, conflicts of interest and certain other
activities. These policies have been determined by the Board of Directors of the
Company and may be amended or revised from time to time at the discretion of the
Board of Directors without a vote of the stockholders of the Company, except
that (i) the Company cannot change its policy of holding its assets and
conducting its business only through the Operating Partnership and its
affiliates without the consent of the holders of OP Units as provided in the
Partnership Agreement; (ii) changes in certain policies with respect to
conflicts of interest must be consistent with legal requirements; and (iii) the
Company cannot take any action intended to terminate its qualification as a REIT
without the approval of the holders of shares of Common Stock representing
two-thirds of all the votes entitled to be cast on the matter at a regular or
special meeting of stockholders.
INVESTMENT POLICIES
Investments in Real Estate or Interests in Real Estate. The Company will
conduct all of its investment activities through the Operating Partnership and
its affiliates. The Company's investment objectives are to provide quarterly
cash distributions and achieve long-term capital appreciation through increases
in the value of the Company. For a discussion of the Properties and the
Company's acquisition and other strategic objectives, see "The Properties" and
"Operating and Growth Strategies."
The Company expects to pursue its investment objectives primarily through
the direct ownership by the Operating Partnership of the Properties and other
acquired office properties. The Company currently intends to invest primarily in
existing improved properties but may, if market conditions warrant, invest in
additional development projects as well. Future investment or development
activities will not be limited to any geographic area or product type or to a
specified percentage of the Company's assets. While the Company intends to
diversify in terms of property locations, size and market, the Company does not
have any limit on the amount or percentage of its assets that may be invested in
any one property or any one geographic area. The Company intends to engage in
such future investment or development activities in a manner which is consistent
with the maintenance of its status as a REIT for federal income tax purposes. In
addition, the Company may purchase or lease income-producing commercial and
other types of properties for long-term investment, expand and improve the real
estate presently owned or other properties purchased, or sell such real estate
properties, in whole or in part, when circumstances warrant.
The Company may also participate with third parties in property ownership,
through joint ventures or other types of co-ownership. Such investments may
permit the Company to own interests in larger assets without unduly restricting
diversification and, therefore, add flexibility in structuring its portfolio.
The Company will not, however, enter into a joint venture or partnership to make
an investment that would not otherwise meet its investment policies.
Equity investments may be subject to existing mortgage financing and other
indebtedness or such financing or indebtedness as may be incurred in connection
with acquiring or refinancing these investments. Debt service on such financing
or indebtedness will have a priority over any distributions with respect to the
Common Stock. Investments are also subject to the Company's policy not to be
treated as an investment company under the Investment Company Act of 1940, as
amended (the "1940 Act").
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Investments in Real Estate Mortgages. While the Company's current
portfolio consists of, and the Company's business objectives emphasize, equity
investments in commercial real estate, the Company may, in the discretion of the
Board of Directors, invest in mortgages and other types of equity real estate
interests consistent with the Company's qualification as a REIT. The Company
does not presently intend to invest in mortgages or deeds of trust, but may
invest in participating or convertible mortgages if the Company concludes that
it may benefit from the cash flow or any appreciation in value of the property.
Investments in real estate mortgages run the risk that one or more borrowers may
default under such mortgages and that the collateral securing such mortgages may
not be sufficient to enable the Company to recoup its full investment.
Securities or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. Subject to the percentage of ownership
limitations and gross income tests necessary for REIT qualification, the Company
also may invest in securities of other REITs or other entities engaged in real
estate activities. In addition, the Company may, but does not presently intend
to, invest in securities of other issuers, including for the purpose of
exercising control over such entities. See "-- Policies with Respect to Other
Activities."
DISPOSITION POLICIES
The Company does not currently intend to dispose of any of the Properties,
although it reserves the right to do so if, based upon management's periodic
review of the Company's portfolio, the Board of Directors determines that such
action would be in the best interests of the Company. The tax consequences of
the disposition of the Properties may, however, influence the decision of
certain directors and executive officers of the Company who hold OP Units as to
the desirability of a proposed disposition. See "Risk Factors -- Conflicts of
Interests in the Business of the Company." Any decision to dispose of a Property
will be made by the Company and approved by a majority of the Board of
Directors.
FINANCING POLICIES
As a general policy, the Company intends to maintain a Debt Policy limiting
the Company's total consolidated indebtedness plus its pro rata share of Joint
Venture Debt to 50% of the Company's Total Market Capitalization. Upon
completion of the Offering and the Formation Transactions, the debt to Total
Market Capitalization ratio of the Company will be approximately 24.5% (22.7% if
the Underwriters' over-allotment option is exercised in full). The Charter and
Bylaws do not, however, limit the amount or percentage of indebtedness that the
Company may incur. In addition, the Company may from time to time modify its
Debt Policy in light of current economic conditions, relative costs of debt and
equity capital, market values of its Properties, general conditions in the
market for debt and equity securities, fluctuations in the market price of its
Common Stock, growth and acquisition opportunities and other factors.
Accordingly, the Company may increase or decrease its debt to Total Market
Capitalization ratio beyond the limits described above. If these policies were
changed, the Company could become more highly leveraged, resulting in an
increased risk of default on its obligations and a related increase in debt
service requirements that could adversely affect the financial condition and
results of operations of the Company and the Company's ability to make
distributions to stockholders.
The Company has established its Debt Policy relative to the Total Market
Capitalization of the Company computed at the time the debt is incurred, rather
than relative to the book value of such assets, a ratio that is frequently
employed, because it believes that the book value of its assets (which to a
large extent is the depreciated value of real property, the Company's primary
tangible asset) does not accurately reflect its ability to borrow and to meet
debt service requirements. Total Market Capitalization, however, is subject to
greater fluctuation than book value, and does not necessarily reflect the fair
market value of the underlying assets of the Company at all times. Moreover, due
to fluctuations in the value of the Company's portfolio of Properties over time,
and since any measurement of the Company's total consolidated indebtedness to
Total Market Capitalization is made only at the time debt is incurred, the debt
to Total Market Capitalization ratio could exceed the 50% level.
The Company has not established any limit on the number or amount of
mortgages that may be placed on any single property or on its portfolio as a
whole.
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Although the Company will consider factors other than Total Market
Capitalization in making decisions regarding the incurrence of debt (such as the
purchase price of properties to be acquired with debt financing, the estimated
market value of properties upon refinancing, and the ability of particular
properties and the Company as a whole to generate sufficient cash flow to cover
expected debt service), there can be no assurance that the debt to Total Market
Capitalization ratio, or any other measure of asset value, at the time the debt
is incurred or at any other time will be consistent with any particular level of
distributions to stockholders. See "Risk Factors -- Changes in Policies, Such as
the Company's Debt Policy, Without Stockholder Approval Could Adversely Affect
the Company" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
CONFLICT OF INTEREST POLICIES
The Company has adopted certain policies and entered into certain
agreements with Messrs. Feldman, Cox, and Kasman designed to minimize potential
conflicts of interest. The Company's Board of Directors is subject to certain
provisions of Maryland law, which are designed to eliminate or minimize certain
potential conflicts of interest. However, there can be no assurance that these
policies will always be successful in eliminating the influence of such
conflicts, and if they are not successful, decisions could be made that might
fail to reflect fully the interests of all stockholders.
Charter and Bylaw Provisions. The Company's Charter, with limited
exceptions, requires that a majority of the Company's Board of Directors be
comprised of Independent Directors (defined as persons who are not officers or
employees of the Company, or an affiliate of the Company. The Charter provides
that such provisions relating to Independent Directors may not be amended,
altered, changed or repealed without the affirmative vote of all of the
Independent Directors and the affirmative vote of the holders of shares entitled
to cast not less than two-thirds of the votes entitled to be cast on such a
matter. In addition, the Company's Bylaws provide that any action pertaining to
any transaction in which the Company is purchasing, selling, leasing or
mortgaging any real estate asset, making a joint venture investment or engaging
in any other transaction in which an advisor, director or officer of the
Company, or affiliated contract manager of any property of the Company or any
affiliate of the foregoing, has any direct or indirect interest other than as a
result of such person's status as a director, officer or stockholder of the
Company, must be approved by the affirmative vote of a majority of the
Independent Directors even if the Independent Directors constitute less than a
quorum.
The Operating Partnership. A conflict of interest may arise between the
Company, as a general and limited partner of the Operating Partnership, and the
other Limited Partners of the Operating Partnership, which may include
affiliates of the Primary Contributors, due to the differing potential tax
liability to the Company and the other Limited Partners from the subsequent sale
of certain Properties by the Operating Partnership resulting from the differing
tax bases of the Company and such affiliates in such Properties. In an effort to
address this and other potential conflicts of interest, the Company's Bylaws
provide that the Company's decision with respect to the subsequent sale of a
Property purchased from Tower Equities must be made by the Independent
Directors. The Partnership Agreement of the Operating Partnership gives the
Company, as general partner of the Operating Partnership, full, complete and
exclusive discretion in managing and controlling the business of the Operating
Partnership and in making all decisions affecting the business and assets of the
Operating Partnership.
Provisions of the MGCL. Pursuant to the MGCL, each director of the Company
is required to discharge his duties in good faith, in a manner he reasonably
believes to be in the best interest of the Company and with the care that an
ordinarily prudent person in a like position would exercise under similar
circumstances. In addition, under the MGCL, a contract or other transaction
between the Company and a director or between the Company and any other
corporation or other entity in which a director of the Company is a director or
has a material financial interest is not void or voidable solely on the grounds
of such interest, the presence of the director at the meeting at which the
contract or transaction is approved or the director's vote in favor thereof if
(a) the fact of the common directorship or interest is disclosed or known to (i)
the board of directors or committee, and the board or committee authorizes,
approves or ratifies the contract or transaction by the affirmative vote of a
majority of disinterested directors, even if the disinterested
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directors constitute less than a quorum, or (ii) the stockholders entitled to
vote, and the transaction or contract is authorized, approved or ratified by a
majority of the votes cast by the stockholders entitled to vote other than the
votes of shares owned of record or beneficially by the interested director or
corporation, firm or other entity, or (b) the transaction or contract is fair
and reasonable to the Company.
POLICIES WITH RESPECT TO OTHER ACTIVITIES
The Company has authority to offer Common Stock, Preferred Stock or options
to purchase stock in exchange for property and to repurchase or otherwise
acquire its Common Stock or other securities in the open market or otherwise and
may engage in such activities in the future. As described under "The Partnership
Agreement -- Exchange Rights," the Company expects (but is not obligated) to
issue Common Stock to holders of OP Units in the Operating Partnership upon
exercise of their exchange rights. Except in connection with the Formation
Transactions and the Concurrent Private Placements, the Company has not issued
Common Stock, OP Units or any other securities in exchange for property or any
other purpose, and the Board of Directors has no present intention of causing
the Company to repurchase any Common Stock. The Company may issue Preferred
Stock from time to time, in one or more series, as authorized by the Board of
Directors without the need for stockholder approval. See "Description of Capital
Stock -- Preferred Stock." The Company has not engaged in trading, underwriting
or agency distribution or sale of securities of other issuers other than the
Operating Partnership, nor has the Company invested in the securities of other
issuers other than the Operating Partnership for the purposes of exercising
control, and does not intend to do so. At all times, the Company intends to make
investments in such a manner as to qualify as a REIT, unless because of
circumstances or changes in the Code (or the Treasury Regulations), the Board of
Directors determines that it is no longer in the best interest of the Company to
qualify as a REIT and such determination is approved by the affirmative vote of
the holders of shares representing not less than two-thirds of all the votes
entitled to be cast on the matter as required by the Charter. The Company has
not made any loans to third parties, although it may in the future make loans to
third parties, including, without limitation, to joint ventures in which it
participates. The Company intends to make investments in such a way that it will
not be treated as an investment company under the 1940 Act. The Company's
policies with respect to such activities may be reviewed and modified or amended
from time to time by the Company's Board of Directors without a vote of the
stockholders.
WORKING CAPITAL RESERVES
The Company will maintain working capital reserves in amounts that the
Board of Directors determines to be adequate to meet normal contingencies in
connection with the operation of the Company's business and investments.
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SHARES AVAILABLE FOR FUTURE SALE
GENERAL
Upon the completion of the Offering and the Formation Transactions, the
Company will have 14,664,360 shares of Common Stock issued and outstanding
(16,391,610 shares if the Underwriters' over-allotment option is exercised in
full). In addition, (i) 1,583,640 shares of Common Stock are reserved for
issuance upon exchange of OP Units, (ii) 9.5% of the total number of issued and
outstanding shares of Common Stock (on a fully diluted basis assuming the
exchange of all OP Units for shares of Common Stock) are reserved for grants of
options and other awards to officers and employees of the Company pursuant to
the 1997 Plan and (iii) 200,000 shares of Common Stock are reserved for grants
of options under the Directors' Plan (the "Company Options"). All of the Common
Stock issued in the Offering will be freely tradeable by persons, other than
affiliates of the Company, without restriction under the Securities Act, subject
to certain limitations on ownership set forth in the Charter. See "Description
of Capital Stock -- Restrictions on Transfer" and "Risk Factors -- Possible
Adverse Effect on Common Stock Price of Shares Available for Future Sale." The
1,949,360 shares of Common Stock issued in the Formation Transactions, the
1,200,000 shares of Common Stock issued in the Concurrent Private Placements and
the 1,583,640 shares of Common Stock available for issuance upon exchange of OP
Units issued in connection with the Formation Transactions, and the Company
Options (collectively, "Restricted Shares") are "restricted" securities under
the meaning of Rule 144 under the Securities Act and may be sold only pursuant
to an effective registration statement under the Securities Act or an applicable
exemption, including an exemption under Rule 144 under the Securities Act. As
described below under "-- Registration Rights," the Company has granted certain
holders registration rights with respect to their shares of Common Stock.
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of Restricted Shares from the Company
or any "affiliate" of the Company, as that term is defined under the Securities
Act, the acquiror or subsequent holder is entitled to sell within any
three-month period a number of shares of Common Stock that does not exceed the
greater of 1.0% of the then outstanding Common Stock or the average weekly
trading volume of Common Stock on all exchanges and reported through the
automated quotation system of a registered securities association during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 are also subject to certain restrictions on
the manner of sales, notice requirements, and the availability of current public
information about the Company. If two years have elapsed since the date of
acquisition of Restricted Shares from the Company or from an "affiliate" of the
Company, and the acquiror or subsequent holder thereof is deemed not to have
been an affiliate of the Company at any time during the 90 days preceding a
sale, such person would be entitled to sell such Common Stock in the public
market under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information requirements, or notice requirements.
In connection with the Offering, the executive officers and directors of
the Company have agreed, subject to certain limited exceptions, not to sell,
offer or contract to sell, grant any option for the sale of, or otherwise
dispose of any shares of Common Stock or OP Units or any securities convertible
into or exchangeable for Common Stock or OP Units acquired at the time of the
Offering for a period of two years from the date of the Prospectus, without the
prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated. In
addition, the other recipients of shares of Common Stock and OP Units in
connection with the Formation Transactions, including the Morgan Stanley
Investors and the Carlyle Funds, have agreed, subject to certain limited
exceptions, not to sell, offer, or contract to sell, grant any option for the
sale of, or otherwise, dispose of any shares of Common Stock or OP Units or any
securities convertible into or exchangeable for shares of Common Stock or OP
Units for a period of one year from the date of the Prospectus, without the
prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated. See
"Underwriting."
The Company has established various stock option plans for the purpose of
attracting and retaining highly qualified directors, executive officers and
other key employees. See "Management -- Stock Option and Restricted Stock Plans
and -- Compensation of Directors." The Company intends to issue options to
purchase approximately 975,000 shares of Common Stock to directors, executive
officers and certain key employees prior to the completion of the Offering and
has reserved additional shares of future issuance under these plans.
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Prior to the expiration of the initial twelve-month period following
consummation of the Offering, the Company expects to file a registration
statement on Form S-8 with the Commission with respect to the shares of Common
stock issuable under these plans, which shares may be resold without
restriction, unless held by affiliates.
Prior to the Offering, there has been no public market for the Common
Stock. Trading of the Common Stock on the New York Stock Exchange is expected to
commence immediately following the completion of the Offering. No prediction can
be made as to the effect, if any, that future sales of shares, or the
availability of shares for future sale, will have on the market price prevailing
from time to time. Sales of substantial amounts of Common Stock (including
shares issued upon the exercise of options), or the perception that such sales
could occur, could adversely affect prevailing market prices of the Common
Stock. See "Partnership Agreement -- Transferability of Interests."
REGISTRATION RIGHTS
The Company has agreed to file a registration statement with the Commission
with respect to sales of Common Stock received upon exchange of OP Units and
shares of Common Stock issued in connection with the Concurrent Private
Placements and the Formation Transactions within 15 days after the expiration of
the one year period following completion of this Offering. The Company will be
obligated to maintain the effectiveness of such registration statement until a
date to be agreed upon or until such time as all of the shares registered
pursuant to such registration statement (i) have been disposed of pursuant to
such registration statement; (ii) have been otherwise distributed pursuant to
Rule 144; or (iii) have been otherwise transferred in a transaction resulting in
the transferee receiving Common Stock no longer deemed to be "restricted
securities." See "Partnership Agreement -- Registration Rights." In addition,
the Company has granted to the Morgan Stanley Investors certain demand and
"piggyback" registration rights. Pursuant to the Company's registration rights
agreements with the Morgan Stanley Investors, the Morgan Stanley Investors have
the right, subject to certain exceptions, (i) on any date within 90 days before
the end of the applicable lock-up period (which, subject to certain exceptions,
expires one year following the consummation of the Offering), to cause the
Company to effect the registration of all or part of the Common Stock held by
the Morgan Stanley Investors; (ii) to cause the Company to effect a shelf
registration of the Common Stock held by Morgan Stanley Investors at any time
following the Offering; and (iii) in the event the Company proposes to effect
the registration of shares of Common Stock for its own account or for the
account of any other holder of Common Stock, to have the Common Stock held by
the Morgan Stanley Investors included in the registration statement related
thereto. The existence of such agreements by the Company may adversely affect
the terms upon which the Company can obtain additional equity financing in the
future.
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PARTNERSHIP AGREEMENT
The following summary of the Partnership Agreement, and the descriptions of
certain provisions thereof set forth elsewhere in this Prospectus, is qualified
in its entirety by reference to the Partnership Agreement, which is filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
MANAGEMENT
The Operating Partnership has been organized as a Delaware limited
partnership pursuant to the terms of the Agreement of Limited Partnership of the
Operating Partnership, dated March 24, 1997 (as amended, the "Partnership
Agreement"), with the Company, as general partner and a limited partner, and
certain of the Primary Contributors and Continuing Investors, as additional
limited partners (together with the Company, as a limited partner, the "Limited
Partners"). Pursuant to the Partnership Agreement, the Company, as the sole
general partner of the Operating Partnership (the "General Partner"), has full,
complete and exclusive responsibility and discretion in the management and
control of the business and affairs of the Operating Partnership, and the
Limited Partners in their capacity as such have no authority to transact
business for, participate in or exercise control or management power over the
business and affairs of the Operating Partnership. However, any amendment to the
Partnership Agreement, other than amendments that (i) add to the obligations of
the General Partner or surrender any right or power granted to the General
Partner or any Affiliate of the General Partner for the benefit of the Limited
Partners, (ii) reflect the admission, substitution, termination or withdrawal of
partners in accordance with the Partnership Agreement, (iii) set forth the
designation rights, powers, duties and preferences of the holders of additional
partnership interests issued by the Operating Partnership pursuant to Section
4.3 of the Partnership Agreement, (iv) reflect a change that does not adversely
affect the Limited Partners in any material respect, or to cure any ambiguity,
correct or supplement any provision in this Agreement not inconsistent with law
or with other provisions, or make other changes with respect to matters arising
under this Partnership Agreement that will not be inconsistent with law or with
the provisions of the Partnership Agreement and (v) satisfy any requirements,
conditions, or guidelines contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in federal or state law,
requires the consent of Limited Partners holding more than 50.0% of the OP Units
held by such Limited Partners (including OP Units held by the Company). The
consent of each adversely affected partner is required for any amendment with
respect to any Partner that would (i) convert a Limited Partner's interest in
the Operating Partnership into a general partner interest; (ii) modify the
limited liability of a Limited Partner in a manner adverse to such Limited
Partner; or (iii) alter the rights of a partner to receive certain distributions
or allocations.
The Limited Partners of the Operating Partnership have agreed that in the
event of any conflict in the fiduciary duties owed by the Company to its
stockholders and by the Company, as General Partner of the Operating
Partnership, to such Limited Partners, the Company may act in the best interests
of the Company's stockholders without violating its fiduciary duties to such
Limited Partners or being liable for any resulting breach of its duties to the
Limited Partners.
The Operating Partnership Agreement provides that, subject to limited
exceptions, all business activities of the Company, including all activities
pertaining to the acquisition and operation of properties, must be conducted
through the Operating Partnership, and that the Operating Partnership must be
operated in a manner that will enable the Company to satisfy the requirements
for being classified as a REIT unless the General Partner ceases to qualify as a
REIT for any reason not related to the business conducted by the Operating
Partnership.
TRANSFERABILITY OF INTERESTS
Subject to limited exceptions, the General Partner may not voluntarily
withdraw from the Operating Partnership or transfer or assign its interests in
the Operating Partnership unless: (i) Limited Partners holding more than 50.0%
of the OP Units held by the Limited Partners (other than OP Units held by the
Company or any affiliate of the Company as a Limited Partner) consent to such
transfer; (ii) such transfer is to an entity which is wholly owned by the
General Partner and is a "Qualified REIT Subsidiary" as defined in Section
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856(i) of the Code; or (iii) the transfer occurs in connection with a
transaction which includes a merger, consolidation or other combination of the
Operating Partnership or sale of substantially all of the assets of the
Operating Partnership as a result of which all Limited Partners will receive an
amount of cash, securities or other property for their OP Units. With certain
exceptions, the Limited Partners may transfer their interests in the Operating
Partnership, in whole or in part, without the written consent of the General
Partner.
The General Partner may not engage in any transaction resulting in a change
of control of the Operating Partnership (a "Transaction") unless in connection
with the Transaction the Limited Partners receive or have the right to receive
cash, securities, or other property equal to the product of the number of shares
of Common Stock into which each OP Unit is then exchangeable and the greatest
amount of cash, securities or other property paid in the Transaction to the
holder of one share of Common Stock in consideration of one share of Common
Stock. If, in connection with the Transaction, a purchase, tender or exchange
offer shall have been made to and accepted by the holders of more than fifty
(50%) of the outstanding shares of Common Stock, each holder of OP Units will
receive, or will have the right to elect to receive, the greatest amount of
cash, securities, or other property which such holder would have received had it
exercised its exchange rights to receive shares of Common Stock in exchange for
its OP Units immediately prior to the expiration of such purchase, tender or
exchange offer and had thereupon accepted such purchase, tender or exchange
offer.
Notwithstanding the foregoing paragraph, the Company may merge, or
otherwise combine its assets, with another entity if, immediately after such
merger or other combination, substantially all of the assets of the surviving
entity, other than OP Units held by the Company, are contributed to the
Operating Partnership as a capital contribution in exchange for OP Units with a
fair market value, as reasonably determined by the Company, equal to the agreed
value of the assets so contributed and the surviving general partner expressly
agrees to assume all obligations of the General Partner.
CAPITAL CONTRIBUTION
The Company intends to contribute to the Operating Partnership all of the
net proceeds of the Offering and the Concurrent Private Placements, in partial
consideration of which it will receive an approximate 1.0% general partner
interest and an approximate 89.3% limited partnership interest in the Operating
Partnership. The Partnership Agreement provides that if the Operating
Partnership requires additional funds at any time or from time to time in excess
of funds available to the Operating Partnership from borrowing or capital
contributions, the Company may borrow such funds from a financial institution or
other lender and lend such funds to the Operating Partnership on the same terms
and conditions as are applicable to the Company's borrowing of such funds. Under
the Partnership Agreement, the Company generally is obligated to contribute the
proceeds of any stock offering as additional capital to the Operating
Partnership. Moreover, the Company is authorized to cause the Operating
Partnership to issue partnership interests (in the form of OP Units) on such
terms and conditions (as determined by the General Partner in its sole
discretion). If the Company so contributes additional capital to the Operating
Partnership, the Company will receive additional OP Units, and its percentage
interest in the Operating Partnership will be increased on a proportionate basis
based upon the amount of such additional capital contributions and the value of
the Operating Partnership at the time of such contributions. Conversely, the
percentage interests of the Limited Partners, other than the Company will be
decreased on a proportionate basis in the event of additional capital
contributions by the Company. However, no additional partnership interests may
be issued to the General Partner unless either (a) such interests are issued in
connection with the grant, award or issuance of equity interests in the General
Partner or (b) such interests are issued to all partners holding partnership
interests in the same class in proportion to their respective percentage
interests in such class.
EXCHANGE RIGHTS
Pursuant to the Exchange Rights Agreement among the Company, the Operating
Partnership and the Limited Partners other than the Company (the "Exchange
Agreement"), such Limited Partners received rights (the "Exchange Rights") that
enable them to cause the Operating Partnership to exchange each OP Unit for cash
equal to the value of a share of Common Stock (or, at the Company's election,
the Company may purchase each OP Unit offered for exchange for one share of
Common Stock). The Operating
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Partnership may not satisfy a Limited Partner's Exchange Right if and to the
extent that the delivery of Common Stock upon exercise of such rights would (i)
be prohibited under the Charter, (ii) otherwise jeopardize the REIT status of
the Company or (iii) cause the acquisition of shares of Common Stock by such
exchanging Limited Partner to be "integrated" with any other distribution of
shares of Common Stock for purposes of complying with the Securities Act. The
Exchange Rights may be exercised at any time after one year following the
closing of the Offering, provided that a Limited Partner may not exercise the
Exchange Rights for less than 1,000 OP Units or, if such Limited Partner holds
less than 1,000 OP Units, for all of the OP Units held by such Limited Partner.
The aggregate number of shares of Common Stock currently issuable upon exercise
of the Exchange Rights is approximately 1,583,640. The number of shares of
Common Stock issuable upon exercise of the Exchange Rights will be adjusted upon
the occurrence of share splits, mergers, consolidations or similar pro rata
share transactions, which otherwise would have the effect of diluting the
ownership interests of the Limited Partners or the stockholders of the Company.
See "Shares Available for Future Sale."
REGISTRATION RIGHTS
The Company has entered into a registration rights agreement (the
"Registration Rights Agreement") with the Operating Partnership and each holder
of OP Units pursuant to which the Company has agreed to file a registration
statement with the Commission with respect to sales of Common Stock received
upon exchange of OP Units and shares of Common Stock issued in connection with
the Concurrent Private Placements and the Formation Transactions within 15 days
after the expiration of the one year period following the Offering. The Company
will be obligated to maintain the effectiveness of such registration statement
until a date to be agreed upon or until such time as all of the shares
registered pursuant to such registration statement (i) have been disposed of
pursuant to such registration statement, (ii) have been otherwise distributed
pursuant to Rule 144, or (iii) have been otherwise transferred in a transaction
resulting in the transferee receiving Common Stock no longer deemed to be
"restricted securities." The Company is required to bear the costs of such
registration statements exclusive of underwriting discounts, commissions, and
certain other costs attributable to, and to be borne by, the selling
stockholders. In connection with such registrations, the Company and the selling
stockholders will mutually indemnify each other against certain liabilities,
including liabilities under the federal securities laws.
OPERATIONS
The Partnership Agreement requires that the Operating Partnership be
operated in a manner that will enable the Company to satisfy the requirements
for being classified as a REIT, to avoid any federal income or excise tax
liability imposed under the Code and to ensure that the Operating Partnership
will not be classified as a "publicly traded partnership" for purposes of
section 7704 of the Code.
In addition to the administrative and operating costs and expenses incurred
by the Operating Partnership, the Operating Partnership pays all administrative
costs and expenses of the Company (the "Company Expenses"), and the Company
Expenses are treated as expenses of the Operating Partnership. The Company
Expenses generally include (i) all expenses relating to the formation of the
Company and the Operating Partnership, (ii) all expenses relating to the public
offering and registration of securities by the Company, (iii) all expenses
associated with the preparation and filing of any periodic reports by the
Company under federal, state or local laws or regulations, (iv) all expenses
associated with compliance by the Company with laws, rules and regulations
promulgated by any regulatory body and (v) all other operating or administrative
costs of the Company incurred in the ordinary course of its business on behalf
of the Operating Partnership.
DISTRIBUTIONS AND ALLOCATIONS
The Partnership Agreement provides that the Operating Partnership will
distribute cash from operations (including net sale or refinancing proceeds, but
excluding net proceeds from the sale of the Operating Partnership's property in
connection with the liquidation of the Operating Partnership) on a quarterly
(or, at the election of the General Partner, more frequently) basis, in amounts
determined by the General Partner in its sole discretion, to the partners in
accordance with their respective percentage interests in the Operating
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Partnership. Upon liquidation of the Operating Partnership, after payment of, or
adequate provision for, debts and obligations of the Operating Partnership,
including any partner loans, any remaining assets of the Operating Partnership
will be distributed to all partners with positive capital accounts in accordance
with their respective positive capital account balances.
Profit and loss of the Operating Partnership for each fiscal year of the
Operating Partnership generally will be allocated among the partners in
accordance with their respective interests in the Operating Partnership. Taxable
income and loss will be allocated in the same manner, subject to compliance with
the provisions of Code sections 704(b) and 704(c) and the Treasury Regulations
promulgated thereunder.
TERM
The Operating Partnership will continue until December 31, 2047, or until
sooner dissolved upon (i) the withdrawal of the General Partner (unless a
majority of remaining partners elect to continue the business of the Operating
Partnership), (ii) the election by the General Partner to dissolve the Operating
Partnership (which election, prior to December 31, 2047, requires the consent of
a majority of the Limited Partners), (iii) the entry of a decree of judicial
dissolution of the Operating Partnership, (iv) the sale of all or substantially
all of the assets and properties of the Operating Partnership or (v) the
bankruptcy or insolvency of the Company, unless all of the remaining partners
elect to continue the business of the Operating Partnership.
TAX MATTERS
Pursuant to the Partnership Agreement, the General Partner will be the tax
matters partner of the Operating Partnership and, as such, will have authority
to handle tax audits and to make tax elections under the Code on behalf of the
Operating Partnership.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary includes a discussion of the material federal income
tax considerations associated with an investment in the Common Stock being sold
in the Offering. The summary should not be construed as tax advice. The
provisions governing treatment as a REIT are highly technical and complex, and
this summary is qualified in its entirety by the applicable Code provisions, the
rules and regulations promulgated thereunder and administrative and judicial
interpretations thereof. Moreover, this summary does not deal with all tax
aspects that might be relevant to a particular prospective stockholder in light
of his personal circumstances, and it does not deal with particular types of
stockholders that are subject to special treatment under the Code, such as
tax-exempt organizations, insurance companies, financial institutions or
broker-dealers, and (with the exception of the general discussion below) foreign
corporations and persons who are not citizens or residents of the United States.
The information in this section is based on the Code, current, temporary and
proposed Treasury Regulations thereunder, the legislative history of the Code,
current administrative interpretations and practices of the IRS (including its
practices and policies as endorsed in private letter rulings, which are not
binding on the IRS except with respect to a taxpayer that receives such a
ruling), and court decisions, all as of the date hereof. The Taxpayer Relief Act
of 1997 (the "1997 Act") was enacted on August 5, 1997. The 1997 Act contains
many provisions which generally make it easier to operate and to continue to
qualify as a REIT for taxable years beginning after the date of enactment
(which, for the Company, would be applicable commencing with its taxable year
beginning January 1, 1998). No assurance can be given that future legislation,
Treasury Regulations, administrative interpretations and court decisions will
not significantly change the current law or adversely affect existing
interpretations of current law. Any such change could apply retroactively to
transactions preceding the date of the change.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES
TO HIM OF THE PURCHASE, OWNERSHIP AND SALE OF COMMON STOCK, OF THE COMPANY'S
ELECTION TO BE TAXED AS A REIT AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
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The Company will elect to be taxed as a REIT, commencing with its taxable
year ending December 31, 1997. The Company believes that, commencing with its
taxable year ending December 31, 1997, it will be organized and will operate in
such manner as to qualify for taxation as a REIT under the Code, and the Company
intends to operate in such a manner so as to meet the Code requirements for
qualification as a REIT for federal income tax purposes. However, no assurance
can be given that such requirements will be met or that the Company will be so
qualified at any time. Battle Fowler LLP ("Counsel") has acted as special tax
counsel to the Company in connection with the election to be taxed as a REIT.
Based on representations made by the Company and the Operating Partnership as to
certain factual matters, including matters related to the organization and
operation of the Company, the Operating Partnership and the Subsidiary
Partnerships, in the opinion of Battle Fowler LLP, the Company, commencing with
the taxable year ending December 31, 1997, will be organized in conformity with
the requirements for qualification as a REIT, and its proposed method of
operation will enable it to meet the requirements for qualification and taxation
as a REIT under the Code, and the Operating Partnership and the Subsidiary
Partnerships will be treated as partnerships for federal income tax purposes.
Qualification and taxation as a REIT depends upon the Company's ability to meet
(through actual annual operating results, distribution levels and diversity of
stock ownership) the various qualification tests imposed under the Code. Counsel
will not review the Company's actual operating results, and no assurance can be
given that such results will meet the REIT requirements on a continuing basis.
Further, the anticipated income tax treatment described in this Prospectus may
be changed, perhaps retroactively, by legislative, administrative or judicial
action at any time.
The opinions described herein represent Counsel's best legal judgment as to
the most likely outcome of an issue if the matter were litigated. Opinions of
Counsel have no binding effect or official status of any kind, and in the
absence of a ruling from the IRS, there can be no assurance that the IRS will
not challenge the conclusion or propriety of any of Counsel's opinions. The
Company does not intend to apply for a ruling from the IRS that it qualifies as
a REIT.
REQUIREMENTS FOR QUALIFICATION AS A REIT
In General. Under the Code, a trust, corporation or unincorporated
association meeting certain requirements (see "-- Structural and Organizational
Requirements") may elect to be treated as a REIT for purposes of federal income
taxation. If a valid election is made, then, subject to certain conditions, the
Company's income that is distributed to its stockholders generally will be taxed
to such stockholders without being subject to tax at the Company level. This
substantially eliminates the "double taxation" (taxation at both the corporate
and stockholder levels) that typically results from the use of corporate
investment vehicles. However, the Company will be taxed at regular corporate
rates on any of its income that is not distributed to the stockholders. (See
"-- Taxation of the Company.") Once made, the election to be taxed as a REIT
continues in effect until voluntarily revoked or automatically terminated by the
Company's failure to qualify as a REIT for a taxable year. If the Company's
election to be treated as a REIT is terminated automatically or is voluntarily
revoked, the Company will not be eligible to re-elect REIT status until the
fifth taxable year after the first taxable year for which the Company's election
was terminated. However, in the event such election is terminated automatically,
the four-year prohibition on a subsequent election to be taxed as a REIT is not
applicable if (i) the Company did not willfully fail to file a timely return
with respect to the termination taxable year; (ii) the inclusion of any
incorrect information in such return was not due to fraud with intent to evade
tax; and (iii) the Company establishes that its failure to meet the requirements
was due to reasonable cause and not to willful neglect.
Structural and Organizational Requirements. To be eligible to be taxed as
a REIT, the Company must satisfy certain structural and organizational
requirements. Among the requirements are the following: (i) the shares of Common
Stock must be transferable; (ii) the shares of Common Stock must be held by 100
or more persons during at least 335 days of a taxable year of twelve months (or
during a proportionate part of a taxable year of less than twelve months) (the
"100-person requirement"); and (iii) no more than 50% of the value of the
outstanding shares of Common Stock may be owned, directly or indirectly, by five
or fewer individuals at any time during the last half of each taxable year (the
"five or fewer" requirement). The requirements of (ii) and (iii) are not
applicable to the first taxable year for which the Company makes an election to
be
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treated as a REIT. However, the Company believes that it will issue a sufficient
amount of Common Stock with sufficient diversity of ownership to satisfy
requirements (ii) and (iii). The Company expects, and will take all necessary
measures within its control to ensure, that the beneficial ownership of the
Company will at all times be held by 100 or more persons and that the Company
will at all times satisfy the "five or fewer" requirement. In this regard, the
Company's Charter contains certain restrictions on the ownership and transfer of
the Company's stock which are designed to assist the Company to satisfy the
"five or fewer" requirement. These restrictions, however, may not ensure that
the Company will, in all cases, be able to satisfy the "five or fewer"
requirement. If the Company were to fail to satisfy the 100 person or the "five
or fewer" requirement, the Company's status as a REIT would terminate, and the
Company would not be able to prevent such termination. Pursuant to the 1997 Act,
for the Company's taxable years commencing on and after January 1, 1998, if the
Company complies with regulatory rules pursuant to which it is required to send
annual letters to certain of its shareholders requesting information regarding
the actual ownership of its stock, but does not know, or exercising reasonable
diligence would not have known, whether it failed to meet the requirement that
it not be closely held, the Company will be treated as having met the "five or
fewer" requirement. If the Company were to fail to comply with these regulatory
rules for any year, it would be subject to a $25,000 penalty. If the Company's
failure to comply was due to intentional disregard of the requirements, the
penalty is increased to $50,000. However, if the Company's failure to comply was
due to reasonable cause and not willful neglect, no penalty would be imposed.
See "-- Failure to Qualify as a REIT" and "Description of Capital
Stock -- Restrictions on Transfer."
If a REIT owns a corporate subsidiary that is a "qualified REIT
subsidiary," that subsidiary is disregarded for federal income tax purposes, and
all assets, liabilities and items of income, deduction and credit of the
subsidiary are treated as assets, liabilities and such items of the REIT itself.
A "qualified REIT subsidiary" is a corporation all of the stock of which is
owned by the REIT. For the Company's 1997 taxable year, all of such stock must
be owned by the Company from the commencement of such corporation's existence.
For taxable years of the Company beginning on and after January 1, 1998, the
Company must own all of the stock of such subsidiary but not from the
commencement of such subsidiary's existence. Except for its interest in the
Management Company, the Company currently does not have any corporate
subsidiaries, but it may have corporate subsidiaries in the future. In such
event, such corporations would generally be organized so as to constitute
"qualified REIT subsidiaries."
A REIT that is a partner in a partnership is deemed to own its
proportionate share of the assets of the partnership and is deemed to be
entitled to the income of the partnership attributable to such share. In
addition, the character of the assets and gross income of the partnership
retains the same character in the hands of the REIT for purposes of satisfying
the gross income and asset tests, as described below. Thus the Company's
proportionate share of the assets and items of income of the Operating
Partnership (including the Operating Partnership's share of such items of the
Subsidiary Partnerships) will be treated as assets and items of income of the
Company for purposes of applying the requirements described herein. A summary of
the rules governing the federal income taxation of partnerships and their
partners is provided below in "-- Tax Aspects of the Operating Partnership."
Income Tests. In order to qualify and to continue to qualify as a REIT,
the Company must satisfy three income tests for each taxable year. First, at
least 75% of the Company's annual gross income (excluding annual gross income
from certain sales of property held primarily for sale to customers in the
ordinary course of business) must be derived directly or indirectly from
investments relating to real property or mortgages on real property or certain
temporary investments. Second, at least 95% of the Company's annual gross income
(excluding gross income from certain sales of property held primarily for sale
in the ordinary course of business) must be derived directly or indirectly from
any of the sources qualifying for the 75% test and from dividends, interest and
gain from the sale or disposition of stock or securities. Third, subject to
certain exceptions in the year in which the Company is liquidated, (i)
short-term gains from sales of stock or securities, (ii) gains from sales of
property (other than foreclosure property) held primarily for sale to customers
in the ordinary course of business and (iii) gains from the sale or other
taxable disposition of real property (including interests in real property and
mortgages on real property) held for less than four years (other than from
involuntary conversions and foreclosure property) must represent in the
aggregate less than
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30% of the Company's annual gross income. In applying these tests, because the
Company is a partner in the Operating Partnership, which is in turn a partner,
either directly or indirectly, in the Subsidiary Partnerships, the Company will
be treated as realizing its proportionate share of the income and loss of these
respective partnerships, as well as the character of such income or loss, and
other partnership items, as if the Company owned directly its proportionate
share of the assets owned by these partnerships. It should be noted that for its
1998 taxable year and all taxable years thereafter, the third test noted above
is no longer applicable.
Substantially all of the income received by the Company is expected to be
rental income. In order for such income to qualify as "rents from real property"
for purposes of satisfying the 75% and 95% gross income tests, several
conditions must be satisfied. First, the amount of rent must not be based in
whole or in part on the income or profits of any person, although rents
generally will qualify as rents from real property if they are based on a fixed
percentage of receipts or sales. Second, rents received from a tenant will not
qualify as "rents from real property" if the Company or an owner of 10% or more
of the Company, directly or constructively, owns 10% or more of such tenant (a
"Related Party Tenant"). For the Company's taxable year which begins on January
1, 1998 and for all taxable years thereafter, only partners who own 25% or more
of the capital or profits interest in a partnership are included in the
determination of whether a tenant is a "Related Party Tenant." Third, if rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, the
portion of rent attributable to such personal property will not qualify as
"rents from real property." Finally, the Company generally must not operate or
manage the property or furnish or render services to the tenants of such
property, other than through an "independent contractor" from whom the Company
derives no income. However, the "independent contractor" requirement does not
apply to the extent the services rendered by the Company are customarily
furnished or rendered in connection with the rental of the real property in the
geographic area in which the property is located (i.e., services which are not
considered rendered to the occupant of the property). In addition, for its 1998
taxable year and thereafter, the Company is permitted to receive up to 1% of the
gross income from each Property from the provision of non-customary services and
still treat all other amounts received from such Property as "rents from real
property." Based on the experience of the Company and its officers and employees
in the office rental markets in which the Company's Properties are located, the
Company believes that all services provided to tenants by the Company will be
considered "usually or customarily rendered" in connection with the rental of
office space for occupancy, although there can be no assurance that the IRS will
not contend otherwise.
The Company believes that its real estate investments, which include its
allocable share of income from the Operating Partnership, will give rise to
income, substantially all of which will qualify as "rents from real property"
for purposes of the 75% and 95% gross income tests. The Company has represented
that it will not (i) charge rent for any property that is based in whole or in
part on the income or profits of any person (other than being based on a
percentage of receipts of sales); (ii) receive rents in excess of a de minimis
amount from Related Party Tenants; (iii) derive rents attributable to personal
property which constitute greater than 15% of the total rents received under the
lease; or (iv) perform services considered to be rendered to the occupant of
property, other than through an independent contractor from whom the Company
derives no income.
The Operating Partnership will own 5% of the voting common stock, and all
of the non-voting stock of the Management Company, a corporation that is taxable
as a regular corporation. The Management Company will perform management,
development and leasing services for the Operating Partnership and other real
properties owned in whole or in part by third parties. The income earned by and
taxed to the Management Company would be nonqualifying income if earned directly
by the Company; as a result of the ownership structure described above, the
income will be earned by and taxed to the Management Company. Dividends paid by
the Management Company to the Company on its stock are qualifying income for
purposes of the 95% gross income test.
The Company expects to receive fees in exchange for the performance of
certain management activities for third parties with respect to properties in
which the Company does not own an interest. Such fees will result in
nonqualifying income to the Company under the 95% and 75% gross income tests. If
the sum of the income realized by the Company (whether directly or through its
interest in the Operating Partnership or the
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Subsidiary Partnerships) which does not satisfy the requirements of the 95%
gross income test (collectively, "Non-Qualifying Income") exceeds 5% of the
Company's gross income for any taxable year, the Company's status as a REIT
would be jeopardized. The Company has represented that the amount of its
Non-Qualifying Income in any taxable year, including such fees, will not exceed
5% of the Company's annual gross income for any taxable year.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of receipts
or sales. Furthermore, interest from a loan that is based on the residual cash
proceeds from sale of the property securing the loan will be treated as gain
from the sale of the secured property.
It is possible that, from time to time, the Company, the Operating
Partnership or a Subsidiary Partnership will enter into hedging transactions
with respect to one or more of its assets or liabilities. Any such hedging
transactions could take a variety of forms. If the Company, the Operating
Partnership or a Subsidiary Partnership enters into an interest rate swap or cap
contract to hedge any variable rate indebtedness incurred to acquire or carry
real estate assets, any periodic income or gain from the disposition of such
contract should be qualifying income for purposes of the 95% gross income test
but not for the 75% gross income test. For the Company's taxable year, which
begins on January 1, 1998, and for all taxable years thereafter, income from
hedging transactions which is qualifying income for the 95% gross income test
also includes payments to the Company under an option, futures contract, forward
rate agreement, or any similar financial instrument. Furthermore, for the
Company's 1997 taxable year any such contract would be considered a "security"
for purposes of applying the 30% gross income test. To the extent that the
Company, the Operating Partnership or a Subsidiary Partnership hedges with other
types of financial instruments or in other situations, it may not be entirely
clear how the income from those transactions will be treated for purposes of the
various income tests that apply to REITs under the Code. The Company intends to
structure any hedging transactions in a manner that does not jeopardize its
status as a REIT.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may still qualify as a REIT for such year if the
Company's failure to meet such tests was due to reasonable cause and not to
willful neglect, the Company attaches a schedule of the sources of its income to
its return, and any incorrect information on the schedule was not supplied
fraudulently with the intent to evade tax. It is not possible to state whether
in all circumstances the Company would be entitled to the benefit of these
relief provisions. Even if these relief provisions apply, a 100% tax is imposed
on the net income attributable to the greater of the amount by which the Company
failed the 75% test or the 95% test. Failure to comply with the 30% gross income
test is not excusable; therefore, if the Company fails to meet the requirements
of the 30% gross income test for its 1997 taxable year, its status as a REIT
automatically terminates regardless of the reason for such failure.
Any gain realized by the Company on the sale of any property held as
inventory or other property held primarily for sale to customers in the ordinary
course of business (including the Company's share of any such gain realized by
the Operating Partnership or a Subsidiary Partnership) will be treated as income
from a prohibited transaction that is subject to a 100% penalty tax. Such
prohibited transaction income may also have an adverse effect upon the Company's
ability to satisfy the income tests for qualification as a REIT. Under existing
law, whether property is held as inventory or primarily for sale to customers in
the ordinary course of a trade or business is a question of fact that depends on
all the facts and circumstances with respect to the particular transaction. The
Operating Partnership and the Subsidiary Partnerships have represented that they
intend to hold the Properties for investment with a view to long-term
appreciation, to engage in the business of acquiring, developing, owning and
operating the Properties (and other properties) and to make such occasional
sales of the Properties as are consistent with the investment objectives of the
Operating Partnership and Subsidiary Partnerships, as the case may be. There can
be no assurance, however, that the IRS might not contend that one or more of
such sales is subject to the 100% penalty tax.
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Asset Tests. At the close of each quarter of its taxable year, the Company
also must satisfy two tests relating to the nature and diversification of its
assets. First, at least 75% of the value of the Company's total assets must be
represented by real estate assets (including its allocable share of real estate
assets held by the Operating Partnership and the Subsidiary Partnerships, stock
or debt instruments held for not more than one year purchased with the proceeds
of an issuance of stock or long-term (at least five years) debt of the Company),
cash, cash items and government securities. Second, no more than 25% of the
Company's total assets may be represented by securities other than those that
can satisfy the 75% asset test described in the preceding sentence. Of the
investments included in the 25% asset class, the value of any one issuer's
securities (excluding shares in qualified REIT subsidiaries and/or another REIT
and excluding partnership interests such as those in the Operating Partnership
and in any Subsidiary Partnerships) owned by the Company may not exceed 5% of
the value of the Company's total assets, and the Company may not own more than
10% of any one issuer's outstanding voting securities (excluding securities of a
qualified REIT subsidiary or another REIT and excluding partnership interests).
The Company has represented that, as of the date of the Offering, (i) at least
75% of the value of its total assets will be represented by real estate assets,
cash and cash items (including receivables) and government securities and (ii)
it will not own any securities that do not satisfy the 25% asset requirement. In
addition, the Company has represented that it will not acquire or dispose, or
cause the Operating Partnership or a Subsidiary Partnership to acquire or
dispose, of assets in the future in a way that would cause it to violate either
asset requirement.
The Operating Partnership owns 5% of the voting stock and 100% of the
non-voting stock of the Management Company. The Company believes that the
Company's pro rata share of the value of the securities of the Management
Company do not exceed 5% of the total value of the Company's assets. There can
be no assurance, however, that the IRS will not contend either that the value of
the securities of the Management Company held by the Company (through the
Operating Partnership) exceeds the 5% value limitation or that non-voting stock
of the Management Company should be considered "voting stock" for this purpose.
After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter (including as a result of the
Company increasing its interest in the Operating Partnership), the failure can
be cured by disposition of sufficient nonqualifying assets within 30 days after
the close of that quarter. The Company intends to maintain adequate records of
the value of its assets to ensure compliance with the asset tests and to take
such other actions within 30 days after the close of any quarter as may be
required to cure any noncompliance. If the Company fails to cure noncompliance
with the asset tests within such time period, the Company will cease to qualify
as a REIT.
Annual Distribution Requirements. In order to qualify as a REIT, the
Company must distribute to the holders of shares of Common Stock an amount at
least equal to (A) the sum of 95% of (i) the Company's "real estate investment
trust taxable income" (computed without regard to the deduction for dividends
paid and excluding any net capital gain) plus (ii) the excess of the net income,
if any, from foreclosure property over the tax on such income, minus (B) the
excess of the sum of certain items of non-cash income (income attributable to
leveled stepped rents, original issue discount on purchase money debt, or a
like-kind exchange that is later determined to be taxable (plus, for the
Company's 1998 taxable year and thereafter, income from cancellation of
indebtedness, original issue discount, and coupon interest) over 5% of the
amount determined under clause (i) above). Such distributions must be paid in
the taxable year to which they relate, or in the following taxable year if
declared before the Company timely files its tax return for such year and if
paid on or before the first regular distribution date after such declaration.
The amount distributed must not be preferential -- i.e., each holder of shares
of Common Stock must receive the same distribution per share. A REIT may have
more than one class of stock, as long as distributions within each class are pro
rata and non-preferential. Such distributions are taxable to holders of Common
Stock (other than tax-exempt entities or nontaxable persons, as discussed below)
in the year in which paid, even though such distributions reduce the Company's
taxable income for the year in which declared. To the extent that the Company
does not distribute all of its net capital gain or distributes at least 95%, but
less than 100%, of its "real estate investment trust
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taxable income," it will be subject to tax thereon at regular corporate tax
rates. For the Company's taxable year beginning on January 1, 1998 and for all
taxable years thereafter, undistributed capital gains may be so designated by
the Company and are includable in the income of the holders of shares of Common
Stock. Such holders are treated as having paid the capital gains tax imposed on
the Company on the designated amounts included in their income as long-term
capital gains. Such stockholders would get an increase in their basis for income
recognized and a decrease in their basis for taxes paid by the Company. In
addition, as discussed below, the Company may be subject to an excise tax if it
fails to meet certain other distribution requirements.
The Company intends to make quarterly distributions to the holders of
shares of Common Stock in an amount sufficient to satisfy the requirements of
the annual distribution test. In this regard, the Partnership Agreement
authorizes the Company, as general partner, to take such steps as are necessary
to distribute to the partners of the Operating Partnership an amount sufficient
to permit the Company to meet the annual distribution requirements. However, it
is possible that the Company, from time to time, may not have sufficient cash or
other liquid assets to meet the 95% distribution requirement, or to distribute
such greater amount as may be necessary to avoid income and excise taxation, due
to timing differences between (i) the actual receipt of income and actual
payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company, or if
the amount of nondeductible expenses, such as principal amortization or capital
expenditures, exceeds the amount of noncash deductions, such as depreciation. In
the event that such timing differences occur, the Company may find it necessary
to cause the Operating Partnership to arrange for borrowings or liquidate some
of its investments in order to meet the annual distribution requirement, or
attempt to declare a consent dividend, which is a hypothetical distribution to
holders of shares of Common Stock out of the earnings and profits of the
Company. The effect of such a consent dividend (which, in conjunction with
dividends actually paid, must not be preferential to those holders who agree to
such treatment) would be that such holders would be treated for federal income
tax purposes as if they had received such amount in cash and they then had
immediately contributed such amount back to the Company as additional paid-in
capital. This would result in taxable income to those holders without the
receipt of any actual cash distribution but would also increase their tax basis
in their shares of Common Stock by the amount of the taxable income recognized.
A portion of the cash to be used by the Company to fund distributions is
expected to come from the Management Company through payments of dividends on
the stock of the Management Company held by the Operating Partnership. The
Management Company pays federal and state income tax at the full applicable
corporate rates. To the extent that the Management Company is required to pay
federal, state or local taxes, the Cash Available for Distribution by the
Company to the Stockholders will be reduced accordingly.
If the Company fails to meet the 95% distribution test due to an adjustment
to the Company's income by reason of a judicial decision or by agreement with
the IRS, the Company may pay a "deficiency dividend" to holders of shares of
Common Stock in the taxable year of the adjustment, which dividend would relate
back to the year being adjusted. In such case, the Company also would be
required to pay interest plus a penalty to the IRS. However, a deficiency
dividend cannot be used to meet the 95% distribution test if the failure to meet
such test was due to the Company's failure to distribute sufficient amounts to
the holders of shares of Common Stock.
In addition, if the IRS successfully challenged the Company's deduction of
all or a portion of the salary and bonus it pays to officers who are also
holders of shares of Common Stock, such payments could be recharacterized as
dividend distributions to such employees in their capacity as stockholders. If
such distributions were viewed as preferential distributions, they would not
count toward the 95% distribution test.
FAILURE TO QUALIFY AS A REIT
The Company's treatment as a REIT for federal income tax purposes will be
terminated automatically if the Company fails to meet the requirements described
above and any available relief provisions do not apply. In such event, the
Company will be subject to tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates, and distributions to
holders of shares of Common Stock will not be deductible by the Company. All
distributions to holders of shares of Common Stock will be taxable as
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ordinary income to the extent of current and accumulated earnings and profits of
the Company and distributions in excess thereof will be treated first as a
tax-free return of capital (to the extent of a holder's tax basis in his shares
of Common Stock) and then as gain realized from the sale of shares of Common
Stock. Corporate stockholders will be eligible for the dividends received
deduction to the extent that distributions are made out of earnings and profits.
As noted above, the Company will not be eligible to elect REIT status again
until the beginning of the fifth taxable year after the year during which the
Company's qualification was terminated, unless the Company meets certain relief
requirements. Failure to qualify for even one year could result in the Company
incurring substantial indebtedness (to the extent borrowings are feasible) or
liquidating substantial investments in order to pay the resulting corporate
income taxes.
TAXATION OF THE COMPANY
In General. For any taxable year in which the Company qualifies as a REIT,
it generally will not be subject to federal income tax on that portion of its
REIT taxable income which is distributed to stockholders (except income or gain
with respect to foreclosure property, which will be taxed at the highest
corporate rate -- currently 35%). If the Company were to fail to qualify as a
REIT, it would be taxed at rates applicable to corporations on all its income,
whether or not distributed to holders of shares of Common Stock. Even if it
qualifies as a REIT, the Company will be taxed on the portion of its REIT
taxable income which it does not distribute to the holders of shares of Common
Stock, such as taxable income retained as reserves.
100 Percent Tax. The Company will be subject to a 100% tax on (i) the
greater of the net income attributable to the amount by which it fails the 75%
income test or the 95% income test; and (ii) any net income derived from a
"prohibited transaction" (i.e., the sale of "dealer" property by the Company).
The imposition of any such tax on the Company would reduce the amount of Cash
Available for Distribution to holders of shares of Common Stock.
A "dealer" is one who holds property primarily for sale to customers in the
ordinary course of its trade or business. The Company believes no asset owned by
the Company, the Operating Partnership or a Subsidiary Partnership is held for
sale to customers and that a sale of any such asset will not occur in the
ordinary course of business of the Company, the Operating Partnership or a
Subsidiary Partnership. Whether property is held "primarily for sale to
customers in the ordinary course of a trade or business" depends, however, on
the facts and circumstances in effect from time to time, including those related
to a particular property. Nevertheless, the Company will attempt to comply with
the terms of safe harbor provisions in the Code prescribing when asset sales
will not be characterized as prohibited transactions. Complete assurance cannot
be given, however, that the Company can comply with the safe harbor provisions
of the Code or avoid owning property that may be characterized as property held
primarily for sale to customers in the ordinary course of a trade or business.
Tax on Net Income from Foreclosure Property. The Company will be subject
to a tax at the highest rate applicable to corporations (currently 35%) on any
"net income from foreclosure property." "Foreclosure property" is property
acquired by the Company as a result of a foreclosure proceeding or by otherwise
reducing such property to ownership by agreement or process of law. "Net income
from foreclosure property" is the gross income derived during the taxable year
from foreclosure property, less applicable deductions, but only to the extent
such income does not qualify under the 75% income test and 95% income test.
Alternative Minimum Tax. The Company will be subject to the alternative
minimum tax on undistributed items of tax preference allocable to it. Code
Section 59(d) authorizes the Treasury to issue regulations allocating items of
tax preference between a REIT and its stockholders. Such regulations have not
yet been issued; however, the Company does not anticipate any significant items
of tax preference.
Excise Tax. In addition to the tax on any undistributed income, the
Company would also be subject to a 4% excise tax on the amount, if any, by which
(i) the sum of (A) 85% of its REIT taxable income for a calendar year, (B) 95%
of any net capital gain for such year and (C) any undistributed amounts (for
purpose of avoiding this excise tax) from prior years, exceeds (ii) the amount
actually distributed by the Company to holders of shares of Common Stock during
the calendar year (or declared as a dividend during the calendar year, if
distributed during the following January) as ordinary income dividends. The
imposition of any excise tax on the Company would reduce the amount of Cash
Available for Distribution to holders of shares of
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Common Stock. The Company intends to take all measures within its control to
avoid imposition of the excise tax.
Tax on Built-In Gain of Certain Assets. If a C corporation elects to be
taxed as a REIT, or if assets of a C corporation are transferred to a REIT in a
transaction in which the REIT has a carryover basis in the assets acquired, such
C corporation generally will be treated as if it sold all of its assets to such
REIT at their respective fair market values and liquidated immediately
thereafter, recognizing and paying tax on all gain. However, under such
circumstances under present law, the REIT is permitted to make an election under
which the C corporation will not recognize gain and instead the REIT will be
required to recognize gain and pay any tax thereon only if it disposes of such
assets during the subsequent 10-year period (the "10-Year Rule"). The Company
intends to make the appropriate election to obtain the above-described tax
consequences. Thus, if the Company acquires any asset from a C corporation as a
result of a merger or other nontaxable exchange, and the Company recognizes gain
on the disposition of such asset during the 10-year period following acquisition
of the asset, then such gain will be subject to tax at the highest regular
corporate rate to the extent the Built-In Gain (the excess of (a) the fair
market value of such asset as of the date of acquisition over (b) the Company's
adjusted basis in such asset as of such date) on the sale of such asset exceeds
any Built-In Loss arising from the disposition during the same taxable year of
any other assets acquired in the same transaction, where Built-In Loss equals
the excess of (x) the Company's adjusted basis in such other assets as of the
date of acquisition over (y) the fair market value of such other assets as of
such date.
TAXATION OF STOCKHOLDERS
Taxable U.S. Stockholders
This Section describes tax consequences to a holder of Common Stock that
(for United States federal income tax purposes) (i) is a citizen or resident of
the United States; (ii) is a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof; or (iii) is an estate or trust the income of which is
subject to United States federal income taxation regardless of its source.
Dividend Income. Distributions from the Company (other than distributions
designated as capital gains dividends) will be taxable to holders of shares of
Common Stock which are not tax-exempt entities as ordinary income to the extent
of the current or accumulated earnings and profits of the Company. Holders of
shares of Common Stock that are corporations may be required to treat up to 20%
of any such capital gains dividends as ordinary income. Such distributions,
whether characterized as ordinary income or as capital gain, are not eligible
for the 70% dividends received deduction for corporations.
Distributions from the Company which are designated (by notice to
stockholders within 30 days after the close of the Company's tax year or with
its annual report) as capital gains dividends by the Company will be taxed as
gain from the sale or exchange of a capital asset held for more than one year to
taxable holders of shares of Common Stock to the extent that they do not exceed
the Company's actual net capital gain for the taxable year without regard to the
period for which a holder has held his shares in the Company. It is not clear
under the 1997 Act whether, for a U.S. stockholder who is an individual or an
estate or trust, such amounts will be taxable at the rate applicable to mid-term
capital gain (i.e., gains from the sale of capital assets held for more than one
year but not more than 18 months) or at the rate applicable to long-term capital
gains (i.e., gains from the sale of capital assets held for more than 18
months). This uncertainty may be clarified by future legislation or regulations.
Distributions from the Company to holders which are not designated as
capital gains dividends and which are in excess of the Company's current and
accumulated earnings and profits are treated as a return of capital to such
holders and reduce the tax basis of a holder's shares of Common Stock (but not
below zero). Any such distribution in excess of the tax basis is taxable to any
such holder that is not a tax-exempt entity as gain realized from the sale of
the shares of Common Stock, taxable as described below.
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The declaration by the Company of a consent dividend would result in
taxable income to consenting holders of shares of Common Stock (other than
tax-exempt entities) without any corresponding cash distributions. See
" -- Requirements for Qualification as a REIT -- Annual Distribution
Requirements."
Portfolio Income. Dividends paid to holders of shares of Common Stock will
be treated as portfolio income. Such income therefore will not be subject to
reduction by losses from passive activities (i.e., any interest in a rental
activity or in a trade or business in which the holder does not materially
participate, such as certain interests held as a limited partner) of any holder
who is subject to the passive activity loss rules. Such distributions will,
however, be considered investment income which may be offset by certain
investment expense deductions.
No Flow-through of Losses. Holders of shares of Common Stock will not be
permitted to deduct any net operating losses or capital losses of the Company.
Sale of Shares. A holder of shares of Common Stock who sells shares will
recognize taxable gain or loss equal to the difference between (i) the amount of
cash and the fair market value of any property received on such sale or other
disposition and (ii) the holder's adjusted basis in such shares. Gain or loss
recognized by a holder of shares of Common Stock who is not a dealer in
securities and whose shares have been held for more than one year will generally
be taxable as long-term capital gain or loss.
Back-up Withholding. Distributions from the Company will ordinarily not be
subject to withholding of federal income taxes, except as discussed under
"Federal Income Tax Considerations -- Foreign Stockholders." Withholding of
income tax at a rate of 31% may be required, however, by reason of a failure of
a holder of shares of Common Stock to supply the Company or its agent with the
holder's taxpayer identification number. Such "backup" withholding also may
apply to a holder of shares of Common Stock who is otherwise exempt from backup
withholding (including a nonresident alien of the United States and, generally,
a foreign entity) if such holder fails to properly document his status as an
exempt recipient of distributions. Each holder will therefore be asked to
provide and certify his correct taxpayer identification number or to certify
that he is an exempt recipient. A stockholder that does not provide the Company
with its correct taxpayer identification number may be subject to penalties
imposed by the IRS.
TAX-EXEMPT STOCKHOLDERS
In general, a holder of shares of Common Stock which is a tax-exempt entity
will not be subject to tax on distributions from the Company. The IRS has ruled
that amounts distributed as dividends by a REIT do not constitute unrelated
business taxable income ("UBTI") when received by certain tax-exempt entities.
Thus, distributions paid to a holder of shares of Common Stock which is a
tax-exempt entity and gain on the sale of shares of Common Stock by a tax-exempt
entity (other than those tax-exempt entities described below) will not be
treated as UBTI, even if the Company incurs indebtedness in connection with the
acquisition of real property (through its percentage ownership of the Operating
Partnership and the Subsidiary Partnerships) provided that the tax-exempt entity
has not financed the acquisition of its shares of Common Stock of the Company.
For tax-exempt entities which are social clubs, voluntary employee
beneficiary associations, supplemental unemployment benefit trusts and qualified
group legal services plans exempt from federal income taxation under Code
Sections 501(c)(7), (c)(9), (c)(17) and (c)(20), respectively, income from an
investment in the Company will constitute UBTI unless the organization is able
to properly deduct amounts set aside or placed in reserve for certain purposes
so as to offset the UBTI generated by its investment in the Company. Such
prospective investors should consult their own tax advisors concerning these
"set aside" and reserve requirements.
In the case of a "qualified trust" (generally, a pension or profit-sharing
trust) holding shares in a REIT, the beneficiaries of such a trust are treated
as holding shares in the REIT in proportion to their actuarial interests in the
qualified trust, instead of treating the qualified trust as a single individual
(the "look through exception"). A qualified trust that holds more than 10% of
the shares of a REIT is required to treat a percentage of REIT dividends as UBTI
if the REIT incurs debt to acquire or improve real property. This rule
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applies, however, only if (i) the qualification of the REIT depends upon the
application of the "look through" exception (described above) to the restriction
on REIT shareholdings by five or fewer individuals, including qualified trusts
(see "Description of Capital Stock -- Restrictions on Transfer"), and (ii) the
REIT is "predominantly held" by qualified trusts, i.e., if either (x) a single
qualified trust held more than 25% by value of the interests in the REIT or (y)
one or more qualified trusts, each owning more than 10% by value, held in the
aggregate more than 50% of the interests in the REIT. The percentage of any
dividend paid (or treated as paid) to such a qualified trust that is treated as
UBTI is equal to the amount of modified gross income (gross income less directly
connected expenses) from the unrelated trade or business of the REIT (treating
the REIT as if it were a qualified trust), divided by the total modified gross
income of the REIT. A de minimis exception applies where the percentage is less
than 5%. Because the Company expects the shares of Common Stock to be widely
held, this provision should not result in UBTI to any tax-exempt entity.
FOREIGN STOCKHOLDERS
The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships, foreign estates
and foreign trusts (collectively, "Foreign Investors") are complex, and no
attempt will be made herein to provide more than a summary of such rules.
Prospective Foreign Investors should consult their own tax advisors to determine
the impact of federal, state and local income tax laws on an investment in the
shares of Common Stock, including any reporting requirements, as well as the tax
treatment of such an investment under their home country laws.
Distributions by the Company. Foreign Investors that are not engaged in
the conduct of a business in the United States and that purchase shares of
Common Stock generally will not be considered as engaged in the conduct of a
trade or business in the United States by reason of ownership of such shares.
The taxation of distributions by the Company to Foreign Investors will depend
upon whether such distributions are attributable to operating income or are
attributable to sales or exchanges by the Company of its United States Real
Property Interests ("USRPIs"). USRPIs are generally direct interests in real
property located in the United States and interests in domestic corporations in
which the fair market value of its USRPIs exceeds a certain percentage.
The Company anticipates that a substantial portion of the distributions to
holders of shares of Common Stock will be attributable to the receipt of rent by
the Company. To the extent that such distributions do not exceed the current or
accumulated earnings and profits of the Company, they will be treated as
dividends and will be subject to a withholding tax equal to 30% of the gross
amount of the dividend, which tax will be withheld and remitted to the IRS by
the Company. Such 30% rate may be reduced by United States income tax treaties
in effect with the country of residence of the Foreign Investor. Dividends that
are effectively connected with a U.S. trade or business will be subject to tax
on a net basis (that is, after an allowance for deductions) at graduated rates,
in the same manner as domestic holders are taxed with respect to such dividends,
and are generally not subject to withholding. Any such dividends received by a
Foreign Investor that is a corporation may also be subject to an additional
branch profits tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
Applicable Treasury Regulations provide that dividends paid to an address
in a country outside the Untied States generally are presumed to be paid to a
resident of such country for purposes of determining the applicability of
withholding discussed above and the applicability of a tax treaty rate. Under
proposed Treasury Regulations, however, a Foreign Investor that wishes to claim
the benefit of an applicable treaty rate would be required to satisfy certain
certification and other requirements. Under certain treaties, lower withholding
rates generally applicable to dividends do not apply to dividends from a REIT,
such as the Company. Certain certification and disclosure requirements must be
satisfied to be exempt from withholding under the effectively connected income
exemption discussed above. Distributions in excess of the Company's earnings and
profits will be treated as a nontaxable return of capital to a Foreign Investor
to the extent of the basis of its shares of Common Stock, and any excess amount
will be treated as an amount received in exchange for the sale of its shares of
Common Stock and treated under the rules described below for the sale of Common
Stock. As a result of a legislative change made by the Small Business Job
Protection Act of 1996, it appears that the Company will be required to withhold
10% of any distribution in excess of the Company's current and
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accumulated earnings and profits. Consequently, although the Company intends to
withhold at a rate of 30% (or lower applicable treaty rate), to the extent that
the Company does not do so, any portion of a distribution not subject to
withholding at a rate of 30% (or lower applicable treaty rate) will be subject
to a withholding rate of 10%. However, the Foreign Investor may seek a refund of
such amounts from the IRS if it subsequently determines that such distribution
was, if fact, in excess of the current or accumulated earnings and profits of
the Company, and the amount withheld exceeded the Foreign Investor's United
States tax liability, if any, with respect to the distribution.
Distributions which are attributable to net capital gains realized from the
disposition of USRPIs (i.e., the Properties) by the Company will be taxed as
though the Foreign Investors were engaged in a trade or business in the United
States and the distributions were gains effectively connected with such trade or
business. Thus, a Foreign Investor would be entitled to offset its gross income
by allowable deductions and would pay tax on the resulting taxable income at the
graduated rates applicable to United States citizens or residents. In addition,
such gain may be subject to a 3% branch profits tax in the hands of a foreign
investor that is a corporation. For both individuals and corporations, the
Company must withhold a tax equal to 35% of all dividends that could be
designated by the Company as capital gains dividends. To the extent that such
withholding exceeds the actual tax owed by the Foreign Investor, a Foreign
Investor may claim a refund from the IRS.
Sale of Common Stock. Gain recognized by a Foreign Investor upon the sale
or exchange of Common Stock generally will not be subject to United States
taxation unless such shares constitute a USRPI. Shares of Common Stock will not
constitute a USRPI so long as the Company is a "domestically controlled REIT."
It is anticipated that the shares owned directly or indirectly by Foreign
Investors will be less than 50% in value of the shares of Common Stock and
therefore the Company will be a "domestically controlled REIT." Accordingly,
shares of Common Stock held by Foreign Investors in the United States will not
be considered USRPIs and gains on sales of such shares will not be taxed to such
Foreign Investors as long as the seller is not otherwise considered to be
engaged in a trade or business in the United States. (The same rule applies to
gains attributable to distributions in excess of the Foreign Investor's cost for
its shares, discussed above.) Similarly, a foreign corporation not otherwise
subject to United States tax which distributes shares of Common Stock to its
stockholders will not be taxed under this rule. However, because the shares of
Common Stock are expected to be publicly traded, no assurance can be given that
the Company will continue to be a "domestically controlled REIT."
Notwithstanding the foregoing, gain from the sale or exchange of shares of
Common Stock not considered a USRPI will be taxable to a Foreign Investor if the
Foreign Investor is a nonresident alien individual who is present in the United
States for 183 days or more during the taxable year and has a "tax home" in the
United States. In such case, the nonresident alien individual will be subject to
a 30% Untied States withholding tax on the amount of such individual's gain.
If the Company does not qualify as or ceases to be a
"domestically-controlled REIT," whether gain arising from the sale or exchange
by a Foreign Investor would be subject to United States taxation as a USRPI will
depend on whether the Common Stock is "regularly traded" (as defined by
applicable Treasury Regulations) on an established securities market (e.g., the
New York Stock Exchange) and on the size of the selling Foreign Investor's
interest in the Company. If gain on the sale or exchange of Common Stock were
subject to taxation as USRPI, the Foreign Investor would be subject to regular
United States income tax with respect to such gain in the same manner as a
United States holder (subject to any applicable alternative minimum tax, a
special alternative minimum tax in the case of nonresident alien individuals and
the possible application of the 30% branch profits tax in the case of foreign
corporations), and 10% of the purchase price would be required to be withheld
and remitted to the IRS.
Back-up Withholding and Information Reporting. The IRS is authorized to
impose annual reporting requirements on certain United States and foreign
persons directly holding USRPIs. The required reports are in addition to any
necessary income tax returns, and do not displace existing reporting
requirements imposed on Foreign Investors by the Agricultural Foreign Investment
Disclosure Act of 1978 and the International Investment Survey Act of 1976. As
of the date of this Prospectus, the IRS has not exercised its authority to
impose reporting under this provision. Furthermore, because shares in a
domestically controlled REIT do not constitute a USRPI, such reporting
requirements are not expected to apply to a Foreign Investor in the Company.
However, the Company is required to file an information return with the IRS
setting forth the
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name, address and taxpayer identification number of the payee of distributions
from the Company (whether the payee is a nominee or is the actual beneficial
owner).
Back-up withholding tax (which generally is a withholding tax imposed at a
rate of 31% on certain payments to persons that fail to furnish certain
information under the United States information reporting requirements) and
information reporting generally will not apply to distributions paid to Foreign
Investors outside the United States that are treated as (i) dividends subject to
the 30% (or lower treaty rate) withholding tax discussed above, (ii) capital
gains dividends or (iii) distributions attributable to gain from the sale or
exchange by the Company of USRPIs. As a general matter, backup withholding and
information reporting will not apply to a payment of the proceeds of a sale of
shares of Common Stock by or through a foreign office of a Foreign broker.
Information reporting (but not backup withholding) will apply, however, to a
payment of the proceeds of a sale of Common Stock by a foreign office of a
broker that (i) is a United States person, (ii) derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States or (iii) is a "controlled foreign corporation" (generally, a foreign
corporation controlled by United States stockholders) for United States tax
purposes, unless the broker has documentary evidence in its record that the
holder is a Foreign Investor and certain other conditions are met, or the holder
otherwise establishes an exemption. A Foreign Investor may obtain a refund of
any amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the IRS.
The United States Treasury has recently issued proposed regulations
regarding the withholding and information reporting rules discussed above. In
general, the proposed regulations do not alter the substantive reporting
requirements but unify current certification procedures and forms and clarify
and modify reliance standards. If finalized in their current form, the proposed
regulations generally would be effective for payment made after December 31,
1997, subject to certain transition rules.
STATEMENT OF STOCK OWNERSHIP
The Company is required to demand annual written statements from the record
holders of designated percentages of its shares of Common Stock disclosing the
actual owners of the shares of Common Stock. The Company must also maintain,
within the Internal Revenue District in which it is required to file its federal
income tax return, permanent records showing the information it has received as
to the actual ownership of such shares of Common Stock and a list of those
persons failing or refusing to comply with such demand.
TAX ASPECTS OF THE OPERATING PARTNERSHIP
The following discussion summarizes certain federal income tax
considerations applicable solely to the Company's investment in the Operating
Partnership and the Subsidiary Partnerships. The discussion does not cover state
or local tax laws or any federal tax laws other than income tax laws.
Classification as a Partnership. The Company will hold substantially all
of its real estate investments through the Operating Partnership which will hold
interests in the Subsidiary Partnerships. In general, partnerships are
"pass-through" entities which are not subject to federal income tax. Instead,
partners are allocated their proportionate shares of the items of income, gain,
loss, deduction and credit of a partnership, and are subject to tax thereon,
without regard to whether the partners receive cash distributions from the
partnership. The Company will be entitled to include in its REIT taxable income
its distributive share of the income of any partnership (including the Operating
Partnership) in which it has an interest and to deduct its distributive share of
the losses of any partnership (including the Operating Partnership) in which it
has an interest only if each such partnership is classified for federal income
tax purposes as a partnership rather than as an association taxable as a
corporation.
Under recently issued regulations ("check the box regulations"), an
organization with two or more members will be classified as a partnership on or
after January 1, 1997 unless it elects to be treated as an association (and
therefore taxable as a corporation) or falls within one of several specific
provisions which define a corporation. For entities which were in existence
prior to January 1, 1997 (such as the Subsidiary Partnerships), the claimed
classification by the entity will be respected for all periods prior to January
1, 1997 if (i) the entity had a reasonable basis for its claimed classification
under the law prior to January 1, 1997;
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(ii) the entity and all members thereof recognized the federal tax consequence
of any change in the entity's classification within the sixty (60) months prior
to January 1, 1997; and (iii) neither the entity nor any member was notified in
writing on or before May 8, 1996 that the classification of the entity was under
examination (in which case the entity's classification would be determined in
the examination). An exception to partnership classification under the "check
the box regulations" exists for a "publicly traded partnership" (i.e., a
partnership in which interests are traded on an established securities market or
are readily tradable on a secondary market or the substantial equivalent
thereof). A publicly traded partnership is treated as a corporation unless at
least 90% of the gross income of such partnership, for each taxable year the
partnership is a publicly traded partnership, consists of "qualifying income."
"Qualifying income" includes income from real property rents, gain from the sale
or other disposition of real property, interest and dividends.
The IRS has issued final regulations providing limited safe harbors from
the definition of a publicly traded partnership. Pursuant to one of those safe
harbors (the "Private Placement Exclusion"), interests in a partnership will not
be treated as readily tradable on a secondary market or the substantial
equivalent thereof if (i) all of the partnership interests are issued in a
transaction that is not required to be registered under the Securities Act and
(ii) the partnership does not have more than 100 partners at any time during the
taxable year (taking into account as a partner each person who indirectly owns
an interest in the partnership through a partnership, grantor trust, or S
corporation (a "flow-through entity"), but only if (a) substantially all the
value of the beneficial owner's interest in the flow-through entity is
attributable to the flow-through entity's interest (direct or indirect) in the
partnership, and (b) a principal purpose of the use of the tiered arrangement is
to permit the partnership to satisfy the 100-partner limitation).
All of the partnership interests in the Operating Partnership and the
Subsidiary Partnerships will be issued in transactions that are not required to
be registered under the Securities Act. In addition, upon the closing of the
Offering, in the aggregate, the Operating Partnership and the Subsidiary
Partnerships will not have more than 100 partners (even taking into account
indirect ownership of such partnerships through partnerships, grantor trusts and
S corporations). Thus, the Operating Partnership and each Subsidiary Partnership
should satisfy the Private Placement Exclusion.
None of the Operating Partnership and the Subsidiary Partnerships has
requested, and none intends to request, a ruling from the IRS that it will be
classified as a partnership for federal income tax purposes. Instead, at the
closing of the Offering, Battle Fowler LLP will deliver its opinion that, based
on the provisions of the partnership agreement of the Operating Partnership and
each Subsidiary Partnership, and certain representations described in the
opinion, the Operating Partnership and each Subsidiary Partnership pursuant to
the provisions of the "check the box regulations" as well as the law prior to
January 1, 1997 will be treated for federal income tax purposes as partnerships
and not as associations taxable as corporations or as publicly traded
partnerships. Unlike a tax ruling, an opinion of counsel is not binding upon the
IRS, and no assurance can be given that the IRS will not challenge the status of
the Operating Partnership and each Subsidiary Partnership as a partnership for
federal income tax purposes. If such challenge were sustained by a court, the
Operating Partnership and each Subsidiary Partnership would be treated as a
corporation for federal income tax purposes, as described below. In addition,
the opinion of Battle Fowler LLP is based on existing law, including
administrative and judicial interpretation thereof. No assurance can be given
that administrative or judicial changes would not modify the conclusions
expressed in the opinion.
If for any reason any partnership in which the Company has an interest was
taxable as a corporation rather than as a partnership for federal income tax
purposes, the Company likely would not be able to satisfy the asset requirements
for REIT status. See "-- Requirements for Qualification as a REIT -- Asset
Tests." In addition, any change in the partnership status of such entities for
tax purposes might be treated as a taxable event in which case the Company might
incur a tax liability without any related cash distribution. See "-- Income
Taxation of the Operating Partnership and Its Partners -- Basis in Operating
Partnership Interest." Further, items of income and deduction of such
partnerships would not pass through to its partners (including the Company), and
such partners would be treated as stockholders for tax purposes. The
partnerships in which the Company has an interest would be required to pay
income tax at corporate tax rates on their net income, and distributions to
their partners would constitute dividends that would not be deductible in
computing the relevant entities' taxable income.
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Under a regulatory "anti-abuse" rule (the "Anti-Abuse Rule"), the IRS may
(i) recast a transaction involving the use of a partnership to reflect the
underlying economic arrangement under the partnership provisions of the Code
(the "Partnership Provisions"), or (ii) prevent the use of a partnership to
circumvent the intended purpose of a Code provision. The Anti-Abuse Rule
contains an example in which a corporation that elects to be treated as a REIT
contributes substantially all of the proceeds from a public offering to a
partnership in exchange for a general partnership interest. The example
concludes that the use of the partnership is not inconsistent with the intent of
the Partnership Provisions and, thus, cannot be recast by the IRS. However, the
Exchange Rights do not conform in all respects to the redemption rights
contained in the foregoing example. Moreover, the Anti-Abuse Rule is
extraordinarily broad in scope and is applied based on an analysis of all of the
facts and circumstances. As a result, there can be no assurance that the IRS
will not attempt to apply the Anti-Abuse Rule to the Company. If the conditions
of the Anti-Abuse Rule are met, the IRS is authorized to take appropriate
enforcement action, including disregarding the Operating Partnership for federal
income tax purposes or treating one or more of the partners as nonpartners. Any
such action potentially could jeopardize the Company's status as a REIT.
INCOME TAXATION OF THE OPERATING PARTNERSHIP AND ITS PARTNERS
Operating Partnership Allocations. As noted above, the Company must
include in its REIT taxable income its distributive share of the income and
losses of any partnership in which it has an interest. Although the provisions
of a partnership agreement generally will determine the allocation of income and
losses among partners, such allocations will be disregarded for tax purposes
under Section 704(b) of the Code if they do not have "substantial economic
effect" or otherwise do not comply with the provisions of Section 704(b) of the
Code and Treasury Regulations.
If an allocation is not recognized for federal income tax purposes, the
item subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership, which will be determined by taking into
account all of the facts and circumstances relating to the economic arrangement
of the partners in respect of such item. The allocations of taxable income and
loss of partnerships in which the Company has an interest are intended to comply
with the requirements of Section 704(b) of the Code and Treasury Regulations.
Tax Allocations in Respect of Contributed Properties. Pursuant to Section
704(c) of the Code, income, gain, loss and deduction attributable to appreciated
or depreciated property that is contributed to a partnership in exchange for an
interest in the partnership must be allocated for federal income tax purposes in
a manner such that the contributing partner benefits from, or is charged with,
the unrealized gain or unrealized loss associated with the property at the time
of the contribution. The amount of such unrealized gain or unrealized loss
generally is equal to the difference between the fair market value of the
contributed property and the adjusted tax basis of such property at the time of
contribution (the "Book-Tax Difference").
The Treasury Department has issued final and temporary regulations under
Section 704(c) of the Code (the "Regulations") which give partnerships great
flexibility in ensuring that a partner contributing property to a partnership
receives the tax burdens and benefits of any precontribution gain or loss
attributable to the contributed property. The Regulations permit partnerships to
use any "reasonable method" of accounting for Book-Tax Differences. The
Regulations specifically describe three reasonable methods, including (i) the
"traditional method" under current law, (ii) the traditional method with the use
of "curative allocations" which would permit distortions caused by a Book-Tax
Difference to be rectified on an annual basis and (iii) the "remedial allocation
method" which is similar to the traditional method with "curative allocations."
The Partnership Agreement permits the Company, as general partner, to select one
of these methods to account for Book-Tax Differences in connection with the
contribution of the Properties and the limited partnership interests in the
Subsidiary Partnerships to the Operating Partnership in exchange for the OP
Units.
Basis in Operating Partnership Interest. The Company's adjusted tax basis
in each of the partnerships in which it has an interest generally (i) will be
equal to the amount of cash and the basis of any other property contributed to
such partnership by the Company, (ii) will be increased by (a) its allocable
share of such partnership's income and (b) its allocable share of any
indebtedness of such partnership and (iii) will be
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reduced, but not below zero, by the Company's allocable share of (a) such
partnership's loss and (b) the amount of cash and the fair market value of any
property distributed to the Company, and by constructive distributions resulting
from a reduction in the Company's share of indebtedness of such partnership.
If the Company's allocable share of the loss (or portion thereof) of any
partnership in which it has an interest would reduce the adjusted tax basis of
the Company's partnership interest in such partnership below zero, the
recognition of such loss will be deferred until such time as the recognition of
such loss (or portion thereof) would not reduce the Company's adjusted tax basis
below zero. To the extent that distributions from a partnership to the Company,
or any decrease in the Company's share of the nonrecourse indebtedness of a
partnership (each such decrease being considered a constructive cash
distribution to the partners), would reduce the Company's adjusted tax basis
below zero, such distributions (including such constructive distributions) would
constitute taxable income to the Company. Such distributions and constructive
distributions normally would be characterized as long-term capital gain if the
Company's interest in such partnership has been held for longer than the
long-term capital gain holding period (currently one year).
Depreciation Deductions Available to the Operating Partnership. Certain
assets owned by the Operating Partnership consist of property contributed to it
by its partners. In general, when property is contributed in a tax-free
transaction under Section 721 of the Code, the transferee-partnership is treated
in the same manner as the contributing partner for purposes of computing
depreciation. The effect of this rule is to continue the historic basis, placed
in service dates and depreciation methods with respect to property contributed
to a partnership. This general rule would apply for any properties the Operating
Partnership acquires by reason of the deemed termination for tax purposes of any
of the Subsidiary Partnerships or to the extent that the Operating Partnership
receives an adjustment under Section 743(b) of the Code by reason of the
acquisition of any interests in a Subsidiary Partnership that did not terminate
for tax purposes.
As described above (see " -- Income Taxation of the Operating Partnership
and Its Partners -- Tax Allocations in Respect of Contributed Properties"), the
Treasury Department has recently issued Regulations which give partnerships
flexibility in ensuring that a partner contributing property to a partnership
receives the tax benefits and burdens of any precontribution gain or loss
attributable to the contributed property.
As described previously, the Company as a general partner may select any
permissible method to account for Book-Tax Differences in connection with the
contribution of the Properties and the limited partnership interests in the
Subsidiary Partnerships to the Operating Partnership in exchange for OP Units.
The use of certain of these methods may result in the Company being allocated
lower depreciation deductions than if a different method were used. The
resulting higher taxable income and earnings and profits of the Company, as
determined for federal income tax purposes, should decrease the portion of
distributions by the Company which may be treated as a return of capital. See
" -- Requirements for Qualification as a REIT -- Annual Distribution
Requirements." The Company may adopt a different method to account for Book-Tax
Differences for property contributed to the Operating Partnership or a
Subsidiary Partnership after the Formation Transactions.
OTHER TAX CONSIDERATIONS
State and Local Taxes. The tax treatment of the Company and holders of
shares of Common Stock in states having taxing jurisdiction over them may differ
from the federal income tax treatment. Accordingly, only a very limited
discussion of state taxation of the Company, the shares of Common Stock or their
holders of shares of Common Stock is provided herein, and no representation is
made as to the tax status of the Company, the shares of Common Stock or their
holders of shares of Common Stock in such states. However, holders of shares of
Common Stock should note that certain states impose a withholding obligation on
partnerships carrying on a trade or business in a state having partners who are
not resident in such state. The Partnership Agreement contains a provision which
permits the Operating Partnership to withhold a portion of a non-resident
partner's distribution (e.g., a distribution to the Company) and to pay such
withheld amount to the taxing state as agent for the non-resident partner. Most
(but not all) states follow the Code in their taxation of REITs. In such states,
the Company should generally not be liable for tax and should be able to file a
claim for refund and obtain any withheld amount from the taxing state. However,
due to the time value of
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money, the requirement of the Operating Partnership to withhold on distributions
to the Company will reduce the yield on an investment in shares of Common Stock.
Each holder of shares of Common Stock should consult his own tax advisor as to
the status of the shares of Common Stock under the respective state tax laws
applicable to him.
Possible Legislative or Other Actions Affecting Tax Consequences; Possible
Adverse Tax Legislation. Prospective stockholders should recognize that the
present federal income tax treatment of an investment in the Company may be
modified by legislative, judicial or administrative action at any time and that
any such action may affect investments and commitments previously made. The
rules dealing with federal income taxation are constantly under legislative and
administrative review, resulting in revisions of regulations and revised
interpretations of established concepts as well as statutory changes. Revisions
in federal tax laws and interpretations thereof could adversely affect the tax
consequences of an investment in the Company.
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ERISA CONSIDERATIONS
The following is a summary of material considerations arising under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
prohibited transaction provisions of section 4975 of the Code that may be
relevant to a prospective purchaser (including, with respect to the discussion
contained in "Status of the Company and the Operating Partnership (and the
Subsidiary Partnerships) under ERISA," a prospective purchaser that is an
employee benefit plan, or another tax-qualified retirement plan, or an
individual retirement account ("IRA")). The discussion does not purport to deal
with all aspects of ERISA or section 4975 of the Code that may be relevant to
particular stockholders (including employee benefit plans subject to Title I of
ERISA, other retirement plans and IRAs subject to the prohibited transaction
provisions of section 4975 of the Code, or governmental plans or church plans
that are exempt from ERISA and section 4975 of the Code but may nonetheless be
subject to similar state law requirement) in light of their particular
circumstances.
The discussion is based on current provisions of ERISA and the Code,
existing and currently proposed regulations under ERISA and the Code, the
legislative history of ERISA and the Code, existing administrative rulings of
the Department of Labor ("DOL") and reported judicial decisions. No assurance
can be given that legislative, judicial or administrative changes will not
affect the accuracy of any statements herein with respect to transactions
entered into or contemplated prior to the effective date of such changes.
A FIDUCIARY MAKING THE DECISION TO INVEST IN THE COMMON SHARES ON BEHALF OF
A PROSPECTIVE PURCHASER THAT IS AN EMPLOYEE BENEFIT PLAN, A TAX-QUALIFIED
RETIREMENT PLAN, OR AN IRA IS ADVISED TO CONSULT ITS OWN LEGAL ADVISOR REGARDING
THE SPECIFIC CONSIDERATIONS ARISING UNDER ERISA, SECTION 4975 OF THE CODE, AND
STATE LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR SALE OF THE COMMON SHARES
BY SUCH PLAN OR IRA.
EMPLOYEE BENEFIT PLANS, TAX-QUALIFIED RETIREMENT PLANS, AND IRAS
Each fiduciary of a pension, profit-sharing or other employee benefit plan
subject to Title I of ERISA ("ERISA Plan") should consider carefully whether an
investment in the Common Stock is consistent with its fiduciary responsibilities
under ERISA. In particular, the fiduciary requirements of Part 4 of Title I of
ERISA require an ERISA Plan's investments to be (i) prudent and in the best
interests of the ERISA Plan, its participants, and its beneficiaries; (ii)
diversified in order to minimize the risk of large losses, unless it is clearly
prudent not to do so; and (iii) authorized under the terms of the ERISA Plan's
governing documents (provided the documents are consistent with ERISA). In
determining whether an investment in the Common Shares is prudent for purposes
of ERISA, the appropriate fiduciary of a ERISA Plan should consider all of the
facts and circumstances, including whether the investment is reasonably
designed, as a part of the ERISA Plan's portfolio for which the fiduciary has
investment responsibility, to meet the objectives of the ERISA Plan, taking into
consideration the risk of loss and opportunity for gain (or other return) from
the investment, the diversification, cash flow and funding requirements of the
ERISA Plan and its portfolio. A fiduciary also should take into account the
nature of the Company's business, the management of the Company, the length of
the Company's operating history, the fact that certain investment properties may
not have been identified yet and the possibility of the recognition of UBTI.
The fiduciary of an IRA or of a qualified retirement plan not subject to
Title I of ERISA because it is a governmental or church plan or of a benefits
arrangement that is a medical savings account or is not subject to ERISA because
it does not cover common law employees ( a "Non-ERISA Plan") should consider
that such an IRA or Non-ERISA Plan may only make investments that are authorized
by the appropriate governing documents and/or under applicable state law.
Fiduciaries of ERISA Plans and persons making the investment decision for
an IRA or other Non-ERISA Plan should consider the application of the prohibited
transaction provisions of ERISA and the Code in making their investment
decision. A "party in interest" or "disqualified person" with respect to an
ERISA Plan or with respect to a Non-ERISA Plan or IRA subject to Code section
4975 is subject to (i) an initial 10% excise tax on the amount involved in any
prohibited transaction involving the assets of the plan or IRA
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and (ii) an excise tax equal to 100% of the amount involved if any prohibited
transaction is not corrected. If the disqualified person who engages in the
transaction is the individual on behalf of whom an IRA or medical savings
account is maintained (or his beneficiary), the IRA or medical savings account
will lose its tax-exempt status and its assets will be deemed to have been
distributed to such individual in a taxable distribution (and no excise tax will
be imposed) on account of the prohibited transaction. In addition, a fiduciary
who permits an ERISA Plan to engage in a transaction that the fiduciary knows or
should know is a prohibited transaction may be liable to the ERISA Plan for any
loss the ERISA Plan incurs as a result of the transaction or for any profits
earned by the fiduciary in the transaction.
STATUS OF THE COMPANY AND THE OPERATING PARTNERSHIP (AND THE SUBSIDIARY
PARTNERSHIPS) UNDER ERISA
The following section discusses certain principles that apply in
determining whether the fiduciary requirements of ERISA and the prohibited
transaction provisions of ERISA and the Code apply to an entity because one or
more investors in the equity interest in the entity is an ERISA Plan or is a
plan subject to Section 4975 of the Code or is an "employee benefit plan" as
defined in Section 3(3) of ERISA. An ERISA Plan fiduciary also should consider
the relevance of those principles to ERISA's prohibition on improper delegation
of control over or responsibility for "plan assets" and ERISA's imposition of
co-fiduciary liability on a fiduciary who participates in, permits (by action or
inaction) the occurrence of or fails to remedy a known breach by another
fiduciary.
If the underlying assets of the Company are deemed to be "plan assets"
under ERISA, (i) the prudence standards and other provisions of Part 4 of Title
I of ERISA would be applicable to any transactions involving the Company's
assets; (ii) persons who exercise any authority or control over the Company's
assets, or who provide investment advice to the Company, with regards to company
assets for a fee or other compensation would (for purposes of the fiduciary
responsibility provisions of ERISA) be fiduciaries of each ERISA Plan that
acquires Common Stock, and transactions involving the Company's assets
undertaken at their direction or pursuant to their advice might violate their
fiduciary responsibilities under ERISA, especially with regard to conflicts of
interest; (iii) a fiduciary exercising his investment discretion over the assets
of an ERISA Plan to cause it to acquire or hold the Common Shares could be
liable under Part 4 of Title I of ERISA for transactions entered into by the
Company that do not conform to ERISA standards of prudence and fiduciary
responsibility; and (iv) certain transactions that the Company might enter into
in the ordinary course of its business and operations might constitute
"prohibited transactions" under ERISA and Section 4975 of the Code.
The Plan Asset Regulations generally provide that when an ERISA Plan or
Non-ERISA Plan or IRA each subject to Section 4975 of the Code, acquires a
security that is an equity interest in an entity and the security is neither a
"publicly-offered security" nor a security issued by an investment company
registered under the Investment Company Act of 1940, the ERISA or Non-ERISA
Plan's or IRA's assets include both the equity interest and an undivided
interest in each of the underlying assets of the issuer of such equity interest,
unless one or more exceptions specified in the Plan Asset Regulations are
satisfied.
The Plan Asset Regulations define a publicly-offered security as a security
that is "freely transferable" and is part of a class of securities that is
"widely-held" and is either registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or sold
pursuant to an effective registration statement under the Securities Act
(provided the securities are registered under the Exchange Act within 120 days
(or such later date as may be allowed by the SEC) after the end of the fiscal
year of the issuer during which the offering occurred). The Common Stock are
being sold in an offering registered under the Securities Act and will be
registered under the Exchange Act. The Plan Asset Regulations provide that a
security is "widely held" only if it is part of a class of securities that is
owned by 100 or more investors independent of the issuer and of one another. A
security will not fail to be widely held because the number of independent
investors falls below 100 subsequent to the initial public offering as a result
of events beyond the issuer's control. The Company anticipates that upon
completion of the Offering, the Common Stock will be "widely held."
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The Plan Asset Regulations provide that whether a security is "freely
transferable" is a factual question to be determined on the basis of all
relevant facts and circumstances. The Plan Asset Regulations further provide
that where a security is part of an offering in which the minimum investment is
$10,000 or less (as is the case with this Offering), certain restrictions
ordinarily will not, alone or in combination, affect a finding that such
securities are freely transferable. The restrictions on transfer enumerated in
the Plan Asset Regulations as not affecting that finding include: (i) any
restriction on or prohibition against any transfer or assignment that would
result in the termination or reclassification of an entity for federal or state
tax purposes, or that otherwise would violate any federal or state statute,
court order, or rule of law (ii) any requirement that advance notice of a
transfer or assignment be given to the issuer, (iii) any administrative
procedure that establishes an effective date, or an event (such as completion of
an offering), prior to which a transfer or assignment will not be effective, and
(iv) any limitation or restriction on transfer or assignment that is not imposed
by the issuer or a person acting on behalf of the issuer. The Company believes
that the restrictions imposed under the Declaration of Trust on the transfer of
the Company's shares of beneficial interest will not result in the failure of
the Common Shares to be "freely transferable." The Company also is not aware of
any other facts or circumstances limiting the transferability of the Common
Stock that are not enumerated in the Plan Asset Regulations as those not
affecting free transferability, and the Company does not intend to impose in the
future (or to permit any person to impose on its behalf) any limitations or
restrictions on transfer that would not be among the enumerated permissible
limitations or restrictions. The Plan Asset Regulations only establish a
presumption in favor of a finding of free transferability, and no assurance can
be given that the DOL or the Treasury Department will not reach a contrary
conclusion.
Assuming that the Common Stock will be "widely held" and that no other
facts and circumstances other than those referred to in the preceding paragraph
exist that restrict transferability of the Common Shares, the Common Stock
should be publicly offered securities and the assets of the Company should not
be deemed to be "plan assets" of any ERISA Plan, IRA, or Non-ERISA Plan subject
to Code Section 4975 that invests in the Common Stock.
The Plan Asset Regulations also will apply in determining whether the
assets of the Operating Partnership (and the Subsidiary Partnerships) will be
deemed to be "plan assets." The partnership interests in the Operating
Partnership and the Subsidiary Partnerships will not be publicly-offered
securities. Nevertheless, if the Common Stock constitute publicly-offered
securities, the indirect investment in the Partnership and the Subsidiary
Partnerships by ERISA Plans, IRAs, or Non-ERISA Plans subject to section 4975 of
the Code through their ownership of Common Stock will not cause the assets of
the Operating Partnership or the Subsidiary Partnerships to be treated as "plan
assets" of such stockholders.
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UNDERWRITING
Subject to the terms and conditions in the United States purchase agreement
(the "U.S. Purchase Agreement") between the Company and each of the underwriters
named below (the "U.S. Underwriters"), and concurrently with the sale of the
2,303,000 shares of Common Stock to the International Managers (as defined
below), the Company has agreed to sell to each of the U.S. Underwriters, for
whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, Legg Mason Wood Walker,
Incorporated, Morgan Stanley & Co. Incorporated, Prudential Securities
Incorporated and Smith Barney Inc., are acting as representatives (the "U.S.
Representatives"), and each of the U.S. Underwriters has severally agreed to
purchase from the Company, the respective number of shares of Common Stock set
forth below opposite their respective names:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................
Legg Mason Wood Walker, Incorporated..............................
Morgan Stanley & Co. Incorporated.................................
Prudential Securities Incorporated................................
Smith Barney Inc. ................................................
---------
Total................................................
=========
</TABLE>
The Company has also entered into a purchase agreement (the "International
Purchase Agreement" and, together with the U.S. Purchase Agreement, the
"Purchase Agreements") with certain underwriters outside the United States and
Canada (the "International Managers" and, together with the U.S. Underwriters,
the "Underwriters") for whom Merrill Lynch International, Legg Mason Wood
Walker, Incorporated, Morgan Stanley & Co. International Limited,
Prudential-Bache Securities (U.K.) Inc. and Smith Barney Inc. are acting as lead
managers. Subject to the terms and conditions set forth in the International
Purchase Agreement and concurrently with the sale of 9,212,000 shares of Common
Stock to the U.S. Underwriters pursuant to the U.S. Purchase Agreement, the
Company has agreed to sell to the International Managers, and the International
Managers have severally agreed to purchase from the Company, an aggregate of
2,303,000 shares of Common Stock. The initial public offering price per share
and the total underwriting discount per share are identical under the U.S.
Purchase Agreement and the International Purchase Agreement.
In each Purchase Agreement, the several U.S. Underwriters and the several
International Managers have agreed, respectively, subject to the terms and
conditions set forth in such Purchase Agreement, to purchase all of the shares
of Common Stock being sold pursuant to such Purchase Agreement if any of such
shares of Common Stock are purchased. Under certain circumstances, the
commitments of non-defaulting U.S. Underwriters or International Managers (as
the case may be) may be increased. The sale of Common Stock pursuant to the U.S.
Purchase Agreement and the International Purchase Agreement are conditioned upon
each other.
The U.S. Representatives have advised the Company that the U.S.
Underwriters propose initially to offer the shares of Common Stock to the public
at the public offering price per share set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $ per share. The U.S. Underwriters may allow, and such dealers may re-allow,
a discount not in excess of $ per share on sales to certain other dealers.
After the date of this Prospectus, the initial public offering price, concession
and discount may be changed. The Company has been informed that the U.S.
Underwriters and the International Managers have entered into an agreement (the
"Intersyndicate Agreement") providing for the coordination of their activities.
Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and the
International Managers are permitted to sell shares of Common Stock to each
other for purposes of resale at the initial public offering price, less an
amount not greater than the selling concession. Under the terms of the
Intersyndicate Agreement, the International Managers and any dealer to whom they
sell shares of Common Stock will not offer to sell or sell shares of Common
Stock to persons who are United States persons or Canadian persons or to persons
they believe intend to resell to persons who are United States persons or
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Canadian persons, and the U.S. Underwriters and any dealer to whom they sell
Common Stock will not offer to sell or sell Common Stock to persons who are
non-United States and non-Canadian persons or to persons they believe intend to
resell to non-United States and non-Canadian persons, except in each case for
transactions pursuant to the Intersyndicate Agreement.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date hereof to purchase up to 1,381,800 additional shares of
Common Stock to cover over-allotments, if any, at the initial public offering
price, less the underwriting discount set forth on the cover page of this
Prospectus. If the U.S. Underwriters exercise this option, each U.S. Underwriter
will have a firm commitment, subject to certain conditions, to purchase
approximately the same percentage thereof which the number of shares of Common
Stock to be purchased by it shown in the foregoing table bears to such U.S.
Underwriter's initial amount reflected in the foregoing table.
At the request of the Company, the U.S. Underwriters have reserved up to
575,000 shares of Common Stock for sale at the public offering price to certain
employees of the Company, their business affiliates and related parties who have
expressed an interest in purchasing shares. The number of shares available to
the general public will be reduced to the extent these persons purchase the
reserved shares. Any reserved shares that are not so purchased by such persons
at the closing of the Offering will be offered by the U.S. Underwriters to the
general public on the same terms as the other shares offered by this Prospectus.
In the Purchase Agreements, the Company and the Operating Partnership have
agreed to indemnify the several Underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments the
Underwriters may be required to make in respect thereof. Insofar as
indemnification of the Underwriters for liabilities arising under the Securities
Act may be permitted pursuant to the foregoing provisions, the Company and the
Operating Partnership have been informed that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
The Company and the Operating Partnership have agreed, subject to certain
exceptions, not to sell, offer or contract to sell, grant any option for the
sale of, or otherwise dispose of any shares of Common Stock or OP Units or any
securities convertible into or exchangeable for Common Stock or OP Units for a
period of one year from the date of the Prospectus, without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
In connection with the Offering, the Continuing Investors, the Primary
Contributors, the Morgan Stanley Investors and the Carlyle Funds have agreed,
subject to certain exceptions, not to sell, offer or contract to sell, grant any
option for the sale of, or otherwise dispose of any shares of Common Stock or OP
Units or any securities convertible into or exchangeable for Common Stock or OP
Units for a period of two years for the Primary Contributors and one year for
the other Continuing Investors, the Morgan Stanley Investors and the Carlyle
Funds from the date of this Prospectus, without the prior written consent of
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The Underwriters do not intend to confirm sales of any account over which
they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations between the Company and the U.S. Representatives. Among the factors
to be considered in such negotiations, in addition to prevailing market
conditions, will be dividend yields and financial characteristics of publicly
traded REITs that the Company and the Representatives believes to be comparable
to the Company, the expected results of operations of the Company (which will be
based on the results of operations of the Properties and the management and
leasing businesses in recent periods), estimates of the future business
potential and earnings prospects of the Company as a whole and the current state
of the real estate market in the Company's primary markets and the economy as a
whole.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and
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purchase the Common Stock. As an exception to these rules, the U.S.
Representatives and the International Managers are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the U.S.
Representatives and the International Managers, respectively, may reduce that
short position by purchasing Common Stock in the open market. The U.S.
Representatives and the International Managers, respectively, may also elect to
reduce any short position by exercising all or part of the over-allotment option
described above.
The U.S. Representatives and the International Managers, may also impose a
penalty bid on certain Underwriters and selling group members. This means that
if the U.S. Representatives or the International Managers purchase Common Stock
in the open market to reduce the Underwriters' short position or to stabilize
the price of the Common Stock, they may reclaim the amount of the selling
concession from the Underwriters and selling group members who sold those shares
as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of a security to the extent
that it were to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Shares. In addition, neither
the Company nor any of the Underwriters makes any representation that the U.S.
Representatives or the International Managers will engage in such transactions
or that such transactions, once commenced, will not be discounted without
notice.
The Company has agreed to pay to Merrill Lynch (i) an advisory fee equal to
1% of the gross proceeds of the Offering (including any exercise of the
Underwriters' over-allotment option) for advisory services rendered in
connection with the evaluation, analysis and structuring of the Offering and
(ii) a $600,000 acquisition advisory fee for services rendered in connection
with the evaluation, analysis and structuring of the acquisition of the 100 Wall
Street Property.
Merrill Lynch Capital Corporation, an affiliate of Merrill Lynch, has
committed to be the syndication agent for the Line of Credit and Merrill Lynch
Credit Corporation, an affiliate of Merrill Lynch, has committed to provide to
the Company the Term Loan. In connection with the closing of these loans, the
Company shall pay Merrill Lynch fees of approximately $2.1 million.
A portion of the net proceeds from the Offering will be used by the Company
to repay in full a mortgage loan made to the Company prior to the Offering by an
affiliate of Merrill Lynch. In connection with such mortgage loan, (i) an
affiliate of Merrill Lynch made an $11.3 million secured loan to the Property
Partnership that owns the 120 Mineola Boulevard Property and (ii) the lender
received an origination fee of 1.00% of the original loan amount, and
reimbursement for its out-of-pocket expenses, including reasonable fees and
expenses of counsel, incurred in connection therewith.
The Morgan Stanley Investors, advised by MSAM, an affiliate of Morgan
Stanley & Co. Incorporated, have agreed to purchase 800,000 shares of Common
Stock in the Concurrent Private Placements. The Underwriters will not receive a
discount or commission on the sale of Common Stock in the Concurrent Private
Placements. The closing of the Concurrent Private Placements is subject to the
closing of the Offering and the satisfaction of other customary conditions.
Upon consummation of the Offering, the Company will repay the outstanding
balance of and the accrued interest on the MSAM Notes by issuing to the Morgan
Stanley Investors 886,200 shares of restricted Common Stock in complete
satisfaction of the MSAM Notes. The Company has granted to the Morgan Stanley
Investors certain registration rights with respect to sale of Common Stock
received by the Morgan
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Stanley Investors or any affiliates in connection with the Concurrent Private
Placements and the cancellation of the MSAM Notes, including the right to
include such shares in a shelf registration statement the Company has agreed to
file within fifteen days after the expiration of the one-year period following
completion of the Offering. Also, the Company has granted to the Morgan Stanley
Investors the right to have a representative observe the meetings of the Board
of Directors and its committees. These Board observation rights terminate at any
time the Morgan Stanley Investors hold less than 60% of the shares of Common
Stock acquired by them at the time of the Offering.
The Common Stock has been approved for listing on the NYSE, subject to
official notice of issuance, under the symbol "TOW." In order to meet one of the
requirements for listing the Common Stock on the NYSE, the Underwriters have
undertaken to sell lots of 100 or more shares of Common Stock to a minimum of
2,000 beneficial holders.
EXPERTS
The consolidated balance sheet of the Company as of June 30, 1997 and the
related consolidated statement of operations, shareholder's equity and cash
flows for the period from March 27, 1997 through June 30, 1997, the combined
balance sheets of the Tower Predecessor as of December 31, 1996 and 1995, and
the related combined statements of operations, owners' deficit and cash flows
for each of the three years in the period ended December 31, 1996 and the
financial statement schedule, the combined statements of revenues and certain
operating expenses of DRA Joint Ventures for each of the two years in the period
ended December 31, 1996 and the period from November 21, 1994 through December
31, 1994 and the statements of revenues and certain operating expenses for 100
Wall Street for the year ended December 31, 1996, included in this Prospectus,
have been included herein in reliance on the reports of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
The Landauer Market Studies were prepared for the Company by Landauer,
which is a real estate service firm with significant experience and expertise
relating to the midtown Manhattan, Orlando, Phoenix, and Tucson office markets
and the various submarkets therein. The statistical and other information from
the Landauer Market Studies appearing in this Prospectus has been included
herein in reliance on Landauer Associate's expertise as real estate services
firm, with respect to the Manhattan, Phoenix, Tucson, and Orlando office
markets.
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LEGAL MATTERS
Certain legal matters including the validity of the shares of Common Stock
offered hereby will be passed upon for the Company by Battle Fowler LLP. In
addition, the description of federal income tax consequences contained in the
section of the Prospectus entitled "Federal Income Tax Considerations" is based
on the opinion of Battle Fowler LLP. Battle Fowler LLP will rely on Ballard
Spahr Andrews & Ingersoll as to certain matters of Maryland law. Certain legal
matters will be passed upon for the Underwriters by Hogan & Hartson L.L.P.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-11 (of which this Prospectus is a part) under the Securities Act with respect
to the securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the content of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules hereto. For further information
regarding the Company and the shares of Common Stock offered hereby, reference
is hereby made to the Registration Statement and such exhibits and schedules.
The Registration Statement and the exhibits and schedules forming a part
thereof filed by the Company with the Commission can be inspected and copies
obtained from the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: 7 World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials can be obtained by mail from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
site on the World Wide Web, the address of which is http://www.sec.gov, that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the
Commission.
The Company intends to furnish its stockholders with annual reports
containing audited combined financial statements and a report thereon by
independent certified public accountants.
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GLOSSARY
Unless the context otherwise requires, the following capitalized terms have
the meanings set forth below for the purposes of this Prospectus.
"1940 Act" means the Investment Company Act of 1940, as amended.
"1997 Plan" means the Tower Realty Trust, Inc. 1997 Stock Incentive Plan.
"ACMs" means asbestos-containing materials.
"Acquisition Cost" means, as of the date of acquisition of a Property, the
aggregate acquisition cost of a Property, including the applicable purchase
price amount and closing costs, and anticipated tenant improvements, leasing
commissions and capital expenditures.
"ADA" means the Americans with Disabilities Act of 1990, as amended.
"Adjusted Acquisition Yield" means the Annualized Net Operating Income at
Acquisition of a Property divided by the Acquisition Cost of the Property.
"Adjusted Investment Yield" means the Annualized Net Operating Income at
August 31, 1997 of a Property divided by the Investment Cost.
"American Express" means American Express Financial Advisors, Inc. and its
affiliates.
"Anti-Abuse Rule" means the regulations issued by the United States
Treasury Department under the Partnership Provisions that would authorize the
IRS, in certain "abusive" transactions involving partnerships, to disregard the
form of a transaction and recast it for federal tax purposes as it deems
appropriate.
"Annualized Net Operating Income at Acquisition" means the rental income
from the Property for the first full month of ownership by the Company
multiplied by 12, and less property operating expenses for such Property for the
first full calendar quarter of ownership by the Company multiplied by four.
"Annualized Net Operating Income at August 31, 1997" means the net
operating income of the Property for the period month August 31, 1997,
annualized.
"Appraised Property" means the Maitland Forum Property.
"Base Rent" means the fixed base rental amount paid by a tenant under the
terms of the related lease agreement, which amount generally does not include
payments on account of real estate taxes, operating expense escalations and
utility charges.
"Beneficiary" means one or more charitable organizations named by the
Company as beneficiary to the Trust.
"Board of Directors" means the Board of Directors of the Company.
"Bylaws" means the Bylaws of the Company.
"Carlyle" means The Carlyle Group, a Washington, D.C. based merchant
banking firm.
"Carlyle Funds" means the private investment funds sponsored by Carlyle
that have agreed to purchase shares of Common Stock in the Concurrent Private
Placements.
"Cash Available for Distribution" means Funds From Operations adjusted for
certain non-cash items, less reserves for capital expenditures.
"Cash Flow" means the sum of (a) Funds from Operations (adjusted for
non-recurring items and non-cash revenue, including, without limitation, the
effect of straight-lining the rents pursuant to GAAP) and (b) interest expense.
"Charter" means the articles of incorporation of the Company filed for
record with the State Department of Assessments and Taxation of Maryland, as may
be amended from time to time.
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"Closing Price" means the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the NYSE or, if the shares of Common Stock are not listed or admitted
to trading on the NYSE, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading for, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, the last quoted price, or if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or, if such system is no longer in use, the principal
other automated quotations system that may then be in use or, if the shares of
Common Stock are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the shares of Common Stock selected by the Board of Directors.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the shares of Common Stock, par value $0.01 per
share, of the Company.
"Company" means Tower Realty Trust, Inc., a Maryland corporation, together
with its subsidiaries.
"Company Expenses" means all administrative costs and expenses of the
Company.
"Company Options" means the stock options granted to officers, directors
and employees of the Company pursuant to the 1997 Plan and the Directors' Plan.
"Concurrent Private Placements" means the private placement by the Company
of $20 million of Common Stock to the Morgan Stanley Investors and $10 million
to the Carlyle Funds at a price per share equal to the Offering Price to be
consummated concurrent with the Offering.
"Continuing Investors" means certain third parties that own interests in
the Properties and who will own OP Units and/or shares of Common Stock upon
completion of the Offering.
"Control Shares" means voting Shares which, if aggregated with all other
such shares previously acquired by the acquiror, or in the respect of which the
acquiror is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third; (ii) one-third or more but
less than a majority; or (iii) a majority or more of all voting power.
"Counsel" means Battle Fowler LLP.
"CPI" means the United States Consumer Price Index.
"Debt Policy" means the Company's policy of limiting its total
consolidated indebtedness plus its pro rata share of Joint Venture Debt to 50%
of the Company's Total Market Capitalization.
"direct vacancy" means office space for which a landlord is not collecting
rent under a prime lease in an office building of 20,000 square feet or more and
does not include office space available for sublease.
"Directors' Plan" means the Tower Realty Trust, Inc. Non-Employee
Directors' Incentive Plan.
"DOL" means the United States Department of Labor.
"DRA" means DRA Realty Advisors.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Plan" means a pension, profit-sharing or other employee benefit
plan subject to Title I of ERISA.
"ESAs" means phase I environmental site assessments.
162
<PAGE> 172
"Escalated Rent" means the base rental income represented by applicable
leases, plus tenant payments on account of real estate tax and operating expense
escalations.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agreement" means that Exchange Rights Agreement among the
Company, the Operating Partnership and the Limited Partners, other than the
Company.
"Exchange Rights" means, pursuant to the Exchange Rights Agreement, the
rights of the Limited Partners to cause the Operating Partnership to exchange
each Unit in exchange for cash or, at the Company's election, one share of
Common Stock.
"Excluded Properties" means the properties that will continue to be owned
by Tower Equities after the Formation Transactions.
"Foreign Investors" means nonresident alien individuals, foreign
corporations, foreign partnerships and foreign trusts and estates.
"Formation Transactions" means the principal transactions in connection
with the formation of the Company and the acquisition of the Properties.
"Founding Director" means each Independent Director eligible to receive
options under the Directors' Plan who is a member of the Board of Directors as
of the date that the registration statement is declared effective by the
Commission.
"Funds From Operations" means income (loss) before minority interest
(computed in accordance with generally accepted accounting principles),
excluding gains (losses) from debt restructuring and sales of property, plus
real estate related depreciation and amortization (excluding amortization of
financing costs), and after adjustments for unconsolidated partnerships and
joint ventures.
"GAAP" means generally accepted accounting principles in the United
States.
"General Partner" means the sole general partner of the Operating
Partnership.
"ICIP" means The Industrial Commercial Incentive Program, a program
established to provide incentives to developers and redevelopers of property in
New York City.
"Independent Director" means a director of the Company who is not an
officer or employee of the Company or the Operating Partnership or an affiliate
of the Company or the Operating Partnership.
"Interested Stockholder" means a stockholder holding 10% or more of the
voting securities in a Maryland corporation, such as the Company.
"International Managers" means the underwriters outside of the United
States and Canada named in this Prospectus for whom Merrill Lynch International;
Legg Mason Wood Walker, Incorporated; Morgan Stanley & Co. International
Limited; Prudential-Bache Securities (U.K.) Inc. and Smith Barney Inc. are
acting as lead managers.
"International Offering" means the public offering of the Common Stock of
the Company outside the United States and Canada.
"International Purchase Agreement" means the purchase agreement between the
Company and the International Managers.
"Intersyndicate Agreement" means the agreement between the U.S.
Underwriters and the International Managers providing for the coordination of
their activities.
"Investment Cost" means as of August 31, 1997 the aggregate investment
cost of a Property, including the applicable purchase price amount, closing
costs, tenant improvements, leasing commissions and capital expenditures less
any applicable depreciation and amortization of tenant improvements, leasing
commissions and capital expenditures.
163
<PAGE> 173
"IRA" means individual retirement account.
"IRS" means the United States Internal Revenue Service.
"ISOs" means incentive stock options.
"Joint Venture Debt" means indebtedness of unconsolidated investments.
"Landauer" means Landauer Associates, Inc.
"Landauer Market Studies" means the report prepared for the Company by
Landauer relating to the Manhattan, Orlando, Phoenix and Tucson office markets
and the various submarkets therein.
"leased" means all space for which leases have been executed and the lease
term has commenced.
"LIBOR" means the London Interbank Offering Rate.
"Limited Partners" means the limited partners of the Operating
Partnership.
"Line of Credit" means the $200 million unsecured line of credit for which
the Company has obtained a commitment.
"Lock-up Period" means the one- or two-year period (as applicable)
commencing from the date of this Prospectus.
"Look-Through Ownership Limitation" means the ownership of as much as up to
15.0% of any class of the Company's stock by mutual funds and certain other
entities.
"Management Company" means Tower Equities Management, Inc., a Delaware
corporation.
"Market Price" means the average of the Closing Price for the five
consecutive Trading Days ending on such date.
"Merrill Lynch" means Merrill Lynch & Co., Inc.
"Metropolitan New York City" means New York, Bronx, Kings, Putnam, Queens,
Richmond, Rockland, Nassau, Suffolk and Westchester Counties, as designated by
Landauer in its market study cited herein.
"Metropolitan Orlando" means Lake, Orange, Osceola and Seminole Counties
in Florida, as designated by Landauer in its market study cited herein.
"Metropolitan Phoenix" means Maricopa and Pinal Counties in Arizona, as
designated by Landauer in its market study cited herein.
"Metropolitan Tucson" means Pima County, Arizona, as designated by
Landauer in its market study cited herein.
"MGCL" means the Maryland General Corporation Law, as may be amended from
time to time.
"Morgan Stanley Investors" means certain private investment funds and
separate accounts advised by MSAM that have agreed to purchase shares of Common
Stock in the Concurrent Private Placements.
"MSAM" means Morgan Stanley Asset Management Inc.
"MSAM Notes" means the convertible notes of the Company held by the Morgan
Stanley Investors in the aggregate principal amount of approximately $12.3
million for the purpose of funding certain pre-Offering transaction expenses and
the acquisition of certain interests of third parties of certain properties.
"NAREIT" means the National Association of Real Estate Investment Trusts.
"Non-ERISA Plan" means a qualified retirement plan not subject to Title I
because it is a governmental or church plan or because it does not cover common
law employees.
"Non-Founding Director" is every director of the Company who is not a
Founding Director.
164
<PAGE> 174
"Non-Qualifying Income" means income realized by the Company which does
not satisfy the requirements of the 95% gross income test.
"NYSE" means the New York Stock Exchange, Inc.
"occupied" means all space which is leased and for which the lease term
has commenced.
"Offering" means the offering of Common Stock which is the subject of the
Prospectus.
"Offering Price" means the assumed public offering price of the Common
Stock of $25.00 per share (the mid-point of the range of public offering prices
set forth on the cover page of this Prospectus).
"One Orlando Land Parcel" means the approximately 3.8 acres of undeveloped
land in Orlando, Florida that the Company holds an option to purchase.
"Operating Partnership" means Tower Realty Operating Partnership, L.P., a
limited partnership organized under the laws of Delaware. Unless the context
requires otherwise, Operating Partnership includes any subsidiaries of the
Operating Partnership.
"OP Units" means units of limited partnership interest in the Operating
Partnership.
"Ownership Limitation" means the ownership of more than 9.8%, or up to 15%
in the case of certain stockholders, of the number or value of any class of the
Company's outstanding stock by any person.
"Participants" means individuals who will participate in the 1997 plan.
"Partnership Agreement" means the agreement of limited partnership of the
Operating Partnership. "Partnership Provisions" means the partnership provisions
of the Code.
"Phoenix Land Parcel" means the 43.2 acres of undeveloped land in Phoenix
that the Company holds an option to purchase.
"Plan Asset Regulations" mean the DOL regulations which define "plan
assets."
"Preferred Stock" means the shares of preferred stock, par value $.01 per
share, of the Company.
"Primary Contributors" means Lawrence H. Feldman (Chairman, Chief
Executive Officer and President of the Company), Robert L. Cox (Executive Vice
President and Chief Operating Officer of the Company), Joseph D. Kasman (Senior
Vice President and Chief Financial Officer of the Company), Clifford L. Stein
(Managing Director of the Company's Southeast Region), Robert M. Adams (a
nominee for director of the Company), Richard M. Wisely (a nominee for director
of the Company), Eric S. Reimer (Vice President -- Leasing of the Company),
Reuben Friedberg (Vice President -- Finance of the Company), and Reid Berman (a
significant investor in Properties Atlantic and a regional director of leasing
for the Company), provided, however, that "Primary Contributors" excludes
certain persons affiliated or associated with Tower Equities or the Primary
Contributors because they were not eligible to receive OP Units for their
interests in Properties under applicable securities laws.
"Properties" means the 21 office buildings referred to herein in which the
Company has an interest.
"Property Partnerships" means the partnerships that currently own the
Properties.
"Registration Rights Agreement" means the Registration Rights Agreement
among the Company, the Operating Partnership and the Limited Partners other than
the Company.
"REIT" means real estate investment trust as defined in Section 856 of the
Code.
"Related Party Tenant" under the Code means a tenant of the Company's real
property in which the Company or an owner of 10.0% or more of the Company,
directly or constructively owns 10.0% or more of the ownership interests.
"Representatives" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Legg Mason Wood Walker, Morgan Stanley & Co. Incorporated,
Prudential Securities Incorporated and Smith Barney Inc.
165
<PAGE> 175
"Restricted Shares" means the 1,949,360 shares of Common Stock received by
MSAM and certain Continuing Investors in the Formation Transactions, the
1,200,000 shares of Common Stock issued in the Concurrent Private Placements,
and the 1,583,640 shares of Common Stock available for issuance upon exchange of
OP Units issued in connection with the Formation Transactions, and the Company
Options.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares-in-Trust" means shares of Common or Preferred Stock that are
transferred automatically to the Trust.
"Stanger" means Robert A. Stanger & Co., Inc.
"Subsidiary Partnerships" means one or more subsidiary partnerships, joint
ventures, general partnerships and limited liability companies through which the
Operating Partnership owns certain of the Properties.
"Term Loan" means the $107 million loan facility that the Company expects
to enter into concurrent with the consummation of the Offering and for which it
has obtained a commitment.
"Total Market Capitalization" means the Company's total equity market
capitalization plus its consolidated indebtedness and pro rata share of
indebtedness of unconsolidated investments.
"Total Value" means Cash Flow capitalized at 9.5% plus (i) 100% of
out-of-pocket costs for assets under development (subject to a maximum of 10% of
Total Value), and (ii) 100% of cash and cash equivalents (excluding restricted
deposits).
"Tower" means Tower Equities & Realty Corp., a Delaware corporation.
"Tower Equities" includes Tower Equities & Realty Corp., a Delaware
corporation ("Tower"), the companies and partnerships affiliated with Tower and
the predecessor entities and affiliates of Tower.
"Tower 45 Loan" means the mortgage indebtedness secured by the Tower 45
Property.
"Tower Predecessor" means the following entities controlled or managed by
Tower Equities: Tower 45 Associates Limited Partnership (the Tower 45 Property),
CXX Mineola Limited Partnership (the 120 Mineola Boulevard Property), Maitland
Property Investors, Ltd. (the Maitland Forum Property), Maitland West Associates
Limited Partnership Investors, Ltd. (the Maitland Forum Property), Maitland West
Associates Limited Partnership (the three Maitland Center Parkway Properties),
5750 Associates Limited Partnership (the 5750 Major Boulevard Property), and the
predecessor management companies, including Tower Equities and Realty Corp., CXX
Mineola Management Corp., Forum Realty and Management Corp., and Tower Equities
of Arizona, L.L.C. The Tower Predecessor includes 100% of the assets,
liabilities and operations of such entities and the respective Properties owned
by them. In addition, the Primary Contributors, including Lawrence H. Feldman,
hold non-controlling interests in the partnership controlling the 2800 North
Central Property and the partnerships that own the following Properties
(collectively, the "DRA Joint Ventures"): 286 Madison Avenue, 290 Madison
Avenue, 292 Madison Avenue, the six Corporate Center Properties, 5151 East
Broadway, and One Orlando Center. The Tower Predecessor includes these
investments in the 2800 North Central Property and the DRA Joint Ventures using
the equity method of accounting.
"Trading Day" means a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange, shall
mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
"Transaction" means any transaction resulting in a change of control of
the Operating Partnership unless in connection with the Transaction the Limited
Partners receive or have the right to receive cash, securities, or other
property equal to the product of the number of shares of Common Stock into which
each OP Unit is then exchangeable and the greatest amount of cash, securities or
other property paid in the Transaction to the holder of one share of Common
Stock in consideration of one share of Common Stock.
"Treasury Regulations" means the income tax regulations promulgated under
the Code.
166
<PAGE> 176
"UBTI" means unrelated business taxable income.
"Underwriters" means the U.S. Underwriters and the International Managers.
"U.S. Offering" means the public offering of the Common Stock of the
Company in the United States and Canada.
"U.S. Purchase Agreement" means the purchase agreement between the Company
and the U.S. Underwriters.
"U.S. Representatives" means Merrill Lynch, Pierce, Fenner & Smith,
Incorporated; Legg Mason Wood Walker, Incorporated; Morgan Stanley & Co.
Incorporated; Prudential Securities Incorporated and Smith Barney Inc.
"U.S. Underwriters" means the Underwriters for the United States and
Canada named in the prospectus for whom the U.S. Representatives are acting as
representatives.
167
<PAGE> 177
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Tower Realty Trust, Inc.
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1997 (unaudited)...... F-2
Pro Forma Condensed Consolidated Statement of Operations for the six months ended
June 30, 1997 (unaudited)........................................................ F-3
Pro Forma Condensed Consolidated Statement of Operations for the year ended December
31, 1996 (unaudited)............................................................. F-4
Notes to the Pro Forma Condensed Consolidated Financial Information................. F-5
Report of Independent Accountants................................................... F-17
Consolidated Balance Sheet as of June 30, 1997...................................... F-18
Consolidated Statement of Operations for the period from March 27, 1997 (date of
inception) through June 30, 1997................................................. F-19
Consolidated Statement of Shareholder's Equity for the period from March 27, 1997
(date of inception) through June 30, 1997........................................ F-20
Consolidated Statement of Cash Flows for the period from March 27, 1997 (date of
inception) through June 30, 1997................................................. F-21
Notes to Consolidated Financial Statements.......................................... F-22
Tower Predecessor
Report of Independent Accountants................................................... F-28
Combined Balance Sheets as of December 31, 1996 and 1995 and (unaudited) as of June
30, 1997......................................................................... F-29
Combined Statements of Operations for each of the three years in the period ended
December 31, 1996 and (unaudited) for the six months ended June 30, 1997 and
1996............................................................................. F-30
Combined Statements of Owners' Deficit for each of the three years in the period
ended December 31, 1996 and (unaudited) for the six months ended June 30, 1997... F-31
Combined Statements of Cash Flows for each of the three years in the period ended
December 31, 1996 and (unaudited) for the six months ended June 30, 1997 and
1996............................................................................. F-32
Notes to Combined Financial Statements.............................................. F-33
Schedule III: Real Estate and Accumulated Depreciation as of December 31, 1996...... F-43
DRA Joint Ventures
Report of Independent Accountants................................................... F-45
Combined Statements of Revenues and Certain Operating Expenses for each of the two
years in the period ended December 31, 1996 and the period from November 21, 1994
through December 31, 1994 and (unaudited) for the six months ended June 30, 1997
and 1996......................................................................... F-46
Notes to Combined Statements of Revenues and Certain Operating Expenses............. F-47
100 Wall Street
Report of Independent Accountants................................................... F-50
Statements of Revenues and Certain Operating Expenses for the year ended December
31, 1996 and (unaudited) for the six months ended June 30, 1997 and 1996......... F-51
Notes to Statements of Revenues and Certain Operating Expenses...................... F-52
</TABLE>
F-1
<PAGE> 178
TOWER REALTY TRUST, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
The following unaudited pro forma condensed consolidated balance sheet is
presented as if (i) the transfer of the Properties, certain development land and
other assets of Tower Equities to be contributed to the Company and (ii) the
consummation of the Offering, the Concurrent Private Placements, the MSAM Notes
and Term Loan and the application of the net proceeds therefrom had occurred on
June 30, 1997. This pro forma condensed consolidated balance sheet should be
read in conjunction with the historical combined financial statements listed on
the index on page F-1. In management's opinion, all adjustments necessary to
reflect the effects of the above transactions have been made.
The following pro forma condensed consolidated balance sheet is not
necessarily indicative of what the actual financial position would have been
assuming the above transactions had been consummated at June 30, 1997, nor does
it purport to represent the future financial position of the Company.
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------------
THE OFFERING
AND CONCURRENT
THE ACQUISITION PRIVATE OTHER
COMPANY PREDECESSOR PROPERTIES PLACEMENTS ADJUSTMENTS
HISTORICAL HISTORICAL (A) (B) (C) PRO FORMA
---------- ----------- ----------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Real estate, net........................ $ 127,577 $ 325,804 $453,381
Deferred charges, net................... $7,640 12,041 $ (7,640) $ 1,094 13,135
Receivables, net........................ 3,436 (936) 2,500
Unbilled rent receivable................ 14,580 (14,580)
Escrowed funds.......................... 421 (421)
Cash and cash equivalents............... 4 4,326 (400,755) 294,925 102,084 584
Investments in joint ventures........... 60 4,745 2,053 (4,745) 2,113
Other assets............................ 3,506 3,000 (3,506) 3,000
---------- ----------- ----------- -------------- ----------- ---------
Total assets.................... $7,704 $ 170,632 $ (69,898) $287,285 $ 78,990 $474,713
======== ========= ========= ============ ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Debt on real estate..................... $7,279 $ 193,381 $ (149,015) $ 77,355 $129,000
Accounts payable and other
liabilities........................... 1,689 25,537 (14,275) 12,951
Amounts due to (from) affiliates........ (1,182) 10,374 (9,192)
---------- ----------- ----------- ----------- ---------
Total liabilities............... 7,786 229,292 (149,015) 53,888 141,951
---------- ----------- ----------- ----------- ---------
Minority interest in Operating
Partnership........................... 11,984 20,294 32,278
----------- ----------- ---------
Shareholders' equity:
Preferred shares, 50,000,000 shares
authorized, none issued and
outstanding.........................
Common shares, $.01 par value,
150,000,000 shares authorized; 1,000
shares issued and outstanding
(historical) and 14,664,360 shares
issued and outstanding (pro
forma).............................. 1 10 $ 127 9 147
Additional paid-in capital............ 24,735 287,158 (11,473) 300,420
Owners' equity (deficit).............. (83) (58,660) 42,388 16,272 (83)
---------- ----------- ----------- -------------- ----------- ---------
Total shareholders' equity
(deficit)..................... (82) (58,660) 67,133 287,285 4,808 300,484
---------- ----------- ----------- -------------- ----------- ---------
Total liabilities and
shareholders' equity
(deficit)..................... $7,704 $ 170,632 $ (69,898) $287,285 $ 78,990 $474,713
======== ========= ========= ============ ========== ========
</TABLE>
The accompanying notes are an integral part of this pro forma condensed
consolidated balance sheet.
F-2
<PAGE> 179
TOWER REALTY TRUST, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following unaudited pro forma condensed consolidated statements of
operations are presented as if (i) the transfer of the Properties, certain
development land and other assets of Tower Equities to be contributed to the
Company and (ii) the completion of the Offering, the Concurrent Private
Placements, the MSAM Notes and Term Loan and the application of the net proceeds
therefrom had occurred on January 1, 1996. These pro forma condensed
consolidated statements of operations should be read in conjunction with the
historical combined financial statements listed on the index on page F-1. In
management's opinion, all adjustments necessary to reflect the effects of the
above transactions have been made.
The following pro forma condensed consolidated statements of operations are
not necessarily indicative of what the actual results of operations of the
Company would have been assuming the above transactions had been consummated as
of January 1, 1996, nor does it purport to represent the results of operations
for future periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
PRO FORMA ADJUSTMENTS
-------------------------
THE ACQUISITION OTHER
COMPANY PREDECESSOR PROPERTIES ADJUSTMENTS
HISTORICAL HISTORICAL (A) (B) PRO FORMA
---------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income..................... $13,521 $21,316 $ 1,908 $36,745
Management fees................... 245 (245)
Construction, leasing, and other
fees........................... 33 474 1,316 (1,304) 519
---- ------- ------- ------- -------
Total revenues............ 33 14,240 22,632 359 37,264
---- ------- ------- ------- -------
Expenses:
Property operating and
maintenance.................... 2,703 6,579 9,282
Real estate taxes................. 2,331 3,043 (50) 5,324
General office and
administration................. 1,746 701 (700) 1,747
Interest expense.................. 176 7,028 (2,563) 4,641
Depreciation and amortization..... 3,494 3,330 6,824
Ground rent and air rights
expense........................ 299 299
---- ------- ------- ------- -------
Total expenses............ 176 17,601 10,323 17 28,117
Equity in income (loss) of joint
ventures....................... 60 68 368 496
---- ------- ------- ------- -------
Income (loss) before minority
interest.......................... (83) (3,293) 12,309 710 9,643
Minority interest in Operating
Partnership....................... 935 935
---- ------- ------- ------- -------
Net income (loss)................... $(83) $(3,293) $12,309 $ (225) $ 8,708
==== ======= ======= ======= =======
Net income per share................ $ 0.59
=======
Weighted average number of common
shares outstanding................ 14,664
=======
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
consolidated statements of operations.
F-3
<PAGE> 180
TOWER REALTY TRUST, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
------------------------------------------
PROPERTY
ACQUIRED PRIOR
TO THE
FORMATION ACQUISITION OTHER
PREDECESSOR TRANSACTIONS PROPERTIES ADJUSTMENTS
HISTORICAL (A) (B) (C) PRO FORMA
----------- -------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income....................... $26,138 $462 $42,731 $ 3,608 $72,939
Management fees..................... 1,261 (1,261)
Construction, leasing, and other
fees............................. 1,335 2 2,374 (2,008) 1,703
------- ---- ------- ------- -------
Total revenues.............. 28,734 464 45,105 339 74,642
------- ---- ------- ------- -------
Expenses:
Property operating and
maintenance...................... 5,481 193 12,939 18,613
Real estate taxes................... 4,722 79 6,310 (100) 11,011
General office and administration... 3,494 47 1,552 (1,730) 3,363
Interest expense.................... 15,511 (6,228) 9,283
Depreciation and amortization....... 6,853 6,747 13,600
Ground rent and air rights
expense.......................... 599 599
------- ---- ------- ------- -------
Total expenses.............. 36,660 319 20,801 (1,311) 56,469
Equity in income (loss) of joint
ventures......................... 461 (63) 398
------- ---- ------- ------- -------
Income (loss) before minority
interest............................ (7,465) 145 24,304 1,587 18,571
Minority interest in Operating
Partnership......................... 1,801 1,801
------- ---- ------- ------- -------
Net income (loss)..................... $(7,465) $145 $24,304 $ (214) $16,770
======= ==== ======= ======= =======
Net income per share.................. $ 1.14
=======
Weighted average number of common
shares outstanding.................. 14,664
=======
</TABLE>
The accompanying notes are an integral part of these pro forma condensed
consolidated statements of operations.
F-4
<PAGE> 181
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. PRO FORMA ADJUSTMENTS TO THE CONSOLIDATED BALANCE SHEET -- JUNE 30, 1997
A. ACQUISITION PROPERTIES
Concurrent with the Offering and related Formation Transactions, the
Company will enter into the following transactions:
- Acquisition of partnership interests in the entities comprising the Tower
Predecessor. The acquisitions of all partnership interests in the Tower
Predecessor, excluding Lawrence Feldman's interest, for approximately
$194.6 million in cash (including repayment of indebtedness), 222,320 OP
Units (approximate value of $5.6 million based on a value of $25.00 per
OP Unit) and 65,000 shares of restricted Common Stock (approximate value
of $1.6 million based on a value of $25 per common share) are accounted
for utilizing the purchase method of accounting. The acquisition of
Lawrence Feldman's interest in the Tower Predecessor is accounted for at
historical cost.
- Acquisition of partnership interests in 2800 North Central. The
acquisitions of certain partnership interests in 2800 North Central,
excluding Lawrence Feldman's interest, for approximately $.9 million in
cash and 45,120 OP Units (approximate value of $1.1 million based on a
value of $25.00 per OP Unit) is accounted for utilizing the purchase
method of accounting. The acquisition of Larry Feldman's interest in 2800
North Central is accounted for at historical cost. In total, the pro
forma consolidated balance sheet includes an approximate 10% ownership
interest in 2800 North Central.
- Acquisition of partnership interests in the entities comprising the DRA
Joint Ventures. The acquisitions of all partnership interests in the DRA
Joint Ventures, excluding Lawrence H. Feldman's interest, for
approximately $28.0 million in cash plus assumption of $22.0 million of
indebtedness and assumption of and repayment of indebtedness aggregating
approximately $107.2 million, 85,920 OP Units (approximate value of $2.1
million based on a value of $25.00 per OP Unit) and 924,800 shares of
restricted Common Stock (approximate value $23.1 million based on a value
of $25.00 per common share) are accounted for utilizing the purchase
method of accounting. The acquisition of Lawrence Feldman's interest in
the DRA Joint Ventures is accounted for at historical cost.
- Acquisition of Century Plaza. The acquisition of Century Plaza from an
unrelated third party for approximately $11.7 million in cash is
accounted for utilizing the purchase method of accounting.
- Acquisition of Properties Atlantic. The acquisition of Properties
Atlantic for 120,000 OP Units (approximate value of $3.0 million based on
a value of $25.00 per OP Unit) is accounted for utilizing the purchase
method of accounting.
- Acquisition of 100 Wall Street. The acquisition of 100 Wall Street from
an unrelated third party for approximately $58.0 million in cash, plus
$1.2 million of transfer taxes and other costs, is accounted for
utilizing the purchase method of accounting.
F-5
<PAGE> 182
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The pro forma adjustments to reflect the acquisitions of Tower Predecessor
(including the acquisition of an approximate 10% ownership interest in 2800
North Central), DRA Joint Ventures, Century Plaza, Properties Atlantic and 100
Wall Street are as follows:
<TABLE>
<CAPTION>
DRA 100
TOWER JOINT CENTURY PROPERTIES WALL
PREDECESSOR VENTURES PLAZA ATLANTIC STREET TOTAL
----------- --------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Real estate..................... $ 72,231 $ 182,483 $ 11,851 $ 59,239 $ 325,804
Cash and cash equivalents....... (194,600)(a) (135,215)(b) (11,701) (59,239) (400,755)
Investment in joint ventures.... 2,053 2,053
Prepaid expenses and other
assets........................ $3,000 3,000
--------- --------- -------- ------ -------- ---------
$ (120,316) $ 47,268 $ 150 $3,000 $ $ (69,898)
========= ========= ======== ====== ======== =========
Debt............................ $ (171,015)(c) $ 22,000 (149,015)
Minority interest in Operating
Partnership................... 6,686 2,148 $ 150 $3,000 11,984
Common shares................... 1 9 10
Additional paid in capital...... 1,624 23,111 24,735
Owners' equity.................. 42,388 42,388
--------- --------- -------- ------ -------- ---------
$ (120,316) $ 47,268 $ 150 $3,000 $ $ (69,898)
========= ========= ======== ====== ======== =========
</TABLE>
- ---------------
(a) The following details the use of cash and cash equivalents in the Tower
Predecessor transaction:
<TABLE>
<CAPTION>
TOWER
PREDECESSOR
--------
<S> <C>
Repayment of indebtedness:
Tower 45..................................................... $123,064(1)
Maitland Forum............................................... 28,875
Maitland West................................................ 4,548
120 Mineola Boulevard........................................ 11,260
5750 Major Boulevard......................................... 3,268(2)
--------
171,015
Cash payments:
Tower 45..................................................... 10,746
Maitland Forum and Maitland West............................. 3,697
120 Mineola Boulevard........................................ 275
5750 Major Boulevard......................................... 4,469
2800 North Central........................................... 925
Transfer taxes and other expenses............................ 3,473
--------
$194,600
========
</TABLE>
- ---------------
(1) At the time of the Offering, it has been assumed for pro forma purposes,
that a portion of the debt encumbering Tower 45 will remain outstanding
($35.0 million), and will then be repaid with proceeds from the Term
Loan. The Term Loan amount in pro forma adjustment C(6) reflects the
repayment of this Tower 45 debt.
F-6
<PAGE> 183
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(2) Indebtedness relating to 5750 Major Boulevard at June 30, 1997 is $3.3
million. At the date of the Offering it is expected that the
indebtedness will increase to $4.7 million to fund construction
expenditures of $1.4 million expected to be incurred.
(b) The use of cash and cash equivalents in the DRA Joint Ventures transaction
of $135.2 million is comprised of (i) payments of $107.2 million for the
partners in the DRA Joint Ventures to repay indebtedness associated with the
properties, and (ii) payments of $28.0 million to DRA and other parties.
(c) Historical debt on real estate for Tower Predecessor at June 30, 1997 is
$193.4 million. The debt on real estate has been reduced by $22.4 million to
reflect anticipated reduction from debt restructurings.
The other historical assets and liabilities of Tower Predecessor, DRA Joint
Ventures, Century Plaza, 100 Wall Street and Properties Atlantic will not be
acquired or assumed in the acquisitions, except for a deferred real estate tax
liability of approximately $13.0 million and the related receivable of
approximately $2.5 million for a portion of this liability which is expected to
be recovered from tenants. This deferred real estate tax liability represents a
portion of real estate taxes accrued on Tower 45 from 1988 through 1995 which is
payable to the taxing authority commencing on July 1, 1998 in payments of $1.3
million per year.
B. THE OFFERING AND CONCURRENT PRIVATE PLACEMENTS
Reflects the initial capitalization of the Company and the issuance of
12,715,000 shares of Common Stock in connection with the Offering (11,515,000
shares) and Concurrent Private Placements (1,200,000 shares) at an assumed
initial public offering price of $25.00 per share. The estimated costs of the
Offering include $18.7 million of underwriters' discount and $11.9 million of
other offering costs (of which $7.6 million has been recorded as a deferred
charge on the Company's historical balance sheet at June 30, 1997), which have
been reflected as a reduction to additional paid-in capital (there is no
underwriters' discount for the shares sold in the Concurrent Private
Placements). The resulting net proceeds of the Offering and Concurrent Private
Placements total approximately $287.3 million.
F-7
<PAGE> 184
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
C. OTHER ADJUSTMENTS
PRO FORMA ADJUSTMENT SUMMARY
BALANCE SHEET
JUNE 30, 1997
<TABLE>
<CAPTION>
INVEST- DEBT
PRO UNBILLED CASH MENTS IN ON
FORMA ADJUST- DEFERRED RENT ESCROWED AND CASH JOINT OTHER REAL
MENT CHARGES RECEIVABLES RECEIVABLE FUNDS EQUIVALENTS VENTURES ASSETS ESTATE
- ---------------------------- --------- ---------- ----------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
C(1) Adjustment to deferred
charges................ $ 1,094 $ (2,431) $ (1,100)
C(2) Elimination of other
assets and liabilities
of Tower Predecessor
and intercompany
receivables............ $ (936) $(421) (4,326) (2,406)
C(3) Elimination of unbilled
rent receivable of
Tower Predecessor...... $ (14,580)
C(4) Elimination of invest-
ment in DRA Joint Ven-
tures.................. $ (4,745)
C(5) Conversion of MSAM
Notes debt............. 3,721 $ (7,279)
C(6) Debt activity.......... 107,000 84,634
C(7) Prepayment penalties... (1,880)
C(8) Allocation to minority
interest in Operating
Partnership............
C(9) Reclass historical
Tower Predecessor
owners' equity to
additional paid-in
capital................
------ ------- -------- ------ ------- ------- ------- -------
$ 1,094 $ (936) $ (14,580) $(421) $102,084 $ (4,745) $ (3,506) $ 77,355
====== ======= ======== ====== ======= ======= ======= =======
<CAPTION>
MINORITY
ACCOUNTS INTEREST
PAYABLE AMOUNTS IN
PRO AND DUE TO OPERATING ADDITIONAL OWNERS'
FORMA ADJUST- OTHER (FROM) PARTNER- COMMON PAID-IN EQUITY
MENT LIABILITIES AFFILIATES SHIP STOCK CAPITAL (DEFICIT)
- ---------------------------- ------------ ---------- ---------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
C(1) Adjustment to deferred
charges................ $ (2,437)
C(2) Elimination of other
assets and liabilities
of Tower Predecessor
and intercompany
receivables............ $ (14,275) $ (9,192) 15,378
C(3) Elimination of unbilled
rent receivable of
Tower Predecessor...... (14,580)
C(4) Elimination of invest-
ment in DRA Joint Ven-
tures.................. (4,745)
C(5) Conversion of MSAM
Notes debt............. $ 9 $ 10,991
C(6) Debt activity.......... 22,366
C(7) Prepayment penalties... (1,880)
C(8) Allocation to minority
interest in Operating
Partnership............ $ 20,294 (20,294)
C(9) Reclass historical
Tower Predecessor
owners' equity to
additional paid-in
capital................ (2,170) 2,170
-------- ------- ------- ------ -------- -------
$ (14,275) $ (9,192) $ 20,294 $ 9 $ (11,473) $ 16,272
======== ======= ======= ====== ======== =======
</TABLE>
The following pro forma adjustments represent other aspects of the Offering
and related Formation Transactions.
(1) Represents the write-off to owners' equity of historical Tower
Predecessor's previously capitalized deferred financing costs on mortgage
loans ($1.3 million) and organizational costs ($1.1 million). Also includes
the capitalization of $2.4 million of deferred financing fees to be
incurred on the Term Loan and Line of Credit.
(2) Represents elimination of other assets and liabilities of the
Tower Predecessor, except for accounts receivable of $2.5 million and a
deferred real estate tax liability of approximately $13.0 million, which
will not be acquired or assumed in the transaction. This deferred real
estate tax liability represents a portion of real estate taxes accrued on
Tower 45 from 1988 through 1995 which is payable to the taxing authority
commencing on July 1, 1998 in payments of $1.3 million per year. Also
represents the elimination of $1.2 million of the Company's amounts due
from affiliates.
(3) Represents the elimination of unbilled rent receivable of the
Tower Predecessor due to the acquisition of the Properties on June 30,
1997.
(4) Represents the elimination of the investment in DRA Joint Ventures
from the Tower Predecessor historical balance sheet. The pro forma
adjustments reflecting the acquisition of the DRA Joint Ventures
effectively records 100% of the DRA Joint Ventures.
(5) Represents the issuance and conversion of certain debt held by
certain investment funds advised by MSAM (the "MSAM Notes") assumed to be
incurred of $11.0 million to 821,200 shares of restricted Common Stock
(approximate value of $20.5 million based on a value of $25.00 per
restricted Common
F-8
<PAGE> 185
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Stock). Other MSAM notes totalling $1.3 million were previously assumed, in
the acquisition of partnership interests in the Tower Predecessor, to be
converted to 65,000 shares of restricted Common Stock (approximate value of
$1.6 million based on a value of $25.00 per share of restricted Common
Stock). See pro forma adjustment 1A. Also represents the redemption of
1,000 shares from the initial incorporation of the Company. The pro forma
adjustment is to increase cash by $3.7 million since this amount will be
borrowed under the MSAM Notes subsequent to June 30, 1997.
(6) Represents the new borrowings under the Term Loan of $107.0
million partially offset by debt forgiveness of $22.4 million.
Pro forma debt outstanding at June 30, 1997 is as follows:
<TABLE>
<S> <C>
Corporate Center.................................................. $ 22,000
Term Loan......................................................... 107,000
---------
$129,000
=========
</TABLE>
At the time of the Offering, it has been assumed for pro forma
purposes, that a portion of the debt encumbering Tower 45 will remain
outstanding, and will then be repaid with proceeds from the Term Loan. The
above Term Loan amount of $107.0 million reflects the repayment of this
Tower 45 debt.
(7) Represents prepayment penalties on Tower Predecessor debt of $1.9
million.
(8) Represents the equity attributable to OP Units owned. The Company
is the sole general partner of the Operating Partnership and will own
approximately 90.3% of the Operating Partnership. Total OP Units
outstanding will be 1,583,640 which will represent an approximate 9.7%
minority interest in the Operating Partnership. The minority interest is
reported as the equity of the Operating Partnership multiplied by the
minority interest ownership percentage in the Operating Partnership.
The holders of the OP Units will have the right to cause the Operating
Partnership to exchange the OP Units for cash or, at the election of the
Company, exchange such OP Units for shares of Common Stock of the Company
on a one-for-one basis.
(9) Reclassifies remaining historical Tower Predecessor owners' equity
to additional paid-in capital.
2. PRO FORMA ADJUSTMENTS TO THE STATEMENT OF OPERATIONS -- JUNE 30, 1997
A. ACQUISITION PROPERTIES
The statements of operations information for the six months ended June 30,
1997 reflects the historical operations of the DRA Joint Ventures, Century
Plaza, Properties Atlantic and 100 Wall Street as follows:
<TABLE>
<CAPTION>
DRA JOINT CENTURY PROPERTIES 100 WALL
VENTURES PLAZA ATLANTIC STREET TOTAL
--------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Rental income....................... $14,503 $ 1,207 $5,606 $21,316
Other income........................ 83 25 $890 318 1,316
------- ------ ---- ------ -------
Total revenues............ 14,586 1,232 890 5,924 22,632
------- ------ ---- ------ -------
Property operating and
maintenance....................... 3,959 665 1,955 6,579
Real estate taxes................... 1,796 55 1,192 3,043
Other expenses...................... 452 81 71 97 701
------- ------ ---- ------ -------
Total expenses............ 6,207 801 71 3,244 10,323
------- ------ ---- ------ -------
Revenues in excess of certain
operating expenses................ $ 8,379 $ 431 $819 $2,680 $12,309
======= ====== ==== ====== =======
</TABLE>
F-9
<PAGE> 186
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
B. OTHER ADJUSTMENTS
PRO FORMA ADJUSTMENT SUMMARY
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
EQUITY IN
CONSTRUCTION, REAL GENERAL OFFICE DEPRECIATION INCOME (LOSS)
PRO FORMA RENTAL MANAGEMENT LEASING AND ESTATE AND INTEREST AND OF JOINT
ADJUSTMENT INCOME FEES OTHER FEES TAXES ADMINISTRATION EXPENSE AMORTIZATION VENTURES
- ---------- ------ ----------- -------------- ------ -------------- -------- ------------ -------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
2B(1) Straight line rental
income.............. $1,908
2B(2) Elimination of
property management
and other fees...... $(245) $ (1,304) $ (727) $ 475
2B(3) Real estate
taxes............... $(50)
2B(4) General office and
administration...... 27
2B(5) Interest
expense............. $ (2,306)
2B(6) Amortization of
deferred financing
fees................ (257)
2B(7) Depreciation
expense............. $3,330
2B(8) Consolidation of DRA
Joint Ventures...... (68)
2B(9) Equity investment in
2800 North
Central............. (39)
2B(10) Minority interest in
Operating
Partnership.........
------ ----- ------- ---- ----- ------ ------ ----
Total............... $1,908 $(245) $ (1,304) $(50) $ (700) $ (2,563) $3,330 $ 368
====== ===== ======= ==== ===== ====== ====== ====
<CAPTION>
MINORITY
INTEREST IN
PRO FORMA OPERATING
ADJUSTMENT PARTNERSHIP
- ---------- -----------
<C> <C>
2B(1)
2B(2)
2B(3)
2B(4)
2B(5)
2B(6)
2B(7)
2B(8)
2B(9)
2B(10)
$ 935
----
$ 935
====
</TABLE>
(1) Reflects an adjustment to increase the Properties' rental revenue for
straight-line rent based on the acquisition date of the Properties of January 1,
1996.
(2) Reflects the elimination of historical management fees ($245) and
construction, leasing and other fees ($1,304) and property management fee
expense ($727) related to the DRA Joint Ventures, Century Plaza and 100 Wall
Street for the six months ended June 30, 1997 and the Tower Predecessor for the
three months ended June 30, 1997. The Management Company was formed as a 95%
owned equity investment of the Company on March 27, 1997. As a result of the
Company's prospective ownership and management of these properties, these
historical amounts will no longer be changed. The Management Company will only
include amounts related to the Excluded Properties and third party management
contracts.
F-10
<PAGE> 187
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
As a result of this pro forma adjustment, the pro forma statement of
operations of the Management Company for the six months ended June 30, 1997 is
as follows (represents revenues and expenses from the Excluded Properties and
third party management contracts):
<TABLE>
<S> <C>
Management fees.............................................................. $ 342
Construction, leasing and other fees......................................... 234
Properties Atlantic third party representation fees.......................... 890
General office and administrative............................................ (600)
-----
Income before income taxes.............................................. 866
Income taxes............................................................ (303)
-----
Net income.............................................................. $ 563
=====
95% equity in earnings of the Management Company recorded by the Company..... $ 535
Management Company earnings included in the Company's historical statement of
operations for the six months ended June 30, 1997.......................... (60)
-----
Pro forma adjustment......................................................... $ 475
=====
</TABLE>
(3) Reflects the reduction in real estate taxes related to the parcel of
land adjacent to One Orlando Center which will not be acquired in the Formation
Transactions (option parcel).
(4) Reflects a net increase of $27 in general office and administrative
expense which is a result of estimated additional costs of operating as a public
company partially by certain expenses (such as separate partnership accounting
fees and reductions in salaries of certain officers) that are no longer
required.
(5) Reflects the net decrease in interest expense as a result of the
repayment of a portion of the existing debt on real estate of Tower Predecessor
partially offset by the assumption of existing debt in connection with the
acquisition of Corporate Center and borrowings under the Term Loan. The
following presents the debt to
F-11
<PAGE> 188
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
be outstanding subsequent to the Offering and related Formation Transactions and
the corresponding interest expense adjustment:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT RATE INTEREST
--------- -------- --------
<S> <C> <C> <C>
Corporate Center..................................... $ 21,000 7.55% $ 793
Corporate Center..................................... 1,000 8.37% 42
Term Loan(a)......................................... 107,000 6.95% 3,718
-------- -------
Total...................................... $ 129,000
========
Pro forma annual interest expense.................... 4,553
Historical interest expense, excluding amortization
of deferred financing fees, in previous columns
(also see (6) below)............................... (6,859)
-------
Reduction to interest expense (also see (6)
below)................................... $ (2,306)
=======
</TABLE>
- ---------------
(a) At the time of the Offering, it has been assumed for pro forma purposes that
a portion of the debt encumbering Tower 45 will remain outstanding and will then
be repaid with proceeds from the Term Loan. The above Term Loan amount of $107.0
million reflects the repayment of this Tower 45 debt. The interest rate is based
on the seven-year U.S. Treasury Note rate (6.05% at September 18, 1997) plus 90
basis points.
(6) Reflects the net decrease in the amortization of deferred financing
fees ($257) as a result of a reduction of the amortization expense associated
with historical deferred financing fees to be written off concurrent with the
Offering ($345) partially offset by the amortization of $1.2 million of deferred
financing fees associated with the Term Loan ($88) amortized over the seven year
term.
(7) Reflects the net increase in depreciation and amortization as a result
of the acquisition of Tower Predecessor, DRA Joint Ventures, Century Plaza,
Properties Atlantic and 100 Wall Street and the related increase in the basis of
the assets. The following outlines the components of the net increase:
<TABLE>
<CAPTION>
PRO FORMA
PURCHASE PURCHASE SIX MONTHS
INCREASE INCREASE PRICE PRICE DEPRECIATION
IN REAL IN OTHER ASSIGNED ASSIGNED DEPRECIABLE AND
ESTATE ASSETS TO LAND TO BUILDING LIFE AMORTIZATION
-------- -------- -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Tower Predecessor............. $ 72,231 $ 14,447 $ 57,784 40 years $ 722
DRA Joint Ventures............ 182,483 54,745 127,738 40 years 1,597
Century Plaza................. 11,851 2,370 9,481 40 years 119
Properties Atlantic........... $3,000 5 years 300
100 Wall Street............... 59,239 11,848 47,391 40 years 592
-------- ------ ------- -------- ------
Net increase in assets and
depreciation and
amortization expense........ $325,804 $3,000 $ 83,410 $ 242,394 $3,330
======== ====== ======= ======== ======
</TABLE>
(8) Reflects the elimination of the equity in earnings from the investment
in the DRA Joint Ventures from Tower Predecessor's historical statement of
operations ($68).
(9) Reflects the decrease of the equity in earnings from the investment in
2800 North Central to reflect the purchase of additional partnership interests,
10% of net loss or ($39).
F-12
<PAGE> 189
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(10) Reflects net income attributable to the minority interest of the
Operating Partnership. The Company is the sole general partner and will own
approximately 90.3% of the Operating Partnership.
(11) Historical debt on real estate for the Tower Predecessor has been
reduced by $23.7 million to reflect anticipated reduction from debt
restructurings. Also, prepayment penalties of approximately $1.9 million will be
paid on the Tower Predecessor debt on real estate. This extraordinary gain on
extinguishment of debt has not been included in the pro forma statements of
operations due to their nonrecurring nature.
3. PRO FORMA ADJUSTMENTS TO THE STATEMENT OF OPERATIONS -- DECEMBER 31, 1996
A. PROPERTY ACQUIRED PRIOR TO THE FORMATION TRANSACTIONS
The statement of operations for the year ended December 31, 1996
information reflects the historical operations of 5750 Major Boulevard which was
acquired on October 24, 1996 (prior to the Formation Transactions). Operations
for 5750 Major Boulevard are included in the Tower Predecessor's combined
financial statements for the period from date of acquisition to December 31,
1996. Operations for this property for the period from January 1, 1996 to the
date of acquisition are reflected in the following table:
<TABLE>
<CAPTION>
5750 MAJOR
BLVD
----------
<S> <C>
Rental income..................................................... $462
Other income...................................................... 2
----
Total revenues.......................................... 464
----
Property operating and maintenance................................ 193
Real estate taxes................................................. 79
Other expenses.................................................... 47
----
Total expenses.......................................... 319
----
Revenues in excess of certain operating expenses........ $145
====
</TABLE>
B. ACQUISITION PROPERTIES
The statements of operations information for the year ended December 31,
1996 reflect the historical operations of the DRA Joint Ventures, Century Plaza,
Properties Atlantic and 100 Wall Street as follows:
<TABLE>
<CAPTION>
DRA JOINT CENTURY PROPERTIES 100 WALL
VENTURES PLAZA ATLANTIC STREET TOTAL
--------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Rental income.................. $29,010 $ 2,404 $ 11,317 $42,731
Other income................... 288 194 $931 961 2,374
------- ------ ---- ------- -------
Total revenues....... 29,298 2,598 931 12,278 45,105
------- ------ ---- ------- -------
Property operating and
maintenance.................. 7,791 997 4,151 12,939
Real estate taxes.............. 3,572 214 2,524 6,310
Other expenses................. 1,083 174 152 143 1,552
------- ------ ---- ------- -------
Total expenses....... 12,446 1,385 152 6,818 20,801
------- ------ ---- ------- -------
Revenues in excess of certain
operating expenses........... $16,852 $ 1,213 $779 $ 5,460 $24,304
======= ====== ==== ======= =======
</TABLE>
F-13
<PAGE> 190
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
C. OTHER ADJUSTMENTS
PRO FORMA ADJUSTMENT SUMMARY
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
EQUITY IN
INCOME MINORITY
CONSTRUCTION, GENERAL DEPRECIATION (LOSS) INTEREST IN
PRO FORMA RENTAL MANAGEMENT LEASING AND REAL OFFICE AND INTEREST AND OF JOINT OPERATING
ADJUSTMENT INCOME FEES OTHER FEES ESTATE TAXES ADMINISTRATION EXPENSE AMORTIZATION VENTURES PARTNERSHIP
- ---------------- ------ ---------- ------------- ------------ -------------- --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3C(1) Straight
line
rental
revenue... $3,608
3C(2) Elimination
of
property
management
and
other
fees... $ (1,261) $(2,008) $ (2,443) $ 410
3C(3) Real
estate
taxes... $ (100)
3C(4) General
office
and
administration... 713
3C(5) Interest
expense... $ (5,900)
3C(6) Amortization
of deferred
financing
fees... (328)
3C(7) Depreciation
expense... $6,747
3C(8) Consolidation
of DRA Joint
Ventures... (461)
3C(9) Equity
investment
in 2800
North
Central... (12)
3C(10) Minority
interest
in
Operating
Partnership... $ 1,801
------ ------- ------- ------- ------- ------- ------ ----- ------
T $3,608 $ (1,261) $(2,008) $ (100) $ (1,730) $ (6,228) $6,747 $ (63) $ 1,801
====== ======= ======= ======= ======= ======= ====== ===== ======
</TABLE>
(1) Reflects an adjustment to increase the Properties' rental revenue for
straight-line rent based on the acquisition date of the Properties of January 1,
1996.
(2) Reflects the elimination of management fees ($1,261) and construction,
leasing and other fees ($2,008) and property management fee expense ($2,443)
related to the DRA Joint Ventures, Century Plaza, 5750 Major Boulevard and 100
Wall Street for the year ended December 31, 1996. As a result of the Company's
prospective ownership and management of these properties these historical
amounts will no longer be charged. The Management Company will only include
amounts related to the Excluded Properties and third party management contracts.
As a result of this pro forma adjustment, the pro forma statement of
F-14
<PAGE> 191
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
operations of the Management Company for the year ended December 31, 1996 is as
follows (represents revenues and expenses from the Excluded Properties and third
party management contracts):
<TABLE>
<S> <C>
Management fees.................................................... $ 514
Construction, leasing and other fees............................... 419
Properties Atlantic third party representation fees................ 931
General office and administrative.................................. (1,200)
------
Income before income taxes.................................... 664
Income taxes.................................................. (232)
------
Net income.................................................... $ 432
======
95% equity in earnings of the Management Company recorded by the
Company.......................................................... $ 410
======
</TABLE>
(3) Reflects the reduction in real estate taxes related to the parcel of
land adjacent to One Orlando Center which will not be acquired in the Formation
Transactions (option parcel).
(4) Reflects a net increase of $713 in general office and administrative
expense which is a result of the estimated additional costs of operating as a
public company partially offset by certain expenses (such as separate
partnership accounting fees and reductions in salaries of certain officers) that
are no longer required.
(5) Reflects the net decrease in interest expense as a result of the
repayment of a portion of the existing debt on real estate of Tower Predecessor
partially offset by the assumption of existing debt in connection with the
acquisition of Corporate Center and borrowings under the Term Loan. The
following presents the debt to be outstanding subsequent to the Offering and
related Formation Transactions and the corresponding interest expense
adjustment:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT RATE INTEREST
--------- -------- --------
<S> <C> <C> <C>
Corporate Center............................ $ 21,000 7.55% $ 1,586
Corporate Center............................ 1,000 8.37% 84
Term Loan(a)................................ 107,000 6.95% 7,436
-------- --------
Total............................. $ 129,000
========
Pro forma annual interest expense........... 9,106
Historical interest expense, excluding
amortization of deferred financing fees,
in previous columns (also see (6)
below).................................... (15,007)
--------
Reduction to interest expense
(also see (6) below)............ $ (5,900)
========
</TABLE>
- ---------------
(a) At the time of the Offering, it has been assumed for pro forma purposes that
a portion of the debt encumbering Tower 45 will remain outstanding and will then
be repaid with proceeds from the Term Loan. The above Term Loan amount of $107.0
million reflects the repayment of this Tower 45 debt. The interest rate is based
on the 7 year U.S. Treasury Note rate (6.05% at September 18, 1997) plus 90
basis points.
(6) Reflects the net decrease in the amortization of deferred financing
fees ($328) as a result of reduction of the amortization expense associated with
historical deferred financing fees to be written off
F-15
<PAGE> 192
TOWER REALTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
concurrent with the Offering ($504) partially offset by the amortization of $1.2
million of deferred financing fees associated with the Term Loan ($176)
amortized over the seven year term.
(7) Reflects the net increase in depreciation and amortization as a result
of the acquisition of Tower Predecessor, DRA Joint Ventures, Century Plaza,
Properties Atlantic and 100 Wall Street and the related increase in the basis of
the assets. The following outlines the components of the net increase:
<TABLE>
<CAPTION>
PRO FORMA
TWELVE
INCREASE PURCHASE PURCHASE MONTHS
INCREASE IN PRICE PRICE DEPRECIATION
IN REAL OTHER ASSIGNED ASSIGNED DEPRECIABLE AND
ESTATE ASSETS TO LAND TO BUILDING LIFE AMORTIZATION
-------- -------- -------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Tower Predecessor.......... $ 72,231 $ 14,447 $ 57,784 40 years $1,444
DRA Joint Ventures......... 182,483 54,745 127,738 40 years 3,194
Century Plaza.............. 11,851 2,370 9,481 40 years 238
Properties Atlantic........ $3,000 5 years 600
100 Wall Street............ 59,239 11,848 47,391 40 years 1,184
Additional depreciation
expense for 5750 Major
Boulevard due to
acquisition in 1996...... 87
-------- ------ ------- -------- ------
Net increase in assets and
depreciation and
amortization expense..... $325,804 $3,000 $ 83,410 $ 242,394 $6,747
======== ====== ======= ======== ======
</TABLE>
(8) Reflects the elimination of the equity in earnings from the investment
in the DRA Joint Ventures from Tower Predecessor's historical statement of
operations ($461).
(9) Reflects the decrease of the equity in earnings from the investment in
2800 North Central to reflect the purchase of additional partnership interests,
10% of net loss or ($12).
(10) Reflects net income attributable to the minority interest of the
Operating Partnership. The Company is the sole general partner and will own
approximately 90.3% of the Operating Partnership.
(11) Historical debt on real estate for the Tower Predecessor has been
reduced by $23.7 million to reflect anticipated reduction from debt
restructuring. Also, prepayment penalties of approximately $1.9 million will be
paid on the Tower Predecessor debt on real estate. This extraordinary gain on
extinguishment of debt has not be included in the pro forma statements of
operations due to their nonrecurring nature.
F-16
<PAGE> 193
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Tower Realty Trust, Inc.
We have audited the accompanying consolidated balance sheet of the Tower
Realty Trust, Inc. as of June 30, 1997 and the related consolidated statements
of operations, shareholder's equity and cash flows for the period from March 27,
1997 (date of inception) to June 30, 1997. These financial statements are the
responsibility of the management of Tower Realty Trust, Inc. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
presents fairly, in all material respects, the financial position of Tower
Realty Trust, Inc. as of June 30, 1997, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
September 15, 1997
F-17
<PAGE> 194
TOWER REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<S> <C>
Cash............................................................................... $ 4
Amounts due from affiliates........................................................ 1,182
Investment in Tower Equities Management, Inc. ..................................... 60
Deferred charges................................................................... 7,640
-----
$ 8,886
=====
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable and accrued expenses.............................................. $ 1,689
Debt............................................................................... 7,279
-----
8,968
Commitments and contingencies (Notes 4 and 5)
Shareholder's equity (deficit):
Preferred shares, 50,000,000 shares authorized, none issued and outstanding........
Common shares, $.01 par value, 150,000,000 shares authorized; 1,000 shares issued
and outstanding.................................................................. 1
Accumulated deficit................................................................ (83)
-----
$ 8,886
=====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE> 195
TOWER REALTY TRUST, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 27, 1997 (DATE OF INCEPTION) THROUGH JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Revenues:
Interest income..................................................................... $ 33
----
Total revenues.............................................................. 33
----
Expenses
Interest expense.................................................................... 176
----
Total expenses.............................................................. 176
----
Equity in income of Tower Equities Management, Inc. .................................. 60
----
Net loss.................................................................... $(83)
====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 196
TOWER REALTY TRUST, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
FOR THE PERIOD FROM MARCH 27, 1997 (DATE OF INCEPTION) THROUGH JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NUMBER OF ACCUMULATED
COMMON SHARES COMMON SHARES DEFICIT
------------- ------------- -----------
<S> <C> <C> <C>
Balance at March 27, 1997......................... -- -- --
Issuance of common shares....................... 1,000 $ 1
Net loss........................................ $ (83)
--
----- ----
Balance at June 30, 1997.......................... 1,000 $ 1 $ (83)
===== == ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 197
TOWER REALTY TRUST, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 27, 1997 (DATE OF INCEPTION) THROUGH JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Cash flow from operating activities:
Net loss......................................................................... $ (83)
Adjustments to reconcile net loss to net cash provided by operating activities:
Equity in income of Tower Equities Management, Inc............................ (60)
Change in accounts payable and accrued expenses............................... 1,689
-------
Net cash flow provided by operating activities........................... 1,546
-------
Cash flow from investing activities:
Increase in deferred charges..................................................... (7,640)
Increase in due from affiliates.................................................. (1,182)
-------
Net cash flow used in investing activities............................... (8,822)
-------
Cash flow from financing activities:
Proceeds from issuance of debt................................................... 7,279
Proceeds from issuance of common stock........................................... 1
-------
Net cash flow provided by investing activities........................... 7,280
-------
Net increase in cash and cash equivalents.......................................... 4
Cash, beginning of year............................................................
-------
Cash, end of year.................................................................. $ 4
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 198
TOWER REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION:
Tower Realty Trust, Inc. (the "Company") was organized in the state of
Maryland on March 27, 1997. The Company intends to qualify as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended,
commencing with its taxable year ending December 31, 1997. Upon completion of
the planned initial public offering (the "Offering")(see Note 3), the Company
intends to acquire a sole 1% general partnership interest in Tower Realty
Operating Partnership, L.P. (the "Operating Partnership"), a Delaware limited
partnership, and an 89.3% limited partnership interest in the Operating
Partnership.
The Company has been formed to continue and expand the commercial real
estate business of Tower Equities & Real Estate Corp. and its affiliates
(collectively, "Tower Equities"), including developing, acquiring, owning,
renovating, managing, and leasing office properties in midtown Manhattan,
Phoenix, Tucson, and Orlando markets.
On March 31, 1997 interests in certain partnerships, properties and limited
liability companies were contributed to the Operating Partnership in exchange
for units of limited partnership interest in the Operating Partnership ("OP
Units"). Certain of these interests will be owned by the Operating Partnership
after consummation of the Company's Offering. Simultaneously, the Company issued
$4.0 million of notes to certain investors advised by Morgan Stanley Asset
Management, Inc. ("MSAM") which are collateralized by the Properties. At June
30, 1997, the balance on the notes has been increased to approximately $7.3
million. The notes bear interest at a rate of 15% per annum and are payable
quarterly, in arrears. Subsequent to June 30, 1997, the Company issued an
additional $5.0 million of notes. All interests contributed in the previously
described transactions were recorded at zero as the historical carry-over basis
of these interests were negative. Under the Partnership agreements, these
partners are not required to fund any partners' deficit balances to the
Operating Partnership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH
Cash consists of funds held at a major financial institution which balance
at times exceeds insurable limits.
DUE FROM (TO) AFFILIATES
Due from (to) affiliates represents amounts paid in connection with the
Offering and formation transactions by or on behalf of affiliates. These amounts
are expected to be settled upon completion of the Offering.
DEFERRED CHARGES
Deferred charges consists of expenses incurred in connection with the
Offering which will be charged to additional paid-in capital upon completion of
the Offering.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-22
<PAGE> 199
TOWER REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECENTLY ISSUED ACCOUNTING STANDARDS
During 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"), No.
129 "Disclosure of Information About Capital Structure" ("SFAS 129"), No. 130
"Reporting Comprehensive Income" ("SFAS 130"), and No. 131 "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131"). All of these
statements are effective for fiscal years beginning after December 15, 1997.
SFAS 128 specifies the computation, representation and disclosure
requirements for earnings per share. SFAS 129 established standards for
disclosing information about an entity's capital structure such as information
about securities, liquidation preference of preferred stock and redeemable
stock. SFAS 130 specifies the presentation and disclosure requirement for
reporting comprehensive income which includes those items which have been
formerly reported as a component of shareholders' equity. SFAS 131 establishes
the disclosure requirements for reporting segment information.
Management believes that, when adopted, SFAS 128, 129, 130 and 131 will not
have a significant impact on the Company's financial statements.
3. THE OFFERING AND RELATED FORMATION TRANSACTIONS:
The Company has filed a registration statement on Form S-11 with the
Securities and Exchange Commission with respect to the Offering. In addition,
the Company intends to sell shares of Common stock in a concurrent private
placement (the "Concurrent Private Placements"). All the net proceeds to the
Company from the Offering and the Concurrent Private Placements will be
contributed either directly or indirectly to the Operating Partnership in
exchange for a sole 1% general partnership interest and an 89.3% limited
partnership interest in the Operating Partnership.
Upon consummation of the Offering and certain related transactions
(collectively, the "Formation Transactions"), the Operating Partnership will own
21 office properties (the "Properties"). The Company will also own or have an
option to acquire four parcels of land adjacent to four of the Properties (the
"Development Parcels"), which can support 2.2 million of rentable square feet of
development.
The Operating Partnership has entered into a $107.0 million seven year term
facility with Merrill Lynch Credit Corporation (the "Term Loan") and will borrow
approximately $72 million under such facility at the closing of the Offering.
The Tower Equities management and leasing companies and Properties Atlantic
Inc. (which, prior to the Offering, was controlled and operated by Clifford
Stein, Managing Director, Southeast Region of the Company) will contribute an
undivided 95% interest in the assets of such companies to the Operating
Partnership in exchange for OP Units and the Operating Partnership will, in
turn, recontribute such assets to Tower Realty Management, Inc. (the "Management
Company") in exchange for 100% of the non-voting stock and 5% of the voting
stock in the Management Company (which collectively is entitled to receive 95%
of the dividends).
The Management Company and each of the members of Tower Equities that hold
interests in seven retail properties and that will continue to be owned by Tower
Equities after the consummation of the Formation Transactions (the "Excluded
Properties") will enter into management agreements with respect to each of the
Excluded Properties. In consideration for the services to be provided under the
management agreements, the Management Company will receive a property management
fee and applicable leasing commissions which will be determined by reference to
existing market rates for similar transactions.
F-23
<PAGE> 200
TOWER REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
LINE OF CREDIT
The Company has obtained a commitment for a $200 million Line of Credit.
The Line of Credit may be used, among other things, to finance the acquisition
or development of additional properties and the redevelopment of properties
owned by the Company.
4. INVESTMENT IN TOWER EQUITIES MANAGEMENT, INC.:
The Company records its investment in Tower Equities Management, Inc.
("TEMI") using the equity method of accounting and, therefore, reports its share
of income and expenses based on its 95% ownership interest in TEMI. Presented
below in condensed financial information of TEMI:
TOWER EQUITIES MANAGEMENT, INC.
BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash.................................................................. $136
Accounts receivable................................................... 297
Equipment............................................................. 113
----
Total assets................................................ $546
====
LIABILITIES AND OWNERS' EQUITY
Accounts payable and accrued expenses................................. $247
Due to affiliates..................................................... 237
Owners' equity........................................................ 62
----
Total liabilities and owners' equity........................ $546
====
</TABLE>
F-24
<PAGE> 201
TOWER REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TOWER EQUITIES MANAGEMENT, INC.
STATEMENT OF OPERATIONS
PERIOD FROM INCEPTION (MARCH 27, 1997) THROUGH JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Revenues:
Management fees................................................... $1,002
Construction, leasing and other fees.............................. 186
------
Total revenues............................................ $1,188
------
Expenses:
General office and administration................................. 1,083
Depreciation and amortization..................................... 9
Total expenses................................................. 1,092
------
Income before taxes............................................ 96
Income tax expense.................................................. 34
------
Net income..................................................... $ 62
======
</TABLE>
5. STOCK INCENTIVE PLANS:
Prior to the Offering, the Board of Directors will adopt the 1997 Plan and
the Directors' Plan.
THE 1997 PLAN
The 1997 Plan will provide for the granting of stock options, restricted
stock and performance shares and incentive awards from time to time with respect
to up to a number of shares of Common Stock equal to 9.5% of the total number of
issued and outstanding shares of Common Stock (on a fully diluted basis assuming
the exchange of all OP Units for shares of Common Stock) to executive or other
key employees of the Company. Options granted under the 1997 Plan may be
incentive stock options ("ISO") or nonqualified stock options. An option
entitles a Participant to purchase shares of Common Stock from the Company at
the option price. The option price will be fixed by the Compensation Committee,
however, the price per share must be equal to or greater than the fair market
value of the Common Stock on the grant date.
The 1997 Plan also permits the Company to issue incentive awards,
performance shares or shares of restricted stock to participants upon such terms
and conditions as shall be determined by the Compensation Committee in its sole
discretion.
THE DIRECTORS' PLAN
A maximum of 200,000 shares of Common Stock will be issuable under the
Directors' Plan. No director who is an employee of the Company is eligible to
participate in the Directors' Plan. The Directors' Plan will provide that each
eligible director who is a member of the Board of Directors as of the date that
the registration statement relating to the Offering is declared effective by the
Commission will be awarded nonqualified options to purchase 20,000 shares of
Common Stock on that date (each such director, a "Founding Director"). Each
eligible director who is not a Founding Director (a "Non-Founding Director")
will receive nonqualified options to purchase 20,000 shares of Common Stock on
the date of the meeting of the Company's stockholders at which the Non-Founding
Director is first elected to the Board of Directors. The options granted to
Founding Directors upon effectiveness of the registration statement relating to
the Offering will have an exercise price equal to the initial public offering
price and will vest in five annual
F-25
<PAGE> 202
TOWER REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
installments beginning on the first anniversary of the date of grant, subject to
the Director's continuous service through such vesting date. The exercise price
of options under future grants will be 100% of the fair market value of the
Common Stock on the date of grant and will vest in the same manner. Options
granted under the Directors' Plan will be exercisable for ten years from the
date of grant. Upon termination of service as a director, options which have not
vested will be forfeited and vested options may be exercised until they expire.
The Directors' Plan will also provide for the annual award of shares of
Common Stock to each eligible director ("Director Stock Award").
6. COMMITMENTS:
EMPLOYMENT AGREEMENTS
The Company will enter into an employment agreement with Mr. Lawrence
Feldman pursuant to which Mr. Feldman will serve as Chairman of the Board, Chief
Executive Officer and President of the Company for a term of three years,
subject, in certain circumstances, to automatic one year extensions, at an
initial annual base compensation of $175,000 (subject to any increases in base
compensation approved by the Compensation Committee). In addition, the Company
will enter into employment agreements with Messrs. Cox, and Kasman, pursuant to
which Mr. Cox will serve as Executive Vice President and Chief Operating
Officer, and Mr. Kasman will serve as Senior Vice President and Chief Financial
Officer, each for a term of three years subject, in certain circumstances, in
the case of Mr. Cox, to automatic one-year extensions, at an annual base
compensation of $150,000 (subject to any increase in base compensation approved
by the Compensation Committee). In addition to base salary, each such executive
officer will be entitled under his employment agreement to receive annual
performance-based compensation as determined by the Compensation Committee. Upon
termination of an officer's employment agreement other than for cause, or by
such officer for "good reason" (as such term is defined in each officer's
employment agreement) each of such officers will be entitled to receive
severance benefits in an amount equal to the greater of (i) the aggregate of all
compensation due such officer during the balance of the term of the employment
agreement or (ii) 2.99 times (or, after the second anniversary of the date of
the agreement, 1.99 times) the "base amount" as determined in the Code, in each
case, payable within 30 days of each such officer's termination. In the case of
an officer's death or disability, salary is continued for a twelve-month period.
In addition, such employment agreements will provide for the grant of the
options and the stock awards previously described above. Pursuant to the
employment agreements, such options are subject to vesting, but will vest upon
an officer's death or disability or a change of control of the Company.
AIR RIGHTS AND GROUND LEASES
On November 30, 1980 Tower Predecessor entered into an air rights lease
agreement with the Village of Mineola which expires in May 2012, subject to the
Company's right to extend the term pursuant to two 30-year renewal options. The
lease provides for a current annual lease payment of $33,000, increasing to
$46,500 in 2001.
On November 30, 1986, Tower Predecessor entered into an agreement to lease
for 250 years the air and corresponding development rights adjacent to one of
the properties. The Operating Partnership has an option that is exercisable from
November 1, 1996 through October 31, 2001 to acquire the lessor's site for a
price as of July 31, 1997, of $11 million. This price increases through the
expiration of the option on October 31, 2001, at a rate of 50% of the percentage
increase in the consumer price index as defined in the lease (approximately $13
million as of July 31, 1997).
F-26
<PAGE> 203
TOWER REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The future minimum lease payments to be paid under these two agreements are
as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31: (IN THOUSANDS)
--------------------------------------------------------------- --------------
<S> <C>
1997........................................................ $ 597
1998........................................................ 597
1999........................................................ 597
2000........................................................ 598
2001........................................................ 606
Thereafter..................................................... 135,394
--------
$138,389
========
</TABLE>
LAND OPTIONS
The Operating Partnership holds an option to acquire contractual rights to
purchase undeveloped land in Phoenix, Arizona. The agreement provides for an
aggregate purchase price of approximately $10.35 million, approximately $5.9
million of which is payable in cash at the closing, with the remainder to be
evidenced by a 120-day collateralized promissory note bearing interest at 8% per
annum.
In addition, the Company holds an option to acquire additional development
rights relating to an approved master plan filed with the city of Orlando for
further development of One Orlando Center.
F-27
<PAGE> 204
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners and Owners of
Tower Predecessor
We have audited the accompanying combined balance sheets of Tower
Predecessor as of December 31, 1996 and 1995, and the related combined
statements of operations, owners' deficit, and cash flows for each of the three
years in the period ended December 31, 1996 and the financial statement schedule
included in the index on page F-1 of this Prospectus. These financial statements
and financial statement schedule are the responsibility of the management of
Tower Predecessor. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above
presents fairly, in all material respects, the combined financial position of
Tower Predecessor as of December 31, 1996 and 1995, and the combined results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be set forth therein.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
April 21, 1997
F-28
<PAGE> 205
TOWER PREDECESSOR
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
JUNE 30, 1997 -------- --------
-------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Real estate.............................................. $ 170,865 $169,619 $163,879
Less: accumulated depreciation......................... (43,288) (40,555) (35,741)
--------- --------- ---------
Real estate, net......................................... 127,577 129,064 128,138
Deferred charges, net.................................... 12,041 11,636 12,543
Receivables, net of allowance for doubtful accounts of 3,436 2,776 3,121
approximately $2.5 million for all periods.............
Unbilled rent receivable................................. 14,580 15,242 16,447
Escrowed funds........................................... 421 413 297
Cash and cash equivalents................................ 4,326 4,985 5,208
Investments in joint ventures............................ 4,745 5,316 4,538
Other assets............................................. 3,506 3,555 3,597
--------- --------- ---------
Total assets................................... $ 170,632 $172,987 $173,889
========= ========= =========
LIABILITIES AND OWNERS' DEFICIT
Real estate debt......................................... $ 193,381 $202,892 $199,962
Deferred real estate taxes............................... 12,951 12,951 12,951
Accounts payable and other liabilities................... 12,586 12,867 11,600
Amounts due to affiliates................................ 10,374 6,147 6,464
--------- --------- ---------
Total liabilities.............................. 229,292 234,857 230,977
Commitments and contingencies (Note 12)
Owners' deficit.......................................... (58,660) (61,870) (57,088)
--------- --------- ---------
Total liabilities and owners' deficit.......... $ 170,632 $172,987 $173,889
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-29
<PAGE> 206
TOWER PREDECESSOR
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
--------------------------- -------------------------------
1997 1996 1996 1995 1994
----------- ----------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income...................... $13,521 $13,467 $26,138 $25,202 $25,994
Management fees.................... 245 626 1,261 961 82
Construction, leasing, and other
fees............................ 474 543 1,335 1,041 320
------- ------- -------- -------- --------
Total revenues............. 14,240 14,636 28,734 27,204 26,396
------- ------- -------- -------- --------
Expenses:
Property operating and
maintenance..................... 2,703 2,781 5,481 5,332 5,278
Real estate taxes.................. 2,331 2,360 4,722 4,571 3,971
General office and
administration.................. 1,746 1,767 3,494 3,497 2,512
Interest expense................... 7,028 7,172 15,511 15,150 12,751
Depreciation and amortization...... 3,494 3,384 6,853 6,897 7,415
Ground rent and air rights
expense......................... 299 299 599 599 599
------- ------- -------- -------- --------
Total expenses............. 17,601 17,763 36,660 36,046 32,526
------- ------- -------- -------- --------
Equity in income of joint ventures... 68 198 461 193 1
------- ------- -------- -------- --------
Net loss before
extraordinary gain on
early extinguishment of
debt..................... (3,293) (2,929) (7,465) (8,649) (6,129)
Extraordinary gain on early
extinguishment of debt............. 6,475
------- ------- -------- -------- --------
Net income (loss).......... $ 3,182 $(2,929) $(7,465) $(8,649) $(6,129)
======= ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-30
<PAGE> 207
TOWER PREDECESSOR
COMBINED STATEMENTS OF OWNERS' DEFICIT
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Balance at January 1, 1994........................................................ $(47,469)
Net loss........................................................................ (6,129)
Contributions, net.............................................................. 2,429
-------
Balance at December 31, 1994...................................................... (51,169)
Net loss........................................................................ (8,649)
Contributions, net.............................................................. 2,730
-------
Balance at December 31, 1995...................................................... (57,088)
Net loss........................................................................ (7,465)
Contributions, net.............................................................. 2,683
-------
Balance at December 31, 1996...................................................... (61,870)
Net income (unaudited).......................................................... 3,182
Contributions, net (unaudited).................................................. 28
-------
Balance at June 30, 1997 (unaudited).............................................. $(58,660)
=======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-31
<PAGE> 208
TOWER PREDECESSOR
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
------------------------- ---------------------------
1997 1996 1996 1995 1994
----------- ----------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income (loss).......................... $ 3,182 $(2,929) $(7,465) $(8,649) $(6,129)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization........... 3,494 3,384 6,853 6,897 7,415
Amortization of deferred financing
costs................................. 345 252 504 575 574
Equity in income of joint ventures, net
of distributions...................... (5) (461) (193) (34)
Gain on disposal of assets.............. (39) (30) (81)
Extraordinary gain on early
extinguishment of debt................ (6,475)
Change in:
Deferred charges...................... (1,352) (765) (867) (373) 1,085
Receivables........................... (660) 352 345 2,673 (2,471)
Unbilled rent receivable.............. 662 239 1,205 3,084 2,437
Escrowed funds........................ (8) (462) (116) 268 69
Other assets.......................... 49 88 42 (616) (278)
Deferred real estate taxes............ 366 1,074
Accounts payable and other
liabilities........................ (281) (595) 1,267 90 (1,548)
Amounts due to affiliates............. 3,617 (252) (317) (2,330) 2,005
------- ------- ------- ------- -------
Net cash flow provided by (used in)
operating activities............. 2,573 (693) 951 1,762 4,118
------- ------- ------- ------- -------
Cash flow from investing activities:
Improvements to real estate................ (1,405) (1,329) (2,659) (967) (1,602)
Acquisitions of real estate................ (3,850)
Distribution from (contribution to) joint
ventures................................ 571 (317) (2,503) (1,808)
Proceeds from disposal of assets........... 39 30 273
------- ------- ------- ------- -------
Net cash flow used in investing
activities....................... (834) (1,329) (6,787) (3,440) (3,137)
------- ------- ------- ------- -------
Cash flow from financing activities:
Partners' contributions, net............... 28 1,239 2,683 2,730 2,429
Proceeds from real estate debt............. 2,186 1,657 7,039 424 780
Repayment of real estate debt.............. (4,612) (1,253) (4,109) (2,916) (3,179)
------- ------- ------- ------- -------
Net cash flow (used in) provided by
financing activities............. (2,398) 1,643 5,613 238 30
------- ------- ------- ------- -------
Net (decrease) increase in cash and cash
equivalents................................ (659) (379) (223) (1,440) 1,011
Cash and cash equivalents, beginning of
years...................................... 4,985 5,208 5,208 6,648 5,637
------- ------- ------- ------- -------
Cash and cash equivalents, end of years...... $ 4,326 $ 4,829 $ 4,985 $ 5,208 $ 6,648
======= ======= ======= ======= =======
Supplemental cash flow information:
Cash paid for interest..................... $ 6,725 $ 6,373 $15,007 $14,575 $12,177
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-32
<PAGE> 209
TOWER PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements of the Tower Predecessor
have been presented on a combined historical cost basis because of common
ownership and management, and because the assets and liabilities are expected to
be the subject of a business combination with Tower Realty Trust, Inc. (the
"Company") and Tower Realty Operating Partnership, L.P. (the "Operating
Partnership"), both newly formed entities with no prior operations. Upon
completion of the Company's public offering, the Company will own a sole 1%
general partnership and a 89.3% limited partnership interest in the Operating
Partnership.
The following entities comprising Tower Predecessor are controlled and
managed by Tower Equities and Real Estate Corp. and its affiliates
(collectively, "Tower Equities") (which is controlled by Lawrence H. Feldman,
Chairman of the Board, Chief Executive Officer and President of the Company):
<TABLE>
<CAPTION>
LAWRENCE H.
FELDMAN'S
OWNERSHIP INTEREST LOCATION
-------------------- ------------------
<S> <C> <C>
Tower 45........................................ 6% New York City
120 Mineola Boulevard........................... 5% Long Island, NY
Maitland Forum.................................. 15% Maitland, FL
Maitland Center Parkway (3 properties).......... 90% Maitland, FL
5750 Major Boulevard (purchased in October
1996)......................................... 6% Orlando, FL
Management Companies............................ 90% New York City and
Maitland, FL
</TABLE>
Lawrence H. Feldman owns a majority general partnership interest in the
partnerships owning these properties. The accompanying combined financial
statements include 100% of the assets, liabilities and operations of these
properties.
Lawrence H. Feldman holds a non-controlling interest in the partnerships
that own the properties listed in the following table. Lawrence H. Feldman is a
general partner and an affiliate of DRA Advisors, Inc. ("DRA") is the managing
general partner in each partnership. The accompanying combined financial
statements include these investments in the DRA Joint Ventures using the equity
method of accounting (see Note 5). Upon consummation of the initial public
offering, the Company will purchase all of the partnership interests in the DRA
Joint Ventures.
<TABLE>
<CAPTION>
LAWRENCE H.
FELDMAN'S
OWNERSHIP INTEREST LOCATION
-------------------- -----------------
<S> <C> <C>
286 Madison Avenue......................................... 3% New York City
290 Madison Avenue......................................... 3% New York City
292 Madison Avenue......................................... 3% New York City
Corporate Center Building(6 properties).................... 20% Phoenix, AZ
5151 East Broadway......................................... 3% Tucson, Arizona
One Orlando Center......................................... 3% Orlando, Florida
</TABLE>
Lawrence H. Feldman also holds a 3.8% non-controlling interest in a
partnership controlling the 2800 North Central Property (which economic interest
could increase up to 27.5% if certain performance criteria are achieved). The
accompanying combined financial statements include this investment using the
equity method of accounting (see Note 5). The Company, upon consummation of the
initial public offering is expected to acquire this interest and the interests
of other Tower Equities employees (10% aggregate interest).
The Company is formed with the intent of qualifying as a Real Estate
Investment Trust ("REIT") under the Internal Revenue Code of 1986, as amended.
The Company expects to raise equity through an initial public offering (the
"Offering") and concurrent private placements (the "Concurrent Private
Placements"). The proceeds from the Offering and the Concurrent Private
Placements are expected to be used to purchase a
F-33
<PAGE> 210
TOWER PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
sole 1% general partnership interest and 89.3% limited partnership interest in
the Operating Partnership which will hold the operating assets and liabilities
of the Company.
All significant intercompany transactions have been eliminated in the
combined financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REAL ESTATE
Real estate and leasehold improvements are stated at cost. In accordance
with Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of,"
Tower Predecessor records impairment writedowns on long-lived assets, when
events and circumstances indicate that the assets might be impaired and the
estimated undiscounted cash flows to be generated by those assets are less than
the carrying amounts of those assets. No such impairment losses have been
recognized in these financial statements.
Depreciation on buildings and improvements is provided under the
straight-line method over an estimated useful life of thirty to forty years.
Depreciation on furniture and fixtures is provided under the straight-line
method over an estimated useful life of five to seven years.
When assets are sold or retired, their costs and related accumulated
depreciation are removed from the accounts with the resulting gains or losses
reflected in net income or loss. Expenditures for maintenance and repairs are
charged to operations as incurred.
DEFERRED CHARGES
Deferred financing costs are recorded at cost and are being amortized on
the straight-line method, which approximates the interest method over the life
of the related debt. Leasing commissions and leasehold improvements are deferred
and amortized over the lesser of the useful life or the terms of the related
leases. Other deferred charges are amortized over terms applicable to the
expenditure.
ESCROWED FUNDS
Escrowed funds are comprised of funds held for the payment of real estate
taxes and mortgage interest.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and investments with
maturities of three months or less when purchased. The majority of Tower
Predecessor's cash and cash equivalents are held at major financial institutions
which balances at times exceed insurable limits. For purposes of the statements
of cash flows, all transactions between Tower Predecessor and other affiliated
entities have been accounted for as settled in cash at the time the transaction
was recorded.
RECEIVABLES AND DEFERRED REAL ESTATE TAXES
Deferred real estate taxes represent a portion of real estate taxes accrued
from 1988 through 1995 for Tower 45 which are payable to the taxing authority
commencing on July 1, 1998 in payments of approximately $1.3 million per year. A
portion of these deferred real estate taxes are expected to be recovered from
tenants (approximately $2.5 million) and is recorded as a receivable in the
accompanying financial statements.
INCOME TAXES
Tower Predecessor is not a legal entity subject to Federal, State or local
income taxes. No provision for income taxes is necessary in the financial
statements of Tower Predecessor since Tower Predecessor's
F-34
<PAGE> 211
TOWER PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
statements combine the operations and balances of partnerships which are not
subject to income tax. The tax effect of its activities accrues to the
individual partners of the respective entity.
REVENUE RECOGNITION
Tower Predecessor, as a lessor, has retained substantially all of the risks
and benefits of ownership of the rental properties and accounts for its leases
as operating leases. Space is leased to tenants under leases ranging from 3 to
10 years. Rental income is recognized over the terms of the leases as it is
earned. Unbilled rental revenue represents rental income earned on a
straight-line basis in excess of rent payments received pursuant to terms of the
individual lease agreements.
Management fee income from third parties and joint venture properties is
recognized as earned under the terms of the related agreements. Construction
fees are recognized ratably over each project's construction period and leasing
fees are generally recognized upon tenant occupancy of the leased premises
unless such fees are irrevocably due and payable upon lease execution, in which
case recognition occurs on the lease execution date.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The most significant estimates relate to the recoverability of
real estate, unbilled rent receivable and investment in joint ventures. Actual
results could differ from those estimates.
UNAUDITED INTERIM STATEMENTS
The combined financial statements as of June 30, 1997 and for the six
months ended June 30, 1997 and 1996 are unaudited. In the opinion of management,
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of such combined financial statements have been
included. The results of operations for the six months ended June 30, 1997 are
not necessarily indicative of Tower Predecessor's future results of operations
for the full year ending December 31, 1997.
3. REAL ESTATE
Real estate consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------
1997 1996 1995
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Land.............................................. $ 25,662 $ 25,662 $ 25,280
Buildings and improvements........................ 145,084 143,838 138,441
Furniture, fixtures and equipment................. 119 119 158
-------- -------- --------
Total................................... 170,865 169,619 163,879
Less: Accumulated depreciation.................... (43,288) (40,555) (35,741)
-------- -------- --------
$ 127,577 $129,064 $128,138
======== ======== ========
</TABLE>
Depreciation expense on real estate for the years ended December 31, 1996,
1995 and 1994 was approximately $5.6 million, $5.7 million and $6.2 million,
respectively, and for the six months ended June 30, 1997 and 1996 (unaudited)
was approximately $2.9 million and $2.8 million, respectively.
F-35
<PAGE> 212
TOWER PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. DEFERRED CHARGES
Deferred charges consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------
1997 1996 1995
----------- -------- -------
(UNAUDITED)
<S> <C> <C> <C>
Deferred financing costs........................... $ 2,248 $ 1,049 $ 2,214
Deferred leasing costs............................. 17,047 17,018 16,500
Deferred brokerage commissions..................... 7,971 7,330 7,132
-------- -------- --------
27,266 25,397 25,846
Less: Accumulated amortization................ (15,225) (13,761) (13,303)
-------- -------- --------
$12,041 $ 11,636 $12,543
======== ======== ========
</TABLE>
During 1996, fully amortized deferred charges of approximately $2.5 million
were written off and removed from the deferred charges asset and accumulated
amortization accounts.
5. INVESTMENTS IN JOINT VENTURES
Tower Predecessor accounts for its investments in joint ventures using the
equity method of accounting and, therefore reports its share of income and
losses based on Lawrence H. Feldman's ownership interests in the respective
entities as described in Note 1.
F-36
<PAGE> 213
TOWER PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Presented below is condensed combined financial information of the DRA
Joint Ventures:
DRA JOINT VENTURES
Combined Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------
1997 1996 1995
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Real estate, net of accumulated depreciation.............. $ 140,285 $140,759 $139,169
Other assets.............................................. 19,401 19,249 10,759
-------- -------- --------
Total assets.................................... $ 159,686 $160,008 $149,928
======== ======== ========
LIABILITIES AND OWNERS' EQUITY
Debt on real estate....................................... $ 129,225 $126,517 $119,288
Accounts payable and other liabilities.................... 4,097 3,956 5,428
-------- -------- --------
Total liabilities............................... 133,322 130,473 124,716
Owners' equity............................................ 26,364 29,535 25,212
-------- -------- --------
Total liabilities and owners' equity............ $ 159,686 $160,008 $149,928
======== ======== ========
</TABLE>
DRA JOINT VENTURES
Combined Statements of Operations
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
--------------------------- ----------------------------
1997 1996 1996 1995 1994
----------- ----------- ------- ------- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income......................... $14,503 $14,331 $29,010 $12,629 $207
Management fees and other............. 83 98 288 224
------ ------ ------- ------- ----
Total revenues................ 14,586 14,429 29,298 12,853 207
------ ------ ------- ------- ----
Expenses:
Property operating expenses, real
estate taxes and management fees... 6,207 6,564 12,446 6,283 170
Interest expense...................... 5,692 4,816 10,176 3,814
Depreciation and amortization......... 2,307 1,949 4,118 1,684 31
------ ------ ------- ------- ----
Total expenses................ 14,206 13,329 26,740 11,781 201
------ ------ ------- ------- ----
Net income.................... $ 380 $ 1,100 $ 2,558 $ 1,072 $ 6
====== ====== ======= ======= ====
</TABLE>
F-37
<PAGE> 214
TOWER PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Presented below is condensed financial information of the 2800 North
Central Property:
2800 NORTH CENTRAL PROPERTY
Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate, net of accumulated depreciation........................ $31,151 $ 30,638
Other assets........................................................ 2,448 2,244
------- -------
Total assets.............................................. $33,599 $ 32,882
======= =======
LIABILITIES AND OWNERS' EQUITY
Debt on real estate................................................. $26,489 $ 25,021
Accounts payable and other liabilities.............................. 925 1,285
------- -------
Total liabilities......................................... 27,414 26,306
Owners' equity...................................................... 6,185 6,576
------- -------
Total liabilities and owners' equity...................... $33,599 $ 32,882
======= =======
</TABLE>
2800 NORTH CENTRAL PROPERTY
Statements of Operations
(in thousands)
<TABLE>
<CAPTION>
PERIOD FROM
SIX-MONTHS MAY 1996
ENDED THROUGH
JUNE 30, DECEMBER 31,
1997 1996
---------- ------------
(UNAUDITED)
<S> <C> <C>
Revenues:
Rental income..................................................... $2,779 $3,615
Management fees and other......................................... 9 48
------ ------
Total revenues............................................ 2,788 3,663
------ ------
Expenses:
Property operating expenses, real estate taxes and management
fees........................................................... 1,360 1,687
Interest expense.................................................. 1,265 1,581
Depreciation and amortization..................................... 554 519
------ ------
Total expenses............................................ 3,179 3,787
------ ------
Net loss.................................................. $ (391) $ (124)
====== ======
</TABLE>
F-38
<PAGE> 215
TOWER PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
6. REAL ESTATE DEBT
Real estate debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------
1997 1996 1995
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Tower 45.................................................. $ 145,430 $147,616 $151,109
120 Mineola Boulevard..................................... 11,260 18,892 18,892
Maitland Forum............................................ 28,875 29,409 27,013
Maitland Center Parkway (3 properties).................... 4,548 4,437 2,948
5750 Major Boulevard...................................... 3,268 2,538
-------- -------- --------
$ 193,381 $202,892 $199,962
======== ======== ========
</TABLE>
The interest rates on the mortgage loans referred to above (with the
exception of Tower 45) are calculated based on the GECC Commercial Paper Rate,
plus an additional rate ranging from 3.25% to 4.50% (8.76% to 9.51% at December
31, 1996 and 8.69% to 9.50% (unaudited) at June 30, 1997). These mortgages are
collateralized by the land, building and improvements, furniture and fixtures,
machinery and equipment and tenant leases and sub leases. The Tower 45 rate is
based on the 30-day LIBOR (5.50% and 5.69% (unaudited) on December 31, 1996 and
June 30, 1997, respectively), plus an additional rate ranging from 1.75% to
2.50%. This loan is collateralized by the Company's rights in a lease on the air
and corresponding development rights adjacent to the property (see Note 12).
Scheduled principal repayments of debt on real estate at December 31, 1996,
are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31, AMOUNT
----------------------------------------------------------------------- --------------
(IN THOUSANDS)
<S> <C>
1997................................................................... $ 1,138
1998................................................................... 170,945
2001................................................................... 28,271
Thereafter............................................................. 2,538
--------
$202,892
========
</TABLE>
During the six months ended June 30, 1997, the debt on 120 Mineola
Boulevard was extinguished with proceeds from another lender of $11,260. Gain on
the early extinguishment of debt totalled $6,475.
7. LEASING ACTIVITIES
The future minimum lease payments to be received by Tower Predecessor as of
December 31, 1996 under noncancelable operating leases, which expire on various
dates through 2007, are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31, AMOUNT
--------------------------------------------------------------------- --------------
(IN THOUSANDS)
<S> <C>
1997................................................................. $ 23,436
1998................................................................. 23,131
1999................................................................. 22,133
2000................................................................. 20,867
2001................................................................. 19,134
Thereafter........................................................... 51,299
--------
$160,000
========
</TABLE>
F-39
<PAGE> 216
TOWER PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The geographic concentration of the future minimum lease payments to be
received as of December 31, 1996 is as follows:
<TABLE>
<CAPTION>
LOCATION AMOUNT
----------------------------------------------------------------------- --------------
(IN THOUSANDS)
<S> <C>
New York, NY........................................................... $132,660
Orlando, Florida....................................................... 27,340
--------
$160,000
========
</TABLE>
Tower 45 comprises 64.6%, 65.1% and 71.7% of total revenues for the years
ended December 31, 1996, 1995 and 1994, respectively.
Tower Predecessor also occupies office space in certain properties it
manages. The costs of operating these property management offices are borne
entirely by the respective owners.
8. ACCOUNTS PAYABLE AND OTHER LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------
1997 1996 1995
----------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Accrued interest............................................ $ 5,981 $ 6,022 $ 5,455
Accounts payable............................................ 3,151 3,336 4,161
Advance rent and deposits................................... 2,331 2,322 1,801
Deferred income............................................. 1,123 1,187 183
------- ------- -------
$12,586 $12,867 $11,600
======= ======= =======
</TABLE>
9. RELATED PARTY TRANSACTIONS
Under the terms of various management agreements, Tower Predecessor
receives cost reimbursements and property management, leasing and tenant service
fees from certain affiliates in which Tower Equities have ownership interests.
Cost reimbursements are comprised primarily of salary and employee benefit
recoveries and reimbursements of certain administrative costs. During the years
ended December 31, 1996 and 1995 fees and cost reimbursements derived from these
agreements totalled approximately $2.2 million and $3.5 million. For the six
months ended June 30, 1997 and 1996, fees and costs derived from these
agreements totalled $0.2 million (unaudited) and $0.8 million (unaudited),
respectively.
Amounts due to affiliates at June 30, 1997 and December 31, 1996 and 1995,
consisted primarily of loans payable to affiliates of Tower Predecessor.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About Fair
Value of Financial Instruments," requires disclosure about the fair value of all
financial assets and liabilities for which it is practicable to estimate the
fair value. Cash equivalents, receivables, accounts payable and other
liabilities, except for deferred real estate taxes and the related receivable,
are carried at amounts that reasonably approximate their fair values. The fair
value of deferred real estate taxes is approximately $8.5 million based upon a
discount rate of 7.1%. The fair value of the related receivable, for which the
carrying amount is $2.5 million and is included in receivables, is approximately
$1.7 million based upon a discount rate of 7.1%. There is no quoted market value
available for any of Tower Predecessor's financial instruments. The real estate
debt of Tower Predecessor are at variable rates based upon LIBOR or the GECC
Commercial Paper Rate plus a fixed amount, as noted in Note 6, which approximate
current market rates. Management believes that
F-40
<PAGE> 217
TOWER PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the carrying amount of Tower Predecessor's financial instruments at December 31,
1996 and 1995 are not significantly different than their fair value.
11. SAVINGS PLAN
Effective January 1, 1994, Tower Predecessor adopted a 401(k) Savings Plan
(the "Plan") for its employees. Under the Plan, as amended, employees, age 21
and older, are eligible to participate in the Plan immediately upon employment.
Base salary and wages are eligible for contribution to the Plan.
Participants may make salary deferral contributions from 1% to 15% per payroll
period.
The Plan provides that matching employer contributions are to be determined
at the discretion of Tower Predecessor. There were no discretionary matching
contributions for the years ended December 31, 1996, 1995 and 1994 and the six
months ended June 30, 1997.
Participants are immediately vested in their pre-tax contributions, and are
vested in Tower Predecessor's discretionary matching contributions after two
years of service.
12. COMMITMENTS AND CONTINGENCIES
LEGAL MATTERS
Tower Predecessor is subject to various legal proceedings and claims that
arise in the ordinary course of business. These matters are generally covered by
insurance. Management believes that the final outcome of such matters will not
have a material adverse effect on the financial position, results of operations
or liquidity of Tower Predecessor.
AIR RIGHTS AND GROUND LEASES
On November 30, 1980 Tower Predecessor entered into an air rights lease
agreement with the Village of Mineola which expires in May 2012, subject to the
Company's right to extend the term pursuant to two 30-year renewal options. The
lease provides for a current annual lease payment of $33,000, increasing to
$46,500 in 2001.
On November 30, 1986, Tower Predecessor entered into an agreement to lease
for 250 years the air and corresponding development rights adjacent to one of
the properties. The Operating Partnership has an option that is exercisable from
November 1, 1996 through October 31, 2001 to acquire the lessor's site for a
price, as of July 31, 1997, of $11 million. This price increases through the
expiration of the option on October 31, 2001, at a rate of 50% of the percentage
increase in the consumer price index as defined in the lease (approximately $13
million as of July 31, 1997). Upon the Company's exercise of this option, its
obligation to pay rent under the air rights lease would automatically be
eliminated.
F-41
<PAGE> 218
TOWER PREDECESSOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The future minimum lease payments to be paid under these two agreements are
as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31, AMOUNT
----------------------------------------------------------------------- --------------
(IN THOUSANDS)
<S> <C>
1997................................................................... $ 597
1998................................................................... 597
1999................................................................... 597
2000................................................................... 598
2001................................................................... 606
Thereafter............................................................. 135,394
--------
$138,389
========
</TABLE>
F-42
<PAGE> 219
SCHEDULE III
TOWER PREDECESSOR
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST COSTS
--------------------- CAPITALIZED
BUILDING AND SUBSEQUENT TO
PROPERTY NAME(1) LOCATION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITIONS
- ------------------------------ ---------------- ------------ ------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Maitland Center Parkway....... Maitland, FL $ 4,437 $ 218 $ 2,400 $ 556
120 Mineola Boulevard......... Long Island, NY 18,892 3,216 16,885 390
Maitland Forum................ Maitland, FL 29,409 3,817 10,415 7,862
Tower 45...................... New York, NY 147,616 18,029 71,886 30,095
5750 Major Boulevard.......... Orlando, FL 2,538 382 3,468 --
-------- ------- ------- -------
$202,892 $25,662 $105,054 $38,903
======== ======= ======= =======
<CAPTION>
GROSS AMOUNT CARRIED
AT CLOSE OF PERIOD
-----------------------------------
LAND AND BUILDING AND ACCUMULATED DATE OF DATE DEPRECIABLE
PROPERTY NAME(1) IMPROVEMENTS IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED LIVES (YEARS)
- ------------------------------ ------------ ------------ -------- ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Maitland Center Parkway....... $ 218 $ 2,956 3,174 355 -- 1992 (2)
120 Mineola Boulevard......... 3,216 17,275 20,491 4,701 -- 1988 (2)
Maitland Forum................ 3,817 18,277 22,094 7,666 1984 -- (2)
Tower 45...................... 18,029 101,981 120,010 27,814 1989 -- (2)
5750 Major Boulevard.......... 382 3,468 3,850 19 -- 1996 (2)
------- -------- -------- -------
$ 25,662 $143,957 $169,619 $40,555
======= ======== ======== =======
</TABLE>
- ---------------
Notes:
(1) Includes properties held by Tower Predecessor. For Maitland Center Parkway
(3 properties), information is unavailable on an individual property basis.
(2) Buildings and improvements depreciated over 35 years to 40 years.
F-43
<PAGE> 220
TOWER PREDECESSOR
REAL ESTATE AND ACCUMULATED DEPRECIATION
A summary of activity for real estate and accumulated depreciation is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Real estate:
Balance at beginning of years...................... $163,879 $163,326 $163,189
Improvements..................................... 2,659 967 1,602
Acquisition of real estate....................... 3,850
Disposition of real estate....................... (769) (414) (1,465)
-------- -------- --------
Balance at end of years.................. $169,619 $163,879 $163,326
======== ======== ========
Accumulated depreciation:
Balance at beginning of years.................... $ 35,741 $ 30,422 $ 25,527
Depreciation expense............................. 5,583 5,733 6,168
Accumulated depreciation of real estate sold or
written off................................... (769) (414) (1,273)
-------- -------- --------
Balance at end of years.................. $ 40,555 $ 35,741 $ 30,422
======== ======== ========
</TABLE>
F-44
<PAGE> 221
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Tower Realty Trust, Inc.
We have audited the accompanying combined statements of revenues and
certain operating expenses of DRA Joint Ventures for each of the two years in
the period ended December 31, 1996 and the period from November 21, 1994 through
December 31, 1994. These historical statements of revenues and certain operating
expenses are the responsibility of DRA Joint Ventures' management. Our
responsibility is to express an opinion on these statements of revenues and
certain operating expenses based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the historical combined statements of
revenues and certain operating expenses are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the combined statements of revenues and certain operating
expenses. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the combined statement of revenues and certain operating
expenses. We believe that our audits provide a reasonable basis for our opinion.
The accompanying combined statements of revenues and certain operating
expenses were prepared for the purpose of complying with rules and regulations
of the Securities and Exchange Commission (for inclusion in the registration
statement on Form S-11 of Tower Realty Trust, Inc.) as described in Note 1, and
are not intended to be a complete presentation of DRA Joint Ventures' revenues
and expenses.
In our opinion, the combined statements of revenues and certain operating
expenses referred to above present fairly, in all material respects, the
combined revenues and certain operating expenses of the DRA Joint Ventures, as
described in Note 1, for each of the two years in the period ended December 31,
1996 and the period from November 21, 1994 through December 31, 1994, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
April 21, 1997
F-45
<PAGE> 222
DRA JOINT VENTURES
COMBINED STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS ENDED YEAR ENDED NOVEMBER 21,
JUNE 30, DECEMBER 31, 1994 THROUGH
--------------------------- ------------------- DECEMBER 31,
1997 1996 1996 1995 1994
----------- ----------- ------- ------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income................... $13,994 $13,561 $27,592 11,672 $193
Unbilled rental income.......... 509 770 1,418 957 14
Other income.................... 83 98 288 224
------ ------ ------- ------- ----
Total revenues.......... 14,586 14,429 29,298 12,853 207
------ ------ ------- ------- ----
Certain operating expenses:
Property operating and
maintenance.................. 3,959 4,190 7,791 4,003 95
Real estate taxes............... 1,796 1,810 3,572 1,746 38
General office and
administration............... 40 169 282 164 31
Management fees................. 412 395 801 370 6
------ ------ ------- ------- ----
Total certain operating
expenses.............. 6,207 6,564 12,446 6,283 170
------ ------ ------- ------- ----
Revenues in excess of
certain operating
expenses.............. $ 8,379 $ 7,865 $16,852 $ 6,570 $ 37
====== ====== ======= ======= ====
</TABLE>
The accompanying notes are an integral part of these combined
statements of revenues and certain operating expenses.
F-46
<PAGE> 223
DRA JOINT VENTURES
NOTES TO COMBINED STATEMENTS OF REVENUES AND
CERTAIN OPERATING EXPENSES
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
The accompanying combined statements of revenues and certain operating
expenses of the DRA Joint Ventures have been presented on a combined historical
cost basis because of common ownership and management, and because the assets
and liabilities are expected to be the subject of a business combination with
Tower Realty Trust, Inc. (the "Company") and Tower Realty Operating Partnership,
L.P. (the "Operating Partnership"), both newly formed entities with no prior
operations. The Company will own a sole 1% general partnership and a 89.3%
limited partnership interest in the Operating Partnership concurrent with the
Company's initial public offering.
The following entities, comprising the Tower Predecessor, are controlled
and managed by Tower Equities and Real Estate Corp. and its affiliates
(collectively, "Tower Equities") (which is controlled by Lawrence H. Feldman,
Chairman of the Board, Chief Executive Officer and President of the Company)
(these properties will also be contributed or acquired by the Operating
Partnership Concurrent with the Offering):
<TABLE>
<CAPTION>
LAWRENCE H.
FELDMAN'S
OWNERSHIP INTEREST LOCATION
------------------ ------------------
<S> <C> <C>
Tower 45.......................................... 6% New York City
120 Mineola Boulevard............................. 5% Long Island, NY
Maitland Forum.................................... 15% Maitland, FL
Maitland Center Parkway (3 properties):........... 90% Maitland, FL
5750 Major Boulevard (purchased in October
1996)........................................... 6% Orlando, FL
Management Companies.............................. 90% New York City and
Maitland, FL
</TABLE>
Mr. Lawrence H. Feldman is a general partner and an affiliate of DRA
Advisors, Inc. ("DRA") is the managing general partner in each partnership
listed in the following table. The accompanying combined statements of revenues
and certain operating expenses include 100% of the revenues and certain
operating expenses of these properties. Upon consummation of the Offering, the
Company will purchase all of the partnership interests in the DRA Joint
Ventures.
<TABLE>
<CAPTION>
LAWRENCE H.
FELDMAN'S
OWNERSHIP INTEREST LOCATION
------------------ ------------------
<S> <C> <C>
286 Madison Avenue................................ 3% New York City
290 Madison Avenue................................ 3% New York City
292 Madison Avenue................................ 3% New York City
Corporate Center Building (6 properties):......... 20% Phoenix, AZ
5151 East Broadway................................ 3% Tucson, AZ
One Orlando Center................................ 3% Orlando, FL
</TABLE>
The Company is formed with the intent of qualifying as a Real Estate
Investment Trust ("REIT") under the Internal Revenue code of 1986, as amended.
The Company expects to raise equity through an initial public offering (the
"Offering") and concurrent private placements (the "Concurrent Private
Placements"). The proceeds from the Offering and the Concurrent Private
Placements will be used to purchase a sole 1% general partnership interest and
89.3% limited partnership interest in the Operating Partnership which will hold
the operating assets and liabilities of the Company.
All significant intercompany transactions have been eliminated in the
combined financial statements.
The accompanying historical statements have been prepared in accordance
with the rules and regulations of the Securities and Exchange Commission and do
not reflect all operations of the properties for the periods
F-47
<PAGE> 224
DRA JOINT VENTURES
NOTES TO COMBINED STATEMENTS OF REVENUES AND
CERTAIN OPERATING EXPENSES -- (CONTINUED)
presented. The statements exclude certain expenses such as interest,
depreciation and amortization and other costs not directly related to the future
operations of the properties that may not be comparable to the expenses expected
to be incurred in the proposed future operations of the properties.
REVENUE RECOGNITION
The DRA Joint Ventures, as a lessor, has retained substantially all of the
risks and benefits of ownership of the rental properties and accounts for its
leases as operating leases. Space is leased to tenants under leases ranging from
3 to 12 years. Rental income is recognized over the terms of the leases as it is
earned. Unbilled rental revenue is recorded for rental income earned on a
straight-line basis in excess of rent payments received pursuant to terms of the
individual lease agreements.
FUTURE RENTAL REVENUE
The future minimum lease payments to be received by the DRA Joint Ventures
as of December 31, 1996 under noncancelable operating leases, which expire on
various dates through 2009, are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31, AMOUNT
----------------------------------------------------------------------- --------------
(IN THOUSANDS)
<S> <C>
1997................................................................. $ 24,457
1998................................................................. 24,279
1999................................................................. 23,085
2000................................................................. 21,618
2001................................................................. 15,097
Thereafter........................................................... 33,551
--------
$142,087
========
</TABLE>
The geographic concentration of the future minimum lease payments to be
received are as follows:
<TABLE>
<CAPTION>
LOCATION AMOUNT
----------------------------------------------------------------------- --------------
(IN THOUSANDS)
<S> <C>
New York, New York..................................................... $ 53,826
Phoenix and Tucson, Arizona............................................ 42,929
Orlando, Florida....................................................... 45,332
--------
$142,087
========
</TABLE>
For the year ended December 31, 1996, One Orlando Center and Corporate
Center Building comprised 29.7% and 27.1% of total revenues, respectively. For
the six months ended June 30, 1997, One Orlando Center and Corporate Center
comprise 30.0% and 26.5% of total revenues, respectively.
One major tenant represented 14% and 13% of the DRA Joint Ventures total
rental income for the year ended December 31, 1996 and the six months ended June
30, 1997.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of combined statements of revenues and certain operating
expenses in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
revenues and certain operating expenses during the reporting period. The most
significant estimate relates to unbilled rental income. Actual results could
differ from those estimates.
F-48
<PAGE> 225
DRA JOINT VENTURES
NOTES TO COMBINED STATEMENTS OF REVENUES AND
CERTAIN OPERATING EXPENSES -- (CONTINUED)
UNAUDITED INTERIM STATEMENTS
The combined revenues in excess of certain operating expenses for the six
months ended June 30, 1997 and 1996 are unaudited. In the opinion of management,
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of such combined statements have been included. The
revenues in excess of certain operating expenses for the six months ended June
30, 1997 are not necessarily indicative of the DRA Joint Ventures future
operations for the full year ending December 31, 1997.
2. RELATED PARTY TRANSACTIONS
Under the terms of various management agreements, DRA Joint Ventures pay
cost reimbursements comprised primarily of salary and employee benefit expenses,
leasing commissions, construction management fees and property management fees
to certain affiliates in which Tower Equities has ownership interests. During
the years ended December 31, 1996 and 1995 fees paid under these agreements
totalled approximately $2.1 million and $2.5 million, respectively. During the
six months ended June 30, 1997 and 1996, fees paid under these agreements
totalled $0.5 million (unaudited) and $0.6 million (unaudited), respectively.
3. LEGAL MATTERS
DRA Joint Ventures is subject to various legal proceedings and claims that
arise in the ordinary course of business. These matters are generally covered by
insurance. Management believes that the final outcome of such matters will not
have a material adverse effect on the financial position, results of operations
or liquidity of DRA Joint Ventures.
4. REAL ESTATE
The following is real estate and accumulated depreciation information for
DRA Joint Ventures as of December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
INITIAL COST COSTS
--------------------- CAPITALIZED
BUILDING AND SUBSEQUENT TO
PROPERTY NAME(1) LOCATION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITIONS
- ---------------------------- ------------- ------------ ------- ------------ -------------
<S> <C> <C> <C> <C> <C>
286 Madison Avenue.......... New York, NY $ 7,909 $ 1,204 $ 5,693 $ 1,078
290 Madison Avenue.......... New York, NY 4,184 736 3,465 100
292 Madison Avenue.......... New York, NY 18,400 3,297 15,593 427
5151 East Broadway.......... Tucson, AZ 15,089 2,020 8,080 5,398
Corporate Center Building... Phoenix, AZ 22,000 8,510 25,531 992
One Orlando Center.......... Orlando, FL 58,935 6,100 54,900 2,991
-------- ------- ------- -------
$126,517 $21,867 $113,262 $10,986
======== ======= ======= =======
<CAPTION>
GROSS AMOUNT CARRIED
AT CLOSE OF PERIOD
-----------------------------------
LAND AND BUILDING AND ACCUMULATED DATE OF DATE DEPRECIABLE
PROPERTY NAME(1) IMPROVEMENTS IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED LIVES (YEARS)
- ---------------------------- ------------ ------------ -------- ----------- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
286 Madison Avenue.......... $ 1,205 $ 6,770 $ 7,975 $ 316 -- 1995 (2)
290 Madison Avenue.......... 736 3,565 4,301 128 -- 1995 (2)
292 Madison Avenue.......... 3,301 16,016 19,317 584 -- 1995 (2)
5151 East Broadway.......... 2,040 13,458 15,498 887 -- 1994 (2)
Corporate Center Building... 8,510 26,523 35,033 969 -- 1995 (2)
One Orlando Center.......... 6,115 57,876 63,991 2,472 -- 1995 (2)
------- -------- -------- -------
$ 21,907 $124,208 $146,115 $ 5,356
======= ======== ======== =======
</TABLE>
- ---------------
Notes:
(1) Includes properties held by DRA Properties. For Corporate Center Building (6
properties), information is unavailable on an individual property basis.
(2) Buildings and improvements depreciated over 40 years.
F-49
<PAGE> 226
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Tower Realty Trust, Inc.
We have audited the accompanying statement of revenues and certain
operating expenses of 100 Wall Street for the year ended December 31, 1996. This
historical statement of revenues and certain operating expenses is the
responsibility of the management of 100 Wall Street. Our responsibility is to
express an opinion on this statement of revenues and certain operating expenses
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the historical statement of revenues and
certain operating expenses is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of revenues and certain operating expenses. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the statement
of revenues and certain operating expenses. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and certain operating expenses was
prepared for the purpose of complying with rules and regulations of the
Securities and Exchange Commission (for inclusion in the registration statement
on Form S-11 of Tower Realty Trust, Inc.) as described in Note 1, and is not
intended to be a complete presentation of 100 Wall Street's revenues and
expenses.
In our opinion, the statement of revenues and certain operating expenses
referred to above presents fairly, in all material respects, the revenues and
certain operating expenses of 100 Wall Street, as described in Note 1, for the
year ended December 31, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Dallas, Texas
September 15, 1997
F-50
<PAGE> 227
100 WALL STREET
STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED
--------------------------- DECEMBER 31,
1997 1996 1996
----------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues:
Rental income......................................... $ 5,606 $ 5,102 $ 11,317
Other income.......................................... 318 610 961
------ ------ -------
Total revenues................................ 5,924 5,712 12,278
------ ------ -------
Certain operating expenses:
Property operating and maintenance.................... 1,955 1,951 4,151
Real estate taxes..................................... 1,192 1,387 2,524
Other expenses........................................ 97 48 143
------ ------ -------
Total certain operating expenses.............. 3,244 3,386 6,818
------ ------ -------
Revenues in excess of certain operating
expenses.................................... $ 2,680 $ 2,326 $ 5,460
====== ====== =======
</TABLE>
The accompanying notes are an integral part of these
statements of revenues and certain operating expenses.
F-51
<PAGE> 228
100 WALL STREET
NOTES TO STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
The accompanying statements of revenues and certain operating expenses of
100 Wall Street have been presented on a historical cost basis because the
assets and liabilities are expected to be the subject of a business combination
with Tower Realty Trust, Inc. (the "Company") and Tower Realty Operating
Partnership, L.P. (the "Operating Partnership") both newly formed entities with
no prior operations. The Company will own a sole 1% general partnership and a
89.3% limited partnership interest in the Operating Partnership concurrent with
the Company's initial public offering. In management's opinion, these statements
of revenues and certain operating expenses include the revenues and expenses
associated with the operations of the property intended to be sold to the
Company.
The Company is formed with the intent of qualifying as a Real Estate
Investment Trust ("REIT") under the Internal Revenue Code of 1986, as amended.
The Company expects to raise equity through an initial public offering (the
"Offering") and concurrent private placements (the "Concurrent Private
Placements"). The proceeds from the Offering and the Concurrent Private
Placements will be used to purchase a sole 1% general partnership interest and
89.3% limited partnership interest in the Operating Partnership which will hold
the operating assets and liabilities of the Company.
The accompanying historical statements have been prepared in accordance
with the rules and regulations of the Securities and Exchange Commission and are
not representative of the actual operations of the property for the periods
presented. The statements exclude certain expenses such as interest,
depreciation and amortization and other costs not directly related to the future
operations of the property that may not be comparable to the expenses expected
to be incurred in the proposed future operations of the property.
REVENUE RECOGNITION
100 Wall Street, as a lessor, has retained substantially all of the risks
and benefits of ownership of the rental properties and accounts for its lease as
operating leases. Space is leased to tenants under leases ranging from 1 to 16
years. Rental income is recognized over the terms of the leases as it is earned.
FUTURE RENTAL REVENUE
The future minimum lease payments to be received by 100 Wall Street as of
December 31, 1996 under noncancelable operating leases, which expire on various
dates through September 2066, are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
------------------------------------------------ ------------
<S> <C>
1997....................................... $ 10,672,038
1998....................................... 11,445,587
1999....................................... 10,409,691
2000....................................... 6,171,497
2001....................................... 5,957,006
Thereafter................................. 27,698,050
-----------
$ 72,353,869
===========
</TABLE>
There were two major tenants which together represented approximately 51%
and 50% of 100 Wall Street total revenue income for the year ended December 31,
1996 and the six months ended June 30, 1997, respectively.
F-52
<PAGE> 229
100 WALL STREET
NOTES TO STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES -- (CONTINUED)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of statements of revenues and certain operating expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenues and
certain operating expenses during the reporting period. Actual results could
differ from those estimates.
UNAUDITED INTERIM STATEMENTS
The revenues in excess of certain operating expenses for the six months
ended June 30, 1997 and 1996 are unaudited. In the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of such statements have been included. The revenues in excess
of certain operating expenses for the six months ended June 30, 1997 are not
necessarily indicative of the 100 Wall Street future operations for the full
year ending December 31, 1997.
F-53
<PAGE> 230
[Color photograph of the One Orlando Center office building]
One Orlando Center, Orlando, Florida
[Color photograph of the 292 Madison Avenue office building]
292 Madison Avenue, Manhattan
[LOGO]
[Color photograph of the 286 Madison Avenue office building]
286 Madison Avenue, Manhattan
For a summary property, operating and ownership data regarding the properties,
see the property tables contained under the caption "The Properties" herein.
<PAGE> 231
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 20
The Company........................... 34
Operating and Growth Strategies....... 36
Use of Proceeds....................... 40
Distributions......................... 41
Capitalization........................ 45
Dilution.............................. 46
Selected Combined Financial and
Operating Data...................... 47
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 52
Property Office Markets and Market
Economies........................... 61
The Properties........................ 75
Management............................ 102
Formation and Structure of the
Company............................. 111
Certain Relationships and
Transactions........................ 115
Principal Stockholders................ 117
Description of Capital Stock.......... 119
Certain Provisions of Maryland Law and
of the Company's Charter and
Bylaws.............................. 124
Policies with Respect to Certain
Activities.......................... 127
Shares Available for Future Sale...... 131
Partnership Agreement................. 133
Federal Income Tax Considerations..... 136
ERISA Considerations.................. 153
Underwriting.......................... 156
Experts............................... 159
Legal Matters......................... 160
Additional Information................ 160
Glossary.............................. 161
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF THE DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
11,515,000 SHARES
TOWER REALTY
TRUST, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH & CO.
LEGG MASON WOOD WALKER
INCORPORATED
MORGAN STANLEY DEAN WITTER
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
, 1997
======================================================
<PAGE> 232
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL,
OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 23, 1997
P R O S P E C T U S
11,515,000 SHARES
TOWER REALTY TRUST, INC.
COMMON STOCK
------------------------
[TOWER REALTY TRUST, INC. LOGO]
Tower Realty Trust, Inc. (collectively with its subsidiaries, the "Company")
has been formed to continue and expand the commercial real estate business of
Tower Equities & Realty Corp. and its affiliates (collectively, "Tower
Equities"), which since 1985 has been engaged in developing, acquiring, owning,
renovating, managing, and leasing office properties in the Manhattan,
Phoenix/Tucson and Orlando markets. Upon completion of this offering (the
"Offering") and related transactions, the Company will own interests in a
portfolio of 21 office buildings (collectively, the "Properties") encompassing
approximately 3.4 million rentable square feet. The Company will operate as a
fully integrated, self-administered, and self-managed real estate company and
expects to qualify as a real estate investment trust ("REIT") for federal income
tax purposes.
All of the shares of common stock, par value $.01 per share (the "Common
Stock"), of the Company offered hereby are being sold by the Company. Of the
11,515,000 shares of Common Stock offered hereby, 2,303,000 shares of Common
Stock are being offered initially outside the United States and Canada by the
International Managers and 9,212,000 shares of Common Stock are being offered
initially in the United States and Canada by the U.S. Underwriters. See
"Underwriting." Upon completion of the Offering, management and directors of the
Company will beneficially own approximately 9.3% of the equity in the Company.
Concurrent with the Offering, and subject to certain conditions, the Company is
directly placing with (i) certain private investment funds and separate accounts
advised by Morgan Stanley Asset Management Inc. $20 million of Common Stock and
(ii) certain private investment funds sponsored by The Carlyle Group $10 million
of Common Stock, in each case, at the price per share sold in the Offering (the
"Concurrent Private Placements"). The Underwriters will not receive a discount
or commission on the sale of Common Stock in the Concurrent Private Placements.
See "The Company -- Concurrent Private Placements."
Prior to the Offering, there has been no public market for the Common Stock.
It is currently anticipated that the initial public offering price per share
will be between $24.00 and $26.00. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price. The
Common Stock has been approved for listing on the New York Stock Exchange,
subject to official notice of issuance, under the symbol "TOW." The Company
intends to make regular quarterly distributions to its stockholders, commencing
with a pro rata distribution with respect to the quarter ending December 31,
1997.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK, INCLUDING:
- the valuation of the Properties and the other assets to be contributed to
the Company in its formation generally based on the value of the Company as
a going concern, and not on third-party appraisals, thereby increasing the
possibility that the consideration to be paid by the Company for the
Properties and such other assets will exceed their fair market value;
- conflicts of interest relating to the formation of the Company, including
the receipt by officers, directors and affiliates of the Company of equity
interests in the Company;
- conflicts of interest relating to the operation of the Company, including
conflicts of interest associated with the potential adverse tax
consequences to certain executive officers and directors of the Company of
sales and refinancings of certain Properties;
- real estate investment and property management risks, such as the need to
renew leases or relet space upon expirations, the instability of cash flows
and changes in the value of office properties owned by the Company due to
economic and other conditions;
- limitations on the stockholders' ability to change control of the Company,
including restrictions on the ownership of the Common Stock by any single
person in excess of 9.8% of the number or value of the shares of
outstanding Common Stock of the Company, subject to an exception that
permits mutual funds and certain other entities to own or purchase up to
15% of any class of the Company's stock in appropriate circumstances;
- taxation of the Company as a corporation if it fails to qualify as a REIT
and the resulting decrease in cash available for distribution in such
event; and
- the possibility that the Company may not be able to refinance outstanding
indebtedness (initially expected to be approximately $131.7 million,
including its pro rata share of indebtedness of unconsolidated investments)
upon maturity, indebtedness might be refinanced on less favorable terms,
and interest rates might increase on variable rate indebtedness and the
lack of limitations in the Company's organizational documents on the amount
of indebtedness that the Company may incur.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==============================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................................. $ $ $
- ------------------------------------------------------------------------------------------------------------------------------
Total(3).............................................. $ $ $
==============================================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company has granted the International Managers a 30-day option to
purchase up to 345,450 additional shares of Common Stock and has granted to
the U.S. Underwriters a 30-day option to purchase up to 1,381,800 additional
shares of Common Stock, solely to cover over-allotments, if any. If such
options are exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The shares of Common Stock are being offered by the several Underwriters,
subject to prior sale, when, as, and if issued to and accepted by them, subject
to approval of certain legal matters by counsel to the Underwriters and to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock offered hereby will be made in New
York, New York on or about , 1997.
------------------------
MERRILL LYNCH INTERNATIONAL
LEGG MASON WOOD WALKER
INCORPORATED
MORGAN STANLEY DEAN WITTER
PRUDENTIAL-BACHE SECURITIES
SMITH BARNEY INC.
------------------------
The date of this Prospectus is , 1997.
<PAGE> 233
UNDERWRITING
Subject to the terms and conditions in the international purchase agreement
(the "International Purchase Agreement"), between the Company and each of the
underwriters named below (the "International Managers"), and concurrently with
the sale of the 9,212,000 shares of Common Stock to the U.S. Underwriters (as
defined below), the Company has agreed to sell to each of the International
Managers, for whom Merrill Lynch International, Legg Mason Wood Walker,
Incorporated, Morgan Stanley & Co. International Limited, Prudential-Bache
Securities (U.K.) Inc. and Smith Barney Inc. are acting as Lead Managers (the
"Lead Managers"), and each of the International Managers has severally agreed to
purchase from the Company, the respective number of Common Shares set forth
below opposite their respective names:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------
---------
<S> <C>
Merrill Lynch International.......................................
Legg Mason Wood Walker, Incorporated..............................
Morgan Stanley & Co. International Limited........................
Prudential-Bache Securities (U.K.) Inc............................
Smith Barney Inc. ................................................
---------
Total................................................
=========
</TABLE>
The Company has also entered into a purchase agreement (the "U.S. Purchase
Agreement" and, together with the International Purchase Agreement, the
"Purchase Agreements") with certain underwriters in the United States and Canada
(the "U.S. Underwriters" and, together with the International Managers, the
"Underwriters")for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, Legg
Mason Wood Walker, Incorporated, Morgan Stanley & Co. Incorporated, Prudential
Securities Incorporated and Smith Barney Inc. are acting as representatives.
Subject to the terms and conditions set forth in the U.S. Purchase Agreement and
concurrently with the sale of 2,303,000 shares of Common Stock to the
International Managers pursuant to the International Purchase Agreement, the
Company has agreed to sell to the U.S. Underwriters, and the U.S. Underwriters
have severally agreed to purchase from the Company, an aggregate of 9,212,000
shares of Common Stock. The initial public offering price per share and the
total underwriting discount per share are identical under the U.S. Purchase
Agreement and the International Purchase Agreement.
In each Purchase Agreement, the several U.S. Underwriters and the several
International Managers have agreed, respectively, subject to the terms and
conditions set forth in such Purchase Agreement, to purchase all of the shares
of Common Stock being sold pursuant to such Purchase Agreement if any of such
shares of Common Stock are purchased. Under certain circumstances, the
commitments of non-defaulting U.S. Underwriters or International Managers (as
the case may be) may be increased. The sale of Common Stock pursuant to the U.S.
Purchase Agreement and the International Purchase Agreement are conditioned upon
each other.
The Lead Managers have advised the Company that the International Managers
propose initially to offer the shares of Common Stock to the public at the
public offering price per share set forth on the cover page of this Prospectus,
and to certain banks, brokers and dealers (the "Selling Group") at such price
less a concession not in excess of $ per share. The International Managers may
allow, and such dealers may re-allow, a discount not in excess of $ per share
on sales to certain other International Managers and members of the Selling
Group. After the date of this Prospectus, the initial public offering price,
concession and discount may be changed. The Company has been informed that the
U.S. Underwriters and the International Managers have entered into an agreement
(the "Intersyndicate Agreement") providing for the coordination of their
activities. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and the International Managers are permitted to sell shares of
Common Stock to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession. Under the terms
of the Intersyndicate Agreement, the International Managers and any dealer to
whom they sell shares of Common Stock will not offer to sell or sell shares of
Common Stock to persons who are United States persons or Canadian persons or to
persons they believe intend to resell to persons who are United States persons
or
156
<PAGE> 234
Canadian persons, and the U.S. Underwriters and any dealer to whom they sell
Common Stock will not offer to sell or sell Common Stock to persons who are
non-United States and non-Canadian persons or to persons they believe intend to
resell to non-United States and non-Canadian persons, except in each case for
transactions pursuant to the Intersyndicate Agreement.
The Company has granted the International Managers an option exercisable
for 30 days after the date hereof to purchase up to 345,450 additional shares of
Common Stock to cover over-allotments, if any, at the initial public offering
price, less the underwriting discount set forth on the cover page of this
Prospectus. If the International Managers exercise this option, each
International Manager will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the foregoing
table bears to such International Managers initial amount reflected in the
foregoing table.
At the request of the Company, the U.S. Underwriters have reserved up to
575,000 shares of Common Stock for sale at the public offering price to certain
employees of the Company, their business affiliates and related parties who have
expressed an interest in purchasing shares. The number of shares available to
the general public will be reduced to the extent these persons purchase the
reserved shares. Any reserved shares that are not so purchased by such persons
at the closing of the Offering will be offered by the U.S. Underwriters to the
general public on the same terms as the other shares offered by this Prospectus.
Each of the Company and the International Managers has represented and
agreed that (a) it has not offered or sold, and prior to the date six months
after the date of this Prospectus will not offer or sell any shares of Common
Stock to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purpose of their businesses or
otherwise in circumstances which do not constitute an offer to the public in the
United Kingdom for the purposes of the Public Offers of Securities Regulations
1995, (b) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the Common Stock in, form or otherwise the United Kingdom and (c) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document received by it in connection with the issue or sale of the Common Stock
to a person who is of a kind described in Article II(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a
person to whom the document may otherwise lawfully be issued or passed on.
Purchasers of shares of Common Stock offered hereby may be required to pay
stamp taxes and other charges in accordance with the laws and practices of the
country of purchase, in addition to the price per share to the public set forth
on the cover page of this Prospectus.
In the Purchase Agreements, the Company and the Operating Partnership have
agreed to indemnify the several Underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments the
Underwriters may be required to make in respect thereof. Insofar as
indemnification of the Underwriters for liabilities arising under the Securities
Act may be permitted pursuant to the foregoing provisions, the Company and the
Operating Partnership have been informed that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
The Company and the Operating Partnership have agreed, subject to certain
exceptions, not to sell, offer or contract to sell, grant any option for the
sale of, or otherwise dispose of any shares of Common Stock or OP Units or any
securities convertible into or exchangeable for Common Stock or OP Units for a
period of one year from the date of the Prospectus, without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
In connection with the Offering, the Continuing Investors, the Primary
Contributors, the Morgan Stanley Investors and the Carlyle Funds have agreed,
subject to certain exceptions, not to sell, offer or contract to sell, grant any
option for the sale of, or otherwise dispose of any shares of Common Stock or OP
Units or any securities convertible into or exchangeable for Common Stock or OP
Units for a period of two years for the Primary Contributors and one year for
the other Continuing Investors, the Morgan Stanley Investors and the
157
<PAGE> 235
Carlyle Funds from the date of this Prospectus, without the prior written
consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
The Underwriters do not intend to confirm sales of any account over which
they exercise discretionary authority.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations between the Company and the U.S. Representatives. Among the factors
to be considered in such negotiations, in addition to prevailing market
conditions, will be dividend yields and financial characteristics of publicly
traded REITs that the Company and the Representatives believes to be comparable
to the Company, the expected results of operations of the Company (which will be
based on the results of operations of the Properties and the management and
leasing businesses in recent periods), estimates of the future business
potential and earnings prospects of the Company as a whole and the current state
of the real estate market in the Company's primary markets and the economy as a
whole.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain Selling Group members to bid for and purchase the Common Stock. As an
exception to these rules, the U.S. Representatives and the International
Managers are permitted to engage in certain transactions that stabilize the
price of the Common Stock. Such transactions may consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, i.e., if they sell more Common Stock than are set
forth on the cover page of this Prospectus, the U.S. Representatives and the
International Managers, respectively, may reduce that short position by
purchasing Common Stock in the open market. The U.S. Representatives and the
International Managers, respectively, may also elect to reduce any short
position by exercising all or part of the over-allotment option described above.
The U.S. Representatives and the International Managers may also impose a
penalty bid on certain Underwriters and selling group members. This means that
if the U.S. Representatives or the International Managers purchase Common Stock
in the open market to reduce the Underwriters' short position or to stabilize
the price of the Common Stock, they may reclaim the amount of the selling
concession from the Underwriters and selling group members who sold those shares
as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might otherwise be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of a security to the extent
that it were to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Shares. In addition, neither
the Company nor any of the Underwriters makes any representation that the U.S.
Representatives or the International Managers will engage in such transactions
or that such transactions, once commenced, will not be discounted without
notice.
The Company has agreed to pay to Merrill Lynch (i) an advisory fee equal to
1% of the gross proceeds of the Offering (including any exercise of the
Underwriters' over-allotment option) for advisory services rendered in
connection with the evaluation, analysis and structuring of the Offering and
(ii) a $600,000 acquisition advisory fee for services rendered in connection
with the evaluation, analysis and structuring of the acquisition of the 100 Wall
Street Property.
Merrill Lynch Capital Corporation, an affiliate of Merrill Lynch, has
committed to be the syndication agent for the Line of Credit and Merrill Lynch
Credit Corporation, an affiliate of Merrill Lynch, has agreed to provide to the
Company the Term Loan. In connection with the closing of these loans, the
Company shall pay Merrill Lynch fees of approximately $2.1 million.
158
<PAGE> 236
A portion of the net proceeds from the Offering will be used by the Company
to repay in full a mortgage loan made to the Company prior to the Offering by an
affiliate of Merrill Lynch. In connection with such mortgage loan, (i) an
affiliate of Merrill Lynch made an $11.3 million secured loan to the Property
Partnership that owns the 120 Mineola Boulevard Property and (ii) the lender
received an origination fee of 1.00% of the original loan amount, and
reimbursement for its out-of-pocket expenses, including reasonable fees and
expenses of counsel, incurred in connection therewith.
The Morgan Stanley Investors, advised by MSAM, an affiliate of Morgan
Stanley & Co. Incorporated, have agreed to purchase 800,000 shares of Common
Stock in the Concurrent Private Placements. The Underwriters will not receive a
discount or commission on the sale of Common Stock in the Concurrent Private
Placements. The closing of the Concurrent Private Placements is subject to the
closing of the Offering and the satisfaction of other customary conditions.
Upon consummation of the Offering, the Company will repay the outstanding
balance of and the accrued interest on the MSAM Notes by issuing to the Morgan
Stanley Investors 886,200 shares of restricted Common Stock in complete
satisfaction of the MSAM Notes. The Company has granted to the Morgan Stanley
Investors certain registration rights with respect to sale of Common Stock
received by the Morgan Stanley Investors or any affiliates in connection with
the Concurrent Private Placements and the cancellation of the MSAM Notes,
including the right to include such shares in a shelf registration statement the
Company has agreed to file within fifteen days after the expiration of the
one-year period following completion of the Offering. Also, the Company has
granted to the Morgan Stanley Investors the right to have a representative
observe the meetings of the Board of Directors and its committees. These Board
observation rights terminate at any time the Morgan Stanley Investors hold less
than 60% of the shares of Common Stock acquired by them at the time of the
Offering.
The Common Stock has been approved for listing on the NYSE, subject to
official notice of issuance, under the symbol "TOW." In order to meet one of the
requirements for listing the Common Stock on the NYSE, the Underwriters have
undertaken to sell lots of 100 or more shares of Common Stock to a minimum of
2,000 beneficial holders.
EXPERTS
The consolidated balance sheet of the Company as of June 30, 1997 and the
related consolidated statement of operations, shareholder's equity and cash
flows for the period from March 27, 1997 through June 30, 1997, the combined
balance sheets of the Tower Predecessor as of December 31, 1996 and 1995, and
the related combined statements of operations, owners' deficit and cash flows
for each of the three years in the period ended December 31, 1996 and the
financial statement schedule, the combined statements of revenues and certain
operating expenses of DRA Joint Ventures for each of the two years in the period
ended December 31, 1996 and the period from November 21, 1994 through December
31, 1994 and the statements of revenues and certain operating expenses for 100
Wall Street for the year ended December 31, 1996, included in this Prospectus,
have been included herein in reliance on the reports of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
The Landauer Market Studies were prepared for the Company by Landauer,
which is a real estate service firm with significant experience and expertise
relating to the midtown Manhattan, Orlando, Phoenix, and Tucson office markets
and the various submarkets therein. The statistical and other information from
the Landauer Market Studies appearing in this Prospectus has been included
herein in reliance on Landauer Associate's expertise as real estate services
firm, with respect to the Manhattan, Phoenix, Tucson, and Orlando office
markets.
159
<PAGE> 237
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 20
The Company........................... 34
Operating and Growth Strategies....... 36
Use of Proceeds....................... 40
Distributions......................... 41
Capitalization........................ 45
Dilution.............................. 46
Selected Combined Financial and
Operating Data...................... 47
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 52
Property Office Markets and Market
Economies........................... 61
The Properties........................ 75
Management............................ 102
Formation and Structure of the
Company............................. 111
Certain Relationships and
Transactions........................ 115
Principal Stockholders................ 117
Description of Capital Stock.......... 119
Certain Provisions of Maryland Law and
of the Company's Charter and
Bylaws.............................. 124
Policies with Respect to Certain
Activities.......................... 127
Shares Available for Future Sale...... 131
Partnership Agreement................. 133
Federal Income Tax Considerations..... 136
ERISA Considerations.................. 153
Underwriting.......................... 156
Experts............................... 159
Legal Matters......................... 160
Additional Information................ 160
Glossary.............................. 161
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF THE DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
11,515,000 SHARES
TOWER REALTY
TRUST, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH INTERNATIONAL
LEGG MASON WOOD WALKER
INCORPORATED
MORGAN STANLEY DEAN WITTER
PRUDENTIAL-BACHE SECURITIES
SMITH BARNEY INC.
, 1997
======================================================
<PAGE> 238
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of the fees and
expenses (other than underwriting discounts and commissions) payable by the
Registrant in connection with the issuance and distribution of the shares of
Common Stock.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 104,333
NASD filing fee................................................. 30,500
NYSE listing fee................................................ 70,000
Advisory fee.................................................... 2,878,000
Printing, engraving and mailing expenses........................ 450,000
Accountants' fees and expenses.................................. 2,300,000
Other consultants' fees and expenses............................ 360,000
Blue Sky fees and expenses...................................... 15,000
Legal fees...................................................... 5,160,000
Transfer agent's fees........................................... 8,000
Miscellaneous expenses.......................................... 502,167
-----------
Total................................................. $11,878,000
===========
Indemnification Insurance Costs (see Item 34)................... $ 266,000
</TABLE>
- ---------------
* To be completed by amendment.
ITEM 32. SALES TO SPECIAL PARTIES.
See response to Item 32.
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES.
On March 31, 1997, as part of its formation, the Company issued 1,000
unregistered shares of Common Stock to Lawrence H. Feldman for a purchase price
of $1,000 in reliance upon an exemption from registration under Section 4(2) of
the Securities Act.
As part of the Formation Transactions an aggregate of 1,583,640 OP Units
and 924,800 shares of restricted Common Stock will be issued to the Primary
Contributors and the Continuing Investors in return for (i) the contribution of
certain interests in the Tower Predecessor Company and in certain of the
Properties and the Development Parcels to the Operating Partnership and (ii) the
contribution by the Primary Contributors of certain assets, including management
contracts relating to certain of the Properties, the Excluded Properties and
certain other Properties. The issuance of the OP Units will be effected in
reliance on an exemption from registration under Section 4(2) of the Securities
Act. The descriptions of the foregoing transactions in the Prospectus under the
heading "Formation and Structure of the Company" are incorporated herein by
reference.
Concurrent with the Offering, and subject to certain conditions, the
Company is directly placing with certain private investment funds advised by
Morgan Stanley Asset Management, Inc. $20 million of Common Stock at the price
per share sold in the Offering in reliance on an exemption from registration
under Section 4(2) of the Securities Act. In addition, concurrent with the
Offering, the Company will issue to the Morgan Stanley Investors approximately
$22.2 million of restricted Common Stock in exchange for the cancellation of
approximately $12.3 million outstanding under the MSAM Notes. Between March 31,
1997, and September 18, 1997, the Company issued an aggregate of $12.3 million
of the MSAM Notes to the Morgan Stanley Investors in reliance on an exemption
from registration under Section 4(2) of the Securities Act.
II-1
<PAGE> 239
Concurrent with the Offering, and subject to certain conditions, the
Company is directly placing with the Carlyle Funds $10 million of Common Stock
at the price per share sold in the Offering in reliance on an exemption from
registration under Section 4(2) of the Securities Act.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter of the
Company contains such a provision which eliminates such liability to the maximum
extent permitted by Maryland law.
The Charter authorizes the Company, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise from and against any
claim or liability to which such person may become subject or which such person
may incur by reason of his or her status as a present or former director or
office of the Company. The Bylaws of the Company obligate it, to the maximum
extent permitted by Maryland law, to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer who is made a party to the proceeding by
reason of his service in that capacity or (b) any individual who, while a
director of the Company and at the request of the Company, serves or has served
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a director, officer,
partner or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.
The Charter and Bylaws also permit the Company to indemnify and advance expenses
to any person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.
The MGCL requires a Maryland corporation (unless its charter provides
otherwise, which the Company's Charter does not) to indemnify a director or
officer who has been successful, on the merits or otherwise, in the defense of
any proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a Maryland corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, under the MGCL,
a Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or in any proceeding in which the director was
adjudged to be liable on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification and then only for
expenses. In addition, the MGCL permits a corporation to advance reasonable
expenses to a director or officer upon the corporation's receipt of (a) a
written affirmation by the director or officer of his good faith belief that he
has met the standard of conduct necessary for indemnification by the corporation
and (b) a written undertaking by or on his behalf to repay the amount paid or
reimbursed by the corporation if it shall ultimately be determined that the
standard of conduct was not met. Indemnification under the provisions of the
MGCL is not deemed exclusive of any other rights, by indemnification or
otherwise, to which an officer or director may be entitled under the Company's
Charter or Bylaws, resolutions of stockholders or directors, contract or
otherwise. However, it is the position of the
II-2
<PAGE> 240
Commission that indemnification of directors and officers for liabilities
arising under the Securities Act is against public policy and is unenforceable
pursuant to Section 14 of the Securities Act.
The Company also has purchased and maintains insurance on behalf of all of
its directors and executive officers against liability asserted against or
incurred by them in their official capacities with the Company, whether or not
the Company is required or has the power to indemnify them against the same
liability.
The Underwriting Agreement will contain certain provisions pursuant to
which certain officers, directors and controlling persons may be entitled to be
indemnified by the underwriters named therein.
ITEM 35. TREATMENT OF PROCEEDS FROM SHARES BEING REGISTERED.
None.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS.
(1) Financial Statements are included in the Prospectus. See "Index to
Financial Statements" in the Prospectus on page F-1.
(2) The following financial statement schedules of the registrant are filed
herewith:
III Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ ----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
*3.1 Articles of Incorporation of the Company
3.2 Form of Amended and Restated Articles of Incorporation
*3.3 Bylaws of the Company
3.4 Form of Amended and Restated Bylaws of the Company
4.1 Form of Common Stock Certificate for the Company
**5.1 Opinion of Battle Fowler LLP
**8.1 Opinion of Battle Fowler LLP, as to Tax Matters
*10.1 Form of Amendment and Restatement of Agreement of Limited Partnership of Tower
Realty Operating Partnership, L.P., by and among Tower Realty Trust, Inc., as
general partner, Lawrence H. Feldman, as initial Limited Partner, and the Persons
set forth in Exhibit A thereto.
*10.2 Form of Exchange Rights Agreement
*10.3 Form of Registration Rights Agreement.
*10.4 Form of Lock-up Agreement
10.5 Form of Tower Realty Trust, Inc. 1997 Incentive Plan
10.6 Form of Tower Realty Trust, Inc. Non-Employee Directors' Incentive Plan
**10.7 Form of Employment Agreement between the Company and Lawrence H. Feldman
**10.8 Form of Employment Agreement between the Company and Robert L. Cox
**10.9 Form of Employment Agreement between the Company and Joseph D. Kasman
10.10 Form of Indemnification Agreement between the Company and its executive officers
and directors
10.11 Purchase Agreement, dated as of March 31, 1997, among Tower Realty Trust, Inc.,
Tower Realty Operating Partnership, L.P. and each of the investors signatory
thereto, as amended by the Purchase Agreement Supplement dated as of May 15, 1997,
Purchase Agreement Supplement No. 2, dated as of May 29, 1997, Purchase Agreement
Supplement No. 3, dated as of May 29, 1997, Purchase Agreement Supplement No. 4,
dated as of July 9, 1997, Purchase Agreement Supplement No. 5, dated as of July
31, 1997
</TABLE>
II-3
<PAGE> 241
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ ----------------------------------------------------------------------------------
<C> <S>
10.12 Contribution Agreement (OP Units-CXX Mineola Limited Partnership) by and among
Tower Realty Operating Partnership, L.P. and Jeffrey Feldman
10.13 Amendment to Contribution Agreement by and among Tower Realty Operating
Partnership, L.P. and Jeffrey Feldman
10.14 Second Amendment to Contribution Agreement by and between Tower Realty Operating
Partnership, L.P. and Jeffrey Feldman
10.15 Contribution Agreement (Cash-Stellar Associates) by and among Tower Realty
Operating Partnership, L.P. and Laurie Jacoby
10.16 First Amendment to Contribution Agreement by and between Tower Realty Operating
Partnership, L.P. and Laurie Jacoby
10.17 Contribution Agreement (OP Units) by and among Tower Realty Operating Partnership,
L.P. and Bama Equities, Inc.
10.18 Amendment to Contribution Agreement by and among Tower Realty Operating
Partnership, L.P. and Bama Equities, Inc.
10.19 Second Amendment to Contribution Agreement by and between Tower Realty Operating
Partnership, L.P. and Bama Equities, Inc.
10.20 Contribution Agreement (Cash-Stellar Associates) by and among Tower Realty
Operating Partnership, L.P. and Valerie Herts Kalnitzky
10.21 First Amendment to Contribution Agreement by and between Tower Realty Operating
Partnership, L.P. and Valerie Hertz Kalnitzky
10.22 Assignment Agreement by Charles M. Kotick, as nominee (CXX)
10.23 Contribution Agreement by and between Tower Realty Operating Partnership, L.P. and
Allan B. Mendelsohn, as Chapter 7 Trustee of Edward Feldman
10.24 Option Agreement, dated as of July 28, 1997, by and between Tower Realty Operating
Partnership, L.P. and Dana II Associates Limited Partnership
10.25 Option Agreement, dated July 28, 1997, by and between Tower Realty Operating
Partnership, L.P. and Tower 45 Ventures Limited Partnership
10.26 Option Agreement, dated July 31, 1997, by and between Tower Realty Operating
Partnership, L.P. and Feldman Tower 45, Inc.
10.27 Contribution Agreement between Maitland Property Investors, Limited and Tower
Realty Operating Partnership, L.P., dated as of August 4, 1997
10.28 Non-Competition Agreement, dated as of August 4, 1997 among Tower Realty Operating
Partnership, L.P., Properties Atlantic, Inc., Clifford Stein and Reid Berman
10.29 Assets Contribution Agreement, dated as of August 4, 1997, between Tower Realty
Operating Partnership, L.P., and Properties Atlantic, Inc., Clifford Stein, and
Reid Berman
10.30 Option Agreement, dated as of July 28, 1997, by and between Tower Realty Operating
Partnership, L.P. and Stellar Associates
10.31 Option Agreement, dated as of July 28, 1997, by and between Tower Realty Operating
Partnership, L.P. and Carlyle Industries, Inc.
10.32 Option Agreement, dated as of July 31, 1997, by and between Tower Realty Operating
Partnership, L.P. and 120 West 45th Street Associates
10.33 Option Agreement, dated as of July 29, 1997, by and between Tower Realty Operating
Partnership, L.P. and Richard Cooke, Craig Cooke and Brian Cooke
10.34 Option Agreement, dated as of July 28, 1997, by and between Tower Realty Operating
Partnership, L.P. and Charles B. Hickcox
10.35 Option Agreement, dated as of July 31, 1997, by and between Tower Realty Operating
Partnership, L.P. and Hazama T-45
10.36 Option Agreement, dated as of July 25, 1997, by and between Tower Realty Operating
Partnership, L.P. and Leo V. Berger
</TABLE>
II-4
<PAGE> 242
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ ----------------------------------------------------------------------------------
<S> <C>
10.37 Omnibus Option Agreement, dated as of July 31, 1997, by and between Tower Realty
Operating Partnership, L.P. and Shoen U.S.A. Inc.
10.38 Option Agreement, dated as of July 28, 1997, by and among Tower Realty Operating
Partnership, L.P., Tower Equities Management, Inc. and Tower Equities and Realty
Corp., CXX Mineola Management Corp., Forum Management and Realty Corp., Madison
40/41 Management Corp., Tower 45 Asset Management Corp. and SJP Realty Corp.
10.39 Contribution Agreement by and between Reid Berman and Tower Realty Operating
Partnership, L.P. dated as of July 31, 1997
10.40 Purchase Agreement by and among Tower Realty Operating Partnership, L.P. and
Anthony DiLeonardo dated as of July 31, 1997, as amended by Amendment No. 1 to
Anthony DiLeonardo Purchase Agreement, dated as of September 18, 1997
10.41 Purchase Agreement by and among Tower Realty Operating Partnership, L.P. and
Carmela Carrano dated as of July 31, 1997, as amended by Amendment No. 1 to
Carmela Carrano Purchase Agreement, dated as of September 18, 1997
10.42 Contribution Agreement by and between Richard Wisely and Tower Realty Operating
Partnership, L.P. dated as of July 31, 1997
10.43 Contribution Agreement by and between Lawrence Stein and Tower Realty Operating
Partnership, L.P. dated as of July 31, 1997
10.44 Contribution Agreement by and between Lawrence H. Feldman and Tower Realty
Operating Partnership, L.P. dated as of July 31, 1997
10.45 Contribution Agreement by and between Clifford L. Stein and Tower Realty Operating
Partnership, L.P. dated as of July 31, 1997
10.46 Contribution Agreement by and between Robert Adams and Tower Realty Operating
Partnership, L.P. dated as of July 31, 1997
10.47 Contribution Agreement by and between Eric Reimer and Tower Realty Operating
Partnership, L.P., dated as of July 31, 1997
10.48 Contribution Agreement by and between Reuben Friedberg and Tower Realty Operating
Partnership, L.P., dated as of July 31, 1997
10.49 Contribution Agreement by and between Joseph Kasman and Tower Realty Operating
Partnership, L.P., dated as of July 31, 1997
10.50 Contribution Agreement by and between Robert Cox and Tower Realty Operating
Partnership, L.P., dated as of July 31, 1997
10.51 Contribution Agreement, dated as of July 31, 1997, by and among Tower Realty
Operating Partnership, L.P. and Joseph Kasman
10.52 Option Agreement, dated as of May 8, 1997, by and among Tower Realty Operating
Partnership, L.P. and Stanley B. Grey
10.53 Option Agreement, dated as of May 8, 1997, by and among Tower Realty Operating
Partnership, L.P. and Michael C. Zerner
10.54 Letter Agreement, dated as of July 28, 1997, between Tower Realty Trust, Inc.,
Tower Realty Operating Partnership, L.P., General Electric Capital Corporation,
General Electric Real Estate Equities, Inc., GENEL Company, Inc. and GEBAM, Inc.
10.55 Contribution Agreement by and among Tower Realty Trust, Inc., Tower Realty
Operating Partnership, L.P. and DRA Opportunity Fund
10.56 Contribution Agreement by and among Tower Realty Trust, Inc., Tower Realty
Operating Partnership, L.P. and Office Invest Sub LLC
10.57 Supplement and Amendment, dated as of September 11, 1997, to the Contribution
Agreement by and among Tower Realty Trust, Inc., Tower Realty Operating
Partnership, L.P. and Office Invest Sub LLC, as parties to the original
Contribution Agreement, and Feldman MOT Portfolio Corp., Feldman FSA Corp., FSA
Associates, L.P. and Lawrence H. Feldman
</TABLE>
II-5
<PAGE> 243
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------ ----------------------------------------------------------------------------------
<S> <C>
10.58 Purchase and Sale Agreement, dated as of March 31, 1997, by and between Tower
Equities and Realty Corp. and Tower Realty Operating Partnership, L.P.
10.59 Purchase and Sale Agreement, dated as of September 11, 1997, by and between 100
Wall LLC and Tower Realty Operating Partnership, L.P.
**10.60 Mortgage Loan Commitment by and between Merrill Lynch Credit Corporation and one
or more subsidiaries of Tower Realty Operating Partnership, L.P.
**10.61 Financial Advisory Fee Agreement by and between Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Tower Realty Trust, Inc. and Tower Realty Operating
Partnership, L.P.
**10.62 Supplemental Representations, Warranties and Indemnity Agreement by and among
Lawrence H. Feldman, Robert L. Cox, Joseph D Kasman, Eric S. Reimer, Reuben
Friedberg and Tower Realty Operating Partnership, L.P. and Tower Realty Trust,
Inc.
**10.63 Line of Credit Commitment by and between Merrill Lynch Capital Corporation and
Tower Realty Operation Partnership, L.P. and Tower Realty Trust, Inc.
10.64 Purchase and Sale Agreement, dated as of July 25, 1997, by and between RSH
Associates, Joel Wiener, and Lawrence H. Feldman
10.65 Option Agreement, dated as of July 31, 1997, by and between Tower Realty Operating
Partnership, L.P. and Carmela Carrano, as amended by Amendment No. 1 to Option
Agreement, dated as of September 18, 1997
10.66 Option Agreement, dated as of July 31, 1997, by and between Tower Realty Operating
Partnership, L.P. and Anthony DiLeonardo, as amended by Amendment No. 1 to Option
Agreement, dated as of September 18, 1997
21.1 Subsidiaries of the Company
**23.1 Consent of Battle Fowler LLP (included in Exhibits 5.1 and 8.1 hereto)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Landauer Associates, Inc.
*24.1 Powers of Attorney
27.1 Financial Data Schedule, amended
*99.1 Consent of Robert M. Adams to be named as a director nominee
*99.2 Consent of Stephen B. Siegel to be named as a director nominee
99.3 Consent of Richard M. Wisely to be named as a director nominee
99.4 Consent of Esko I. Korhonen to be named as a director nominee
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
ITEM 37. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 33 of this
Registration Statement, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction
II-6
<PAGE> 244
the question as to whether such indemnification by it is against public policy
as expressed in the Act, and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 245
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-11 and has duly caused this amendment to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York, on September 23,
1997.
TOWER REALTY TRUST, INC.
a Maryland corporation (Issuer)
By: /s/ LAWRENCE H. FELDMAN
------------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive
Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ -------------------
<C> <S> <C>
/s/ LAWRENCE H. FELDMAN Chairman, Chief Executive September 23, 1997
- ------------------------------------------ Officer
Lawrence H. Feldman and President (principal
executive
officer)
* Senior Vice President and September 23, 1997
- ------------------------------------------ Chief Financial Officer
Joseph D. Kasman (principal financial officer)
* Vice President of Accounting September 23, 1997
- ------------------------------------------ and Controller (principal
Thomas Woodward accounting
officer)
* Director September 23, 1997
- ------------------------------------------
Lester S. Garfinkel
*By /s/ LAWRENCE H. FELDMAN
- ------------------------------------------
Lawrence H. Feldman
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 246
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- ---------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
*3.1 Articles of Incorporation of the Company
3.2 Form of Amended and Restated Articles of Incorporation
*3.3 Bylaws of the Company
3.4 Form of Amended and Restated Bylaws of the Company
4.1 Form of Common Stock Certificate for the Company
**5.1 Opinion of Battle Fowler LLP
**8.1 Opinion of Battle Fowler LLP, as to Tax Matters
*10.1 Form of Amendment and Restatement of Agreement of Limited Partnership of Tower
Realty Operating Partnership, L.P., by and among Tower Realty Trust, Inc., as
general partner, Lawrence H. Feldman, as initial Limited Partner, and the Persons
set forth in Exhibit A thereto.
*10.2 Form of Exchange Rights Agreement
*10.3 Form of Registration Rights Agreement.
*10.4 Form of Lock-up Agreement
10.5 Form of Tower Realty Trust, Inc. 1997 Incentive Plan
10.6 Form of Tower Realty Trust, Inc. Non-Employee Directors' Incentive Plan
**10.7 Form of Employment Agreement between the Company and Lawrence H. Feldman
**10.8 Form of Employment Agreement between the Company and Robert L. Cox
**10.9 Form of Employment Agreement between the Company and Joseph D. Kasman
10.10 Form of Indemnification Agreement between the Company and its executive officers
and directors
10.11 Purchase Agreement, dated as of March 31, 1997, among Tower Realty Trust, Inc.,
Tower Realty Operating Partnership, L.P. and each of the investors signatory
thereto, as amended by the Purchase Agreement Supplement dated as of May 15,
1997, Purchase Agreement Supplement No. 2, dated as of May 29, 1997, Purchase
Agreement Supplement No. 3, dated as of May 29, 1997, Purchase Agreement
Supplement No. 4, dated as of July 9, 1997, Purchase Agreement Supplement No. 5,
dated as of July 31, 1997
10.12 Contribution Agreement (OP Units-CXX Mineola Limited Partnership) by and among
Tower Realty Operating Partnership, L.P. and Jeffrey Feldman
10.13 Amendment to Contribution Agreement by and among Tower Realty Operating
Partnership, L.P. and Jeffrey Feldman
10.14 Second Amendment to Contribution Agreement by and between Tower Realty Operating
Partnership, L.P. and Jeffrey Feldman
10.15 Contribution Agreement (Cash-Stellar Associates) by and among Tower Realty
Operating Partnership, L.P. and Laurie Jacoby
10.16 First Amendment to Contribution Agreement by and between Tower Realty Operating
Partnership, L.P. and Laurie Jacoby
10.17 Contribution Agreement (OP Units) by and among Tower Realty Operating
Partnership, L.P. and Bama Equities, Inc.
10.18 Amendment to Contribution Agreement by and among Tower Realty Operating
Partnership, L.P. and Bama Equities, Inc.
10.19 Second Amendment to Contribution Agreement by and between Tower Realty Operating
Partnership, L.P. and Bama Equities, Inc.
10.20 Contribution Agreement (Cash-Stellar Associates) by and among Tower Realty
Operating Partnership, L.P. and Valerie Herts Kalnitzky
10.21 First Amendment to Contribution Agreement by and between Tower Realty Operating
Partnership, L.P. and Valerie Hertz Kalnitzky
10.22 Assignment Agreement by Charles M. Kotick, as nominee (CXX)
10.23 Contribution Agreement by and between Tower Realty Operating Partnership, L.P.
and Allan B. Mendelsohn, as Chapter 7 Trustee of Edward Feldman
10.24 Option Agreement, dated as of July 28, 1997, by and between Tower Realty
Operating Partnership, L.P. and Dana II Associates Limited Partnership
</TABLE>
<PAGE> 247
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- ---------------------------------------------------------------------------------
<S> <C>
10.25 Option Agreement, dated July 28, 1997, by and between Tower Realty Operating
Partnership, L.P. and Tower 45 Ventures Limited Partnership
10.26 Option Agreement, dated July 31, 1997, by and between Tower Realty Operating
Partnership, L.P. and Feldman Tower 45, Inc.
10.27 Contribution Agreement between Maitland Property Investors, Limited and Tower
Realty Operating Partnership, L.P., dated as of August 4, 1997
10.28 Non-Competition Agreement, dated as of August 4, 1997 among Tower Realty
Operating Partnership, L.P., Properties Atlantic, Inc., Clifford Stein and Reid
Berman
10.29 Assets Contribution Agreement, dated as of August 4, 1997, between Tower Realty
Operating Partnership, L.P., and Properties Atlantic, Inc., Clifford Stein, and
Reid Berman
10.30 Option Agreement, dated as of July 28, 1997, by and between Tower Realty
Operating Partnership, L.P. and Stellar Associates
10.31 Option Agreement, dated as of July 28, 1997, by and between Tower Realty
Operating Partnership, L.P. and Carlyle Industries, Inc.
10.32 Option Agreement, dated as of July 31, 1997, by and between Tower Realty
Operating Partnership, L.P. and 120 West 45th Street Associates
10.33 Option Agreement, dated as of July 29, 1997, by and between Tower Realty
Operating Partnership, L.P. and Richard Cooke, Craig Cooke and Brian Cooke
10.34 Option Agreement, dated as of July 28, 1997, by and between Tower Realty
Operating Partnership, L.P. and Charles B. Hickcox
10.35 Option Agreement, dated as of July 31, 1997, by and between Tower Realty
Operating Partnership, L.P. and Hazama T-45
10.36 Option Agreement, dated as of July 25, 1997, by and between Tower Realty
Operating Partnership, L.P. and Leo V. Berger
10.37 Omnibus Option Agreement, dated as of July 31, 1997, by and between Tower Realty
Operating Partnership, L.P. and Shoen U.S.A. Inc.
10.38 Option Agreement, dated as of July 28, 1997, by and among Tower Realty Operating
Partnership, L.P., Tower Equities Management, Inc. and Tower Equities and Realty
Corp., CXX Mineola Management Corp., Forum Management and Realty Corp., Madison
40/41 Management Corp., Tower 45 Asset Management Corp. and SJP Realty Corp.
10.39 Contribution Agreement by and between Reid Berman and Tower Realty Operating
Partnership, L.P. dated as of July 31, 1997
10.40 Purchase Agreement by and among Tower Realty Operating Partnership, L.P. and
Anthony DiLeonardo dated as of July 31, 1997, as amended by Amendment No. 1 to
Anthony DiLeonardo Purchase Agreement, dated as of September 18, 1997
10.41 Purchase Agreement by and among Tower Realty Operating Partnership, L.P. and
Carmela Carrano dated as of July 31, 1997, as amended by Amendment No. 1 to
Carmela Carrano Purchase Agreement, dated as of September 18, 1997
10.42 Contribution Agreement by and between Richard Wisely and Tower Realty Operating
Partnership, L.P. dated as of July 31, 1997
10.43 Contribution Agreement by and between Lawrence Stein and Tower Realty Operating
Partnership, L.P. dated as of July 31, 1997
10.44 Contribution Agreement by and between Lawrence H. Feldman and Tower Realty
Operating Partnership, L.P. dated as of July 31, 1997
10.45 Contribution Agreement by and between Clifford L. Stein and Tower Realty
Operating Partnership, L.P. dated as of July 31, 1997
</TABLE>
<PAGE> 248
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- ---------------------------------------------------------------------------------
<C> <S>
10.46 Contribution Agreement by and between Robert Adams and Tower Realty Operating
Partnership, L.P. dated as of July 31, 1997
10.47 Contribution Agreement by and between Eric Reimer and Tower Realty Operating
Partnership, L.P., dated as of July 31, 1997
10.48 Contribution Agreement by and between Reuben Friedberg and Tower Realty Operating
Partnership, L.P., dated as of July 31, 1997
10.49 Contribution Agreement by and between Joseph Kasman and Tower Realty Operating
Partnership, L.P., dated as of July 31, 1997
10.50 Contribution Agreement by and between Robert Cox and Tower Realty Operating
Partnership, L.P., dated as of July 31, 1997
10.51 Contribution Agreement, dated as of July 31, 1997, by and among Tower Realty
Operating Partnership, L.P. and Joseph Kasman
10.52 Option Agreement, dated as of May 8, 1997, by and among Tower Realty Operating
Partnership, L.P. and Stanley B. Grey
10.53 Option Agreement, dated as of May 8, 1997, by and among Tower Realty Operating
Partnership, L.P. and Michael C. Zerner
10.54 Letter Agreement, dated as of July 28, 1997, between Tower Realty Trust, Inc.,
Tower Realty Operating Partnership, L.P., General Electric Capital Corporation,
General Electric Real Estate Equities, Inc., GENEL Company, Inc. and GEBAM, Inc.
10.55 Contribution Agreement by and among Tower Realty Trust, Inc., Tower Realty
Operating Partnership, L.P. and DRA Opportunity Fund
10.56 Contribution Agreement by and among Tower Realty Trust, Inc., Tower Realty
Operating Partnership, L.P. and Office Invest Sub LLC
10.57 Supplement and Amendment, dated as of September 11, 1997, to the Contribution
Agreement by and among Tower Realty Trust, Inc., Tower Realty Operating
Partnership, L.P. and Office Invest Sub LLC, as parties to the original
Contribution Agreement, and Feldman MOT Portfolio Corp., Feldman FSA Corp., FSA
Associates, L.P. and Lawrence H. Feldman
10.58 Purchase and Sale Agreement, dated as of March 31, 1997, by and between Tower
Equities and Realty Corp. and Tower Realty Operating Partnership, L.P.
10.59 Purchase and Sale Agreement, dated as of September 11, 1997, by and between 100
Wall LLC and Tower Realty Operating Partnership, L.P.
**10.60 Mortgage Loan Commitment by and between Merrill Lynch Credit Corporation and one
or more subsidiaries of Tower Realty Operating Partnership, L.P.
**10.61 Financial Advisory Fee Agreement by and between Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Tower Realty Trust, Inc. and Tower Realty Operating
Partnership, L.P.
**10.62 Supplemental Representations, Warranties and Indemnity Agreement by and among
Lawrence H. Feldman, Robert L. Cox, Joseph D Kasman, Eric S. Reimer, Reuben
Friedberg and Tower Realty Operating Partnership, L.P. and Tower Realty Trust,
Inc.
**10.63 Line of Credit Commitment by and between Merrill Lynch Capital Corporation and
Tower Realty Operating Partnership, L.P. and Tower Realty Trust, Inc.
10.64 Purchase and Sale Agreement, dated as of July 25, 1997, by and between RSH
Associates, Joel Wiener, and Lawrence H. Feldman
10.65 Option Agreement, dated as of July 31, 1997, by and between Tower Realty
Operating Partnership, L.P. and Carmela Carrano, as amended by Amendment No. 1 to
Option Agreement, dated as of September 18, 1997
</TABLE>
<PAGE> 249
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- ---------------------------------------------------------------------------------
<S> <C>
10.66 Option Agreement, dated as of July 31, 1997, by and between Tower Realty
Operating Partnership, L.P. and Anthony DiLeonardo, as amended by Amendment No. 1
to Option Agreement, dated as of September 18, 1997
21.1 Subsidiaries of the Company
**23.1 Consent of Battle Fowler LLP (included in Exhibits 5.1 and 8.1 hereto)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Landauer Associates, Inc.
*24.1 Powers of Attorney
27.1 Financial Data Schedule, amended
*99.1 Consent of Robert M. Adams to be named as a director nominee
*99.2 Consent of Stephen B. Siegel to be named as a director nominee
99.3 Consent of Richard Wisely to be named as a director nominee
99.4 Consent of Esko I. Korhonen to be named as a director nominee
</TABLE>
- ---------------
* Previously filed.
** To be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
DRAFT: SEPTEMBER 15, 1997
________________ SHARES
TOWER REALTY TRUST, INC.
(a Maryland corporation)
Common Stock
($.01 Par Value Per Share)
U.S. PURCHASE AGREEMENT
September __, 1997
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
LEGG MASON WOOD WALKER, INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
as Representatives of the several Underwriters
c/o MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Dear Ladies and Gentlemen:
Tower Realty Trust, Inc., a Maryland corporation, and Tower Realty
Operating Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"), each confirms its agreement with Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), Legg Mason Wood Walker, Incorporated
("Legg Mason"), Morgan Stanley & Co. Incorporated ("Morgan Stanley"), Prudential
Securities Incorporated ("Prudential") and Smith Barney Inc. ("Smith Barney")
and each of the other U.S. Underwriters named in Schedule 1 hereto
(collectively, the "U.S. Underwriters," which term shall also include any
underwriter substituted as provided in Section 10 hereof), for whom Merrill
Lynch, Legg Mason, Morgan Stanley, Prudential and Smith Barney are acting as
representatives (in such
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capacity, Merrill Lynch, Legg Mason, Morgan Stanley, Prudential and Smith Barney
shall hereinafter be referred to as the "U.S. Representatives"), with respect to
the sale by the Company and the purchase by the U.S. Underwriters, acting
severally and not jointly, of ____________ shares of common stock, $.01 par
value per share (the "Common Stock"), of the Company, as set forth in Schedule 1
hereto (except as may be provided otherwise in the U.S. Pricing Agreement, as
hereinafter defined), and with respect to the grant by the Company to the U.S.
Underwriters of the option described in Section 2(b) hereof to purchase all or
any part of an additional ____________ shares of Common Stock to cover
over-allotments. The aforesaid ____________ shares of Common Stock (the "Initial
U.S. Stock"), together with all or any part of the ____________ shares of Common
Stock subject to the option described in Section 2(b) hereof (the "U.S. Option
Stock"), are collectively hereinafter referred to as the "U.S. Stock."
It is understood that the Company and the Operating Partnership are
concurrently entering into an agreement dated the date hereof (the
"International Purchase Agreement") providing for the offering by the Company of
an aggregate of _____________ shares of Common Stock (the "Initial International
Stock") through arrangements with certain underwriters outside the United States
and Canada (the "International Managers") for which Merrill Lynch International,
Legg Mason Wood Walker, Incorporated, Morgan Stanley & Co., Incorporated,
Prudential-Bache Securities (U.K.) Inc., and Smith Barney Inc. are acting as
lead managers (the "Lead Managers") and the grant by the Company to the
International Managers, acting severally and not jointly, of an option to
purchase all or any part of the International Managers' pro rata portion of up
to _____________ additional shares of Common Stock solely to cover
overallotments, if any (the "International Option Stock" and, together with the
U.S. Option Stock, the "Option Stock"). The Initial International Stock and the
International Option Stock are hereinafter called the "International Stock." It
is understood that the Company is not obligated to sell and the U.S.
Underwriters are not obligated to purchase, any Initial U.S. Stock unless all of
the shares of the Initial International Stock are contemporaneously purchased by
the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters," the Initial U.S. Stock and the Initial
International Securities are hereinafter collectively called the "Initial
Stock," and the U.S. Stock and International Stock are hereinafter collectively
called the "Stock."
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing for
the coordination of certain transactions among the Underwriters under the
direction of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated (in such capacity, the "Global Coordinator").
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The Company and the Operating Partnership each understand that the U.S.
Underwriters propose to make a public offering of the U.S. Stock as soon as the
U.S. Representatives deem advisable after this Agreement and the U.S. Pricing
Agreement have been executed and delivered.
The Company and the U.S. Underwriters agree that up to 100,000 shares
of the Initial U.S. Stock to be purchased by the U.S. Underwriters and that up
to ___________ shares of the Initial International Stock to be purchased by the
International Managers (collectively, the "Reserved Stock") shall be reserved
for sale by the Underwriters to certain eligible employees and persons having
business relationships with the Company, as part of the distribution of the
Securities by the Underwriters, subject to the terms of this Agreement, the
applicable rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. and all other applicable laws, rules and regulations.
To the extent that such shares of Reserved Stock are not orally confirmed for
purchase by such eligible employees or persons having business relationships
with the Company by the end of the first business day after the date of this
Agreement, such shares of Reserved Stock may be offered to the public as part of
the public offering contemplated hereby.
Prior to the purchase and public offering of the U.S. Stock by the
several U.S. Underwriters, the Company and the U.S. Representatives, acting on
behalf of the several U.S. Underwriters, shall enter into an agreement
substantially in the form of Exhibit A hereto (the "U.S. Pricing Agreement").
The U.S. Pricing Agreement may take the form of an exchange of any standard form
of written telecommunication between the Company and the U.S. Representatives
and shall specify such applicable information as is indicated in Exhibit A
hereto. The offering of the U.S. Stock will be governed by this Agreement, as
supplemented by the U.S. Pricing Agreement. From and after the date of the
execution and delivery of the U.S. Pricing Agreement, this Agreement shall be
deemed to incorporate the U.S. Pricing Agreement.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-11 (No. 333-33011) covering the
registration of the Stock under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two
forms of prospectus are to be used in connection with the offering and sale of
the Stock: one
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relating to the U.S. Stock (the "Form of U.S. Prospectus") and one relating to
the International Stock (the "Form of International Prospectus"). The Form of
International Prospectus is identical to the Form of U.S. Prospectus, except for
the front cover and back cover pages and the information under the caption
"Underwriting." The information included in any such prospectus or in any such
Term Sheet, as the case may be, that was omitted from such registration
statement at the time it became effective but that is deemed to be part of such
registration statement at the time it became effective (a) pursuant to paragraph
(b) of Rule 430A is referred to as "Rule 430A Information," or (b) pursuant to
paragraph (d) of Rule 434 is referred to as "Rule 434 Information." Each Form of
U.S. Prospectus and Form of International Prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto and schedules thereto at the time it
became effective and including the Rule 430A Information and the Rule 434
Information, as applicable, is herein called the "Registration Statement." Any
registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations
to register additional shares of Common Stock to be sold in the public offering
of the Securities is herein referred to as the "Rule 462(b) Registration
Statement," and after such filing the term "Registration Statement" shall
include the Rule 462(b) Registration Statement. The final Form of U.S.
Prospectus and the final Form of International Prospectus in the forms first
furnished to the Underwriters for use in connection with the offering of the
Stock are herein called the "U.S. Prospectus" and the "International
Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is
relied on, the terms "U.S. Prospectus" and "International Prospectus" shall
refer to the preliminary U.S. Prospectus dated September __, 1997 and
preliminary International Prospectus dated September __, 1997, respectively,
each together with the applicable Term Sheet, and all references in this
Agreement to the date of such Prospectuses shall mean the date of the applicable
Term Sheet. For purposes of this Agreement, all references tot he Registration
Statement, any preliminary prospectus, the U.S. Prospectus, the International
Prospectus or any Term Sheet or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR").
At or prior to the Closing Time (as hereinafter defined), the Company
will complete a series of transactions described in the Prospectus under the
heading "Formation and Structure of the Company." As part of these transactions,
among other things, the Company has acquired or will acquire, directly or
indirectly, (i) a 100% interest in 20 office properties and a 10% interest in
one office property (the "Office Properties"); (ii) the ground lease encumbering
the Maitland Forum Property (the "Ground Lease"); (iii) two parcels of land
adjacent to two of the
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Properties which can support an aggregate of approximately 370,000 square feet
of development; (iv) options to acquire two parcels of land that can support an
aggregate of 1,800,000 square feet of development, ((i)-(iv) are individually
referred to as a "Property" and collectively referred to as the "Properties"),
and (v) substantially all of the assets of Tower Equities (as defined in the
Prospectus), except for certain Excluded Properties (as defined in the
Prospectus) and Properties Atlantic Inc. related to management, leasing and
tenant/landlord representation businesses (together, the "Management Business").
As used herein, the term "Formation Transactions" shall mean the occurrence of
all of the events described in this paragraph and the other transactions
described in the section of the Prospectus captioned "Formation and Structure of
the Company," and the term "Formation Documents" shall mean all the material
contracts, agreements and other documents executed in connection with the
Formation Transactions.
Section 1. Representations and Warranties of the Company and the
Operating Partnership.
(a) The Company and the Operating Partnership jointly and severally
represent and warrant to each U.S. Underwriter as of the date hereof as of the
date of the U.S. Pricing Agreement (such later date being hereinafter referred
to as the "Representation Date"), as of the Closing Time referred to in Section
2(c) and as of each Date of Delivery referred to in Section 2(b), and agrees
with each U.S. Underwriter as follows:
(i) Compliance with Registration Requirements. At the time the
Registration Statement and any Rule 462(b) Registration Statement
becomes effective and at the Representation Date, the Registration
Statement and any Rule 462(b) Registration Statement will comply in all
material respects with the requirements of the 1933 Act and the 1933
Act Regulations and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Prospectuses, at the Representation Date (unless the term
"Prospectuses" refers to prospectuses that have been provided to the
Underwriters by the Company for delivery to investors in connection
with the offering of the Stock that differ from the Prospectuses on
file at the Commission at the time the Registration Statement become
effective, in which case at the time they are first provided to the
Underwriters for such use) and at the Closing Time and each Date of
Delivery referred to in Section 2(c) hereof, will comply in all
material respects with the requirements of the 1933 Act and the 1933
Act Regulations and will not contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
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were made, not misleading, and the Prospectuses, any preliminary
prospectuses and supplements thereto or prospectus wrapper prepared in
connection therewith, at their respective times of issuance and at the
Closing Time, complied and will comply in all material respects with
any applicable laws or regulations of foreign jurisdictions in which
the Prospectuses and any such preliminary prospectuses, as amended or
supplemented, if applicable, are distributed in connection with the
offer and sale of Reserved Stock; provided, however, that the
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or U.S.
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by or on behalf of any U.S.
Underwriter, concerning such U.S. Underwriter, through the U.S.
Representatives expressly for use in the Registration Statement or the
U.S. Prospectus. If Rule 434 is used, the Company will comply with the
requirements of Rule 434 an the Prospectuses shall not be "materially
different," as such term is used in Rule 434, from the prospectuses
included in the Registration Statement at the time it became effective.
Each preliminary prospectus and the prospectuses filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectuses
delivered to the Underwriters for use in connection with this offering
were identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
(ii) No Stop Order or Proceedings. No stop order suspending
the effectiveness of the Registration Statement or any part thereof has
been issued and, to the knowledge of the Company or the Operating
Partnership, no proceeding for that purpose has been instituted or is
contemplated by the Commission or by the state securities authority of
any jurisdiction. No order preventing or suspending the use of the U.S.
Prospectus has been issued and, to the knowledge of the Company or the
Operating Partnership, no proceeding for that purpose has been
instituted or is contemplated by the Commission or by the state
securities authority of any jurisdiction.
(iii) Independent Accountants. Coopers & Lybrand L.L.P., the
accounting firm that certified the financial statements and supporting
schedules included in the Registration Statement, is an independent
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public accountant as required by the 1933 Act and the 1933 Act
Regulations.
(iv) Financial Statements. The financial statements (including
the related schedules and notes thereto) included in the Registration
Statement and the Prospectuses present fairly the financial position of
the respective entity or entities, or Property or Properties, as
applicable, to which they apply, presented therein at the respective
dates indicated and the results of their operations for the respective
periods specified, and except as otherwise stated in the Registration
Statement, said financial statements have been prepared in conformity
with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the period involved. The financial
statement schedules included in the Registration Statement present
fairly the information required to be stated therein. The selected
combined financial and operating data and the summary selected
financial information included in the Registration Statement present
fairly the information included therein and have been prepared on a
basis consistent with that of the audited financial statements included
in the Registration Statement. The unaudited pro forma condensed
consolidated financial statements and the related notes thereto
included in the Prospectus present fairly the information shown
therein, and have been prepared in accordance with the applicable
requirements of Rules 11-01 and 11-02 of Regulation S-X under the 1933
Act, and the necessary pro forma adjustments have been properly applied
to the historical amounts in the compilation of such information, and
the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the
transactions and circumstances referred to therein. Other than the
historical and pro forma financial statements (and schedules) included
in the Registration Statement and Prospectuses, no other financial
statements (or schedules) are required by the 1933 Act or the 1933 Act
Regulations to be included therein.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given in the Registration
Statement and the Prospectuses, except as otherwise stated therein, (A)
there has been no material adverse change in the condition, financial
or otherwise, or in the earnings, assets, or business affairs of the
Company, the Operating Partnership, the Subsidiaries (as hereinafter
defined) and the Predecessor Entities (as hereinafter defined)
considered as one enterprise, whether or not arising in the ordinary
course of business (a "Material Adverse Change"), (B) no casualty loss
or condemnation or other material adverse event with respect to any
Property has occurred that is material to the Company,
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the Operating Partnership, the Subsidiaries and the Predecessor
Entities considered as one enterprise, (C) there have been no
transactions entered into by the Company, the Operating Partnership,
any Subsidiary or any Predecessor Entity, other than those arising in
the ordinary course of business, which are material with respect to the
Company, the Operating Partnership, the Subsidiaries and the
Predecessor Entities considered as one enterprise, except in connection
with the Formation Transactions, (D) there has been no dividend or
distribution of any kind declared, paid or made by the Company on any
class of its capital stock, by the Operating Partnership with respect
to its partnership interests or by any Subsidiary on any class of its
capital stock or with respect to any equity interests therein, and (E)
there has been no change in the capital stock of the Company, the
partnership interests of the Operating Partnership or the equity
interests of any Subsidiary, or any material increase in the
indebtedness of the Company or the Operating Partnership, except in
connection with the Formation Transactions.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation and is in good
standing under the laws of the State of Maryland, and has all corporate
power and authority to hold its properties, conduct the business in
which it is engaged or proposes to engage as described in the
Prospectus and to enter into and perform its obligations under this
Agreement and the Formation Documents to which it is a party. The
Company is duly qualified as a foreign corporation to transact business
and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure to so qualify or be in good standing would not have a material
adverse effect on the condition, financial or otherwise, or on the
earnings, assets, business affairs or business prospects of the
Company, the Operating Partnership, the Subsidiaries and the
Predecessor Entities considered as one enterprise (a "Material Adverse
Effect").
(vii) Good Standing of the Operating Partnership. The
Operating Partnership has been duly formed and is validly existing as a
limited partnership in good standing under the Delaware Revised Uniform
Limited Partnership Act (the "Delaware Act"), and has partnership power
and authority to own, lease and operate its Properties, to conduct the
business in which it is engaged or proposes to engage as described in
the Prospectus and to enter into and perform its obligations under this
Agreement and the Formation Documents to which it is a party. The
Operating Partnership is duly qualified or registered as a foreign
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partnership to transact business and is in good standing in each
jurisdiction in which such qualification or registration is required
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify or be in
good standing would not result in a Material Adverse Effect. The
Company is the sole general partner of the Operating Partnership.
(viii) Good Standing of the Subsidiaries. The subsidiaries
listed on Exhibit 21 to the Registration Statement (collectively, other
than the Operating Partnership, the "Subsidiaries") are the only
subsidiaries required to be identified as such in the Registration
Statement. Each of the Subsidiaries has been duly organized or formed,
as the case may be, and is validly existing as a partnership,
corporation or limited liability company in good standing under the
laws of its respective jurisdiction of organization, and has all
partnership, corporate or limited liability company power and authority
to own, lease and operate its properties, to conduct the business in
which it is engaged or proposes to engage as described in the
Prospectus, and to enter into and perform its obligations under the
Formation Documents to which it is a party. Each of the Subsidiaries is
duly qualified or registered to transact business as a foreign
partnership, corporation or limited liability company and is in good
standing in each jurisdiction in which such qualification or
registration is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where the failure to so
qualify would not result in a Material Adverse Effect. Each of the
partnership or operating agreements of the Subsidiaries, as applicable,
is in full force and effect.
(ix) Good Standing of the Predecessor Entities. Each of Tower
Equities & Realty Corp. ("Tower") and the companies and partnerships
affiliated with Tower including each entity that currently owns a
Property (collectively, the "Predecessor Entities") has been duly
formed and is validly existing as a partnership, corporation or limited
liability company in good standing under the laws of its state of
formation, and has power and authority to own, lease and operate its
properties, to conduct the business in which it is engaged and to enter
into and perform its respective obligations under the Formation
Documents to which it is a party. Each Predecessor Entity is duly
qualified or registered to transact business and is in good standing in
each jurisdiction in which such qualification or registration is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure to so qualify would
not result in a Material Adverse Effect.
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(x) Capitalization. The authorized capital stock of the
Company is as set forth in the Prospectuses under the caption
"Description of Capital Stock" and the issued and outstanding shares of
capital stock of the Company, as of the Closing Time, will be as are
set forth in the Prospectuses under the caption "Capitalization." All
of such issued and outstanding shares of Common Stock are validly
issued, fully paid and non-assessable, and none of such shares of
Common Stock were issued in violation of preemptive or other similar
rights of any securityholder of the Company. All of the issued and
outstanding shares of Common Stock of the Company have been, or at the
Closing Time will be, issued and sold at or prior to the Closing Time
in compliance with applicable law (including federal and state
securities laws). No capital stock is reserved for any purpose except
in connection with (A) the Formation Transactions, (B) the 1997 Stock
Incentive Plan and the Non-Employee Directors' Plan of the Company as
described in the Prospectuses, and (C) the possible issuance of Common
Stock upon the redemption or exchange of the limited partnership
interests of the Operating Partnership (the "OP Units") pursuant to the
Agreement of Limited Partnership of the Operating Partnership (the
"Partnership Agreement"). Except for OP Units and Common Stock issuable
upon the exercise of options or upon conversion of outstanding debt of
the Company as described in the Prospectuses, there are no outstanding
securities convertible into or exchangeable for any stock of the
Company and no outstanding options, rights (preemptive or otherwise) or
warrants to purchase or to subscribe for such capital stock or any
other securities of the Company, and a sufficient number of shares of
Common Stock has been duly reserved by the Company for issuances
contemplated by clauses (A) - (C). Except as described in the
Registration Statement or the Prospectuses, the Company has not sold or
issued any shares of capital stock during the six-month period
preceding the date of the Prospectuses, including any sales pursuant to
Rule 144A or Regulations D or S under the 1933 Act.
(xi) Authorization and Description of Stock. The shares of
Stock have been duly authorized for issuance and sale to the U.S.
Underwriters pursuant to this Agreement and the International Managers
pursuant to the International Purchase Agreement, respectively, and,
when issued and delivered by the Company pursuant to this Agreement and
the International Purchase Agreement, respectively, against payment of
the consideration set forth in the U.S. Pricing Agreement and the
International Pricing Agreement, respectively, will be validly issued,
fully paid and non-assessable. The terms of the Common Stock conform,
in all material respects, to all statements and descriptions related
thereto contained in the
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Prospectuses and such description conforms, in all material respects,
to the rights set forth in the instruments defining the same. The form
of stock certificate to be used to evidence the Common Stock will be in
due and proper form and will comply with all applicable legal
requirements under Maryland law. The issuance of the Stock is not
subject to any preemptive or other similar rights of any securityholder
of the Company. No holder of Stock will be subject to personal
liability by reason of being such a holder. Other than as disclosed in
the Prospectuses, there are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the 1933 Act
with respect to any securities of the Company owned or to be owned by
such person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration
statement filed by the Company under the 1933 Act.
(xii) Authorization and Description of OP Units. The OP Units
to be issued in the Formation Transactions, including, without
limitation, the OP Units to be issued to the Company, have been duly
authorized for issuance by the Operating Partnership to the holders or
prospective holders thereof, and at the Closing Time or Date of
Delivery will be validly issued and fully paid, except to the extent
that the Company, as general partner of the Operating Partnership, may
have liability as such general partner. The OP Units owned by the
Company are owned directly by the Company, free and clear of all liens,
encumbrances, equities or claims. The OP Units will be owned in the
percentage amounts set forth in the Prospectuses by the Company and by
the persons described in the Prospectuses. All OP Units issued and
outstanding will have been offered and sold at or prior to the Closing
Time in compliance with all applicable laws (including, without
limitation, federal and state securities laws).
(xiii) Absence of Defaults and Conflicts. None of the Company,
the Operating Partnership, or any Subsidiary is in violation of its
charter, bylaws, limited liability company agreement, certificate of
limited partnership or partnership agreement, as the case may be, and
none of the Company, the Operating Partnership, or any Subsidiary is in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
loan agreement, joint venture or partnership agreement, note, lease or
other instrument to which such entity is a party or by which such
entity may be bound, or to which any of the property or assets of such
entity is subject (collectively, "Instruments and
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Agreements"), except where a default thereunder would not result in a
Material Adverse Effect.
(xiv) Authorization of Agreements. (A) This Agreement has been
duly and validly authorized, executed and delivered by the Company and
the Operating Partnership, and assuming due authorization, execution
and delivery by the Representatives, it is a valid and binding
agreement of the Company and the Operating Partnership, enforceable in
accordance with its terms, except as enforcement of rights to indemnity
and contribution may be limited by Federal or state securities laws or
principles of public policy; (B) at the Representation Date, the
Pricing Agreement will have been duly and validly authorized, executed
and delivered by the Company, and assuming due authorization, execution
and delivery by the Representatives, it will be a valid and binding
agreement of the Company and the Operating Partnership, enforceable in
accordance with its terms; (C) at the Closing Time, the Partnership
Agreement will have been duly and validly authorized, executed and
delivered by the Company and, assuming the due authorization, execution
and delivery thereof by each other party thereto, will be a valid and
binding agreement of the Company, enforceable against the Company in
accordance with its terms; (D) at the Closing Time, each of the
Formation Documents to which the Company, the Operating Partnership,
any Subsidiary or any Predecessor Entity is a party pursuant to the
Formation Transactions will have been duly and validly authorized,
executed and delivered by such parties, and, assuming the due
authorization, execution and delivery thereof by each other party
thereto, will be valid and binding agreements of such parties,
enforceable against such parties in accordance with their terms;
provided, however, that the enforceability of each of the foregoing
documents may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally.
(xv) Absence of Default or Conflicts Regarding Formation
Transactions. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby by the
Company and the Operating Partnership, and the execution, delivery and
performance of the Formation Documents and the consummation of the
Formation Transactions by the Company, the Operating Partnership, the
Subsidiaries or the Predecessor Entities do not and will not conflict
with or constitute a breach or violation by any of the Company, the
Operating Partnership, the Subsidiaries or the Predecessor Entities of,
or default or Repayment Event (as defined below) under or result in the
creation or imposition of any lien, charge
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or encumbrance upon any assets, properties or operations of the
Company, the Operating Partnership, any Subsidiary or any Predecessor
Entity pursuant to, (A) any of the Formation Documents; (B) any of the
Agreements and Instruments except for (1) contracts or other agreements
that are terminable at will or are terminable by the other party
thereto on not more than 30 days' notice and (2) operating, service,
equipment or other similar contracts entered into in the ordinary
course (provided that any contract or agreement excepted in (1) above,
and the contracts excepted in (2) above, are not material to the
condition, financial or otherwise, or the earnings, assets, business
affairs or business prospects of the contract party); (C) the charter,
bylaws, limited liability company agreement, certificate of limited
partnership or partnership agreement, as the case may be, of the
Company, the Operating Partnership, any Subsidiary or any Predecessor
Entity; or (D) any applicable law, rule, order, administrative
regulation or administrative or court decree, except in the cases of
clauses (A) & (B), where such conflict, default or Repayment Event
would not result in a Material Adverse Effect. As used herein, a
"Repayment Event" means any event or condition which gives the holder
of any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption of repayment of all or a portion of such indebtedness by the
Company, the Operating Partnership, any Subsidiary or any Predecessor
Entity. The Formation Documents are sufficient to effect the transfer
to the Company or Operating Partnership of all direct or indirect
interests of the Predecessor Entities in the Properties and other
assets specified therein upon payment of the consideration therefor.
(xvi) Absence of Proceedings. There is no action, suit or
proceeding, before or brought by any court or governmental agency or
body, domestic or foreign, now pending, or, to the knowledge of the
Company or the Operating Partnership, threatened against or affecting
the Company, the Operating Partnership, any Subsidiary, any Predecessor
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Entity, any Property, or any executive officer or director of the
Company that is required to be disclosed in the Registration Statement
(other than as disclosed therein) or that, if determined adversely to
the Company, the Operating Partnership, any Subsidiary, any Predecessor
Entity, any Property, or any such executive officer or director, might
(A) result in any Material Adverse Effect or (B) materially and
adversely affect the consummation of the transactions contemplated by
this Agreement or the Formation Documents. The aggregate of all pending
legal or governmental proceedings to which the Company, any Subsidiary,
any Predecessor Entity, any Property or any executive officer or
director is a party or of which any of their respective assets,
properties or operations is the subject which are not described in the
Registration Statement and the Prospectus, including ordinary routine
litigation incidental to the business, could not, reasonably be
expected to result in a Material Adverse Effect.
(xvii) Accuracy of Exhibits. There are no contracts or
documents of the Company, the Operating Partnership, any Subsidiary or
any Predecessor Entity which are required to be described in the
Registration Statement or the Prospectuses or to be filed as exhibits
to the Registration Statement which have not been so described or
filed.
(xviii) REIT Qualification. Commencing with the taxable year
ending December 31, 1997, the Company will be organized in conformity
with the requirements for qualification as a real estate investment
trust under the Internal Revenue Code of 1986, as amended (the "Code")
and its proposed method of operation will enable it to meet the
requirements for taxation as a real estate investment trust under the
Code.
(xix) Investment Company Act. Neither the Company nor the
Operating Partnership is, or at the Closing Time will be, required to
be registered under the Investment Company Act of 1940, as amended (the
"1940 Act").
(xx) Possession of Intellectual Property. The Company and the
Operating Partnership own or possess, or can acquire on reasonable
terms, the trademarks, service marks, trade names, or other
intellectual property (collectively, "Intellectual Property") necessary
to carry on the business now operated by them, and no such entity has
received any notice or is otherwise aware of any infringement of or
conflict with asserted rights of others with respect to any
Intellectual Property and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity
or inadequacy, singly or in the aggregate, would result in a Material
Adverse Effect.
(xxi) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of any court or governmental authority or
agency is necessary or required for performance by the Company, the
Operating Partnership, any Subsidiary or any Predecessor Entity of its
obligations in connection with the offering, issuance or sale of the
Stock under this Agreement and the International Purchase Agreement or
the consummation of any other part of the Formation Transactions,
except
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(i) such as have already been obtained or may be required under the
1933 Act or the 1933 Act Regulations or state securities or real estate
syndication laws, (ii) such as have been obtained under the laws and
regulations of jurisdictions outside the United States in which the
Reserved Stock is offered and sold, and (iii) state filings in
connection with the Formation Transactions (which have or will be made
prior to or at the Closing Time). All material authorizations, consents
and approvals of all non-governmental persons necessary to consummate
the Formation Transactions have been or will be obtained at or prior to
the Closing Time.
(xxii) Possession of Licenses and Permits. Each of the
Company, the Operating Partnership and the Subsidiaries possess such
permits, licenses, approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate
federal, state, or local regulatory agencies or bodies necessary to
conduct the business of such entity in the manner described in the
Registration Statement and Prospectuses, except where the failure to
possess any such Governmental License would not have a Material Adverse
Effect.
The Company, the Operating Partnership and the
Subsidiaries are in material compliance with the terms and conditions
of all such Governmental Licenses, except where the failure so to
comply would not, singly or in the aggregate, result in a Material
Adverse Effect. All of the Governmental Licenses are valid and in full
force and effect, except where the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full
force and effect would not result in a Material Adverse Effect. Neither
the Company nor the Operating Partnership has received any notice of
proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.
(xxiii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or the Operating Partnership exists or, to the
knowledge of the Company or the Operating Partnership, is imminent,
which may reasonably be expected to result in a Material Adverse
Effect.
(xxiv) Listing on NYSE. The Common Stock has been approved for
listing on the New York Stock Exchange subject to notice of issuance.
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(xxv) Title to Property. (A) The Predecessor Entities that
currently own the Properties have, and at the Closing Time or Date of
Delivery and upon consummation of the Formation Transactions, the
Company, the Operating Partnership and/or the Subsidiaries, except for
the Joint Venture Property described below will have, good and
marketable fee simple title to the Properties (or, to the extent
described in the Prospectuses, a valid leasehold estate in the land
underlying such Properties) and all other assets that are used or
useful for the effective operation of such Properties in the manner in
which they currently are operated, subject, however, to existing
mortgages on such Properties as described in the Prospectuses, to
utility easements serving such Properties, to liens of ad valorem taxes
not due and payable as of the Closing Time (or which are being
contested in good faith pursuant to applicable law), to zoning and
similar governmental land use matters affecting such Properties that
are consistent with the current uses of such Properties, other
statutory liens not material in amount and which are not due and
payable as of the Closing Time, title matters which do not materially
detract from the marketability or value, or interfere with the use of,
the Properties or otherwise materially impair the business operations
being conducted or proposed to be conducted thereon, tenant leases,
service marks and trade names used in connection with such Properties,
(which are owned by the Predecessor Entities and to which the Operating
Partnership shall succeed), ownership by others of certain items of
equipment and other items of personal property that are not material to
the conduct of business operations at such Properties; (B) with respect
to the 2800 North Central Property in which the Operating Partnership
will acquire less than all of the ownership interest (the "Joint
Venture Property"), the Predecessor Entity that currently owns such
ownership interests in the Joint Venture Property has, and at the
Closing Time the Operating Partnership will have, good and marketable
title to such ownership interests and the entity owning the Joint
Venture Property has all assets that are used or useful for the
effective operation of such Property in the manner in which it is
currently operated, subject to the exceptions set forth in clause (A)
above; (C) the Ground Lease is in full force and effect, and none of
the Company, the Operating Partnership, or any Subsidiary or any
Predecessor Entity has received notice of the assertion of any claim by
anyone adverse to the tenant's rights as lessee under such lease, or
affecting or questioning such tenant's right to the continued
possession or use of the Property under such lease or of a default
under such lease; (D) all liens, charges, encumbrances, claims, or
restrictions on or affecting any of the Properties and the assets of
the Company, the Operating Partnership, any Subsidiary or any
Predecessor Entity which are required to be disclosed in the Prospectus
are disclosed therein;
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(E) no Predecessor Entity or any tenant of any of the Properties is in
default under any of the leases pursuant to which any Predecessor
Entity, as lessor, leases its Property (and neither the Company nor the
Operating Partnership knows of any event which, but for the passage of
time or the giving of notice, or both, would constitute a default under
any of such leases, other than such defaults that would not result in a
Material Adverse Effect; (F) no person has an option or right of first
refusal to purchase all or part of any Property or any interest
therein; (G) each of the Properties complies with all applicable codes,
laws and regulations (including, without limitation, building and
zoning codes, laws and regulations and laws relating to access to the
Properties), except if and to the extent disclosed in the Prospectuses
and except for such failures to comply that would not individually or
in the aggregate result in a Material Adverse Effect; (H) there is in
effect for the assets of the Company, the Operating Partnership, the
Subsidiaries and the Predecessor Entities (including the Properties)
insurance coverages that are commercially reasonable for the types of
assets owned by them, and neither the Company, the Operating
Partnership, any Subsidiary, nor any Predecessor Entity has received
from any insurance company notice of any material defects or
deficiencies affecting the insurability of any such assets (including
the Properties); and (I) neither the Company nor the Operating
Partnership has knowledge of any pending or threatened condemnation
proceedings, zoning change, or other similar proceeding or action that
will in any manner affect the size of, use of, improvements on,
construction on or access to the Properties, except such proceedings or
actions as are disclosed in the Prospectuses or that would not have a
Material Adverse Effect.
(xxvi) Environmental Laws. Except as disclosed in the
Prospectuses, (A) each Property, including, without limitation, the
Environment (as defined below) associated with such Property, is free
of any Hazardous Substance (as defined below) in violation of any
Environmental Law (as defined below) applicable to such Property,
except for Hazardous Substances that would not result in a Material
Adverse Effect; (B) none of the Company, the Operating Partnership, any
Subsidiary or any Predecessor Entity has caused or suffered to occur
any Release (as defined below) of any Hazardous Substance into the
Environment on, in, under or from any Property in violation of any
Environmental Law applicable to such Property, and no condition exists
on, in, under or, to the knowledge of the Company and the Operating
Partnership, adjacent to any Property that would reasonably be expected
to result in the incurrence of material liabilities or any material
violation of any Environmental Law applicable to such Property or give
rise to the imposition of any Lien (as defined below)
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under any Environmental Law; (C) none of the Company, the Operating
Partnership, any Subsidiary or any Predecessor Entity or to the
Company's knowledge, any tenant or subtenant is engaged in or intends
to engage in any manufacturing at the Properties that (1) requires the
use, handling, transportation, storage, treatment or disposal of any
Hazardous Substance (other than cleaning solvents and similar materials
and other than insecticides and herbicides that are used in the
ordinary course of operating the Properties and in compliance with all
applicable Environmental Laws) or (2) requires permits or is otherwise
regulated pursuant to any Environmental Law; (D) none of the Company,
the Operating Partnership or any Predecessor Entity has received any
notice of a claim under or pursuant to any Environmental Law applicable
to a Property or under common law pertaining to Hazardous Substances on
or originating from any Property; (E) none of the Company, the
Operating Partnership or any Predecessor Entity has received any notice
from any Governmental Authority (as defined below) claiming any
material violation of any Environmental Law that is uncured or
unremediated as of the date hereof; and (F) no Property is included or,
to the knowledge of the Company or the Operating Partnership, proposed
for inclusion on the National Priorities List issued pursuant to CERCLA
(as defined below) by the United States Environmental Protection Agency
(the "EPA") or on the Comprehensive Environmental Response,
Compensation, and Liability Information System database maintained by
the EPA, or has otherwise been identified by the EPA as a potential
CERCLA removal, remedial or response site or included or, to the
knowledge of the Company and the Operating Partnership, proposed for
inclusion on, any similar list of potentially contaminated sites
pursuant to any other applicable Environmental Law and none of the
Company, the Operating Partnership, or any such Predecessor Entity has
received any written notice from the EPA or any other Governmental
Authority proposing the inclusion of any Property on such list and (G)
there are no underground storage tanks located on or in any Property.
As used herein, "Hazardous Substance" shall include, without
limitation, any hazardous substance, hazardous waste, toxic or
dangerous substance, pollutant, solid waste or similarly designated
materials, including, without limitation, oil, petroleum or any
petroleum-derived substance or waste, asbestos or asbestos-containing
materials, PCBs, pesticides, explosives, radioactive materials,
dioxins, urea formaldehyde insulation or any constituent of any such
substance, pollutant or waste, including any such substance, pollutant
or waste identified or regulated under any Environmental Law
(including, without limitation, materials listed in the United States
Department of
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Transportation Optional Hazardous Material Table, 49 C.F.R. Section
172.101, as heretofore amended, or in the EPA's List of Hazardous
Substances and Reportable Quantities, 40 C.F.R. Part 302, as heretofore
amended); "Environment" shall mean any surface water, drinking water,
ground water, land surface, subsurface strata, river sediment,
buildings, structures, and ambient workplace and indoor air;
"Environmental Law" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
Section 9601 et seq.) ("CERCLA"), the Resource Conservation and
Recovery Act of 1976, as amended (42 U.S.C. Section 6901, et seq.), the
Clean Air Act, as amended (42 U.S.C. Section 7401, et seq.), the Clean
Water Act, as amended (33 U.S.C. Section 1251, et seq.), the Toxic
Substances Control Act, as amended (15 U.S.C. Section 2601, et seq.),
the Occupational Safety and Health Act of 1970, as amended (29 U.S.C.
Section 651, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Section 1801, et seq.), and all other federal, state
and local laws, ordinances, regulations, rules, orders, decisions and
permits relating to the protection of the environment or of human
health from environmental effects; "Governmental Authority" shall mean
any federal, state or local governmental office, agency or authority
having the duty or authority to promulgate, implement or enforce any
Environmental Law; "Lien" shall mean, with respect to any Property, any
mortgage, deed of trust, pledge, security interest, lien, encumbrance,
penalty, fine, charge, assessment, judgment or other liability in, on
or affecting such Property; and "Release" shall mean any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, emanating or disposing of any Hazardous
Substance into the Environment, including, without limitation, the
abandonment or discarding of barrels, containers, tanks (including,
without limitation, underground storage tanks) or other receptacles
containing or previously containing any Hazardous Substance or any
release, emission, discharge or similar term, as those terms are
defined or used in any Environmental Law.
(xxvii) Tax Compliance. Each of the Company, the Operating
Partnership, the Subsidiaries and the Predecessor Entities has filed
all federal, state, and local income tax returns which have been
required to be filed and has paid all taxes required to be paid and any
other assessment, fine or penalty levied against it, to the extent that
any of the foregoing is due and payable, except, in all cases, for any
such tax, assessment, fine or penalty that is being contested in good
faith.
(xxviii) No Price Manipulation. Neither the Company nor the
Operating Partnership, nor any of their directors, officers or
controlling
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persons, has taken or will take, directly or indirectly, any action
resulting in a violation of Rule 102 of Regulation M under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or
designed to cause or result in, or that has constituted or that
reasonably might be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Stock.
(xxix) ERISA Compliance. The Company and the Operating
Partnership are in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published administrative interpretations thereunder ("ERISA"); no
"reportable event" (as defined in ERISA) has occurred with respect to
any "pension plan" (as defined in ERISA) which is subject to Title IV
of ERISA and which is sponsored, maintained or contributed to by the
Company or the Operating Partnership; the Company or the Operating
Partnership has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the
Code including the regulations and published administrative
interpretations thereunder; and each "pension plan" which is sponsored,
maintained or contributed to by the Company or the Operating
Partnership that is intended to be qualified under Section 401(a) of
the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause the
loss of such qualification, except in the case of all of the foregoing
provisions for such noncompliance, reportable events, liabilities, or
failures to qualify that would not result in a Material Adverse Effect.
(xxx) Record Keeping. The Company and the Operating
Partnership and the Predecessor Entities (i) make and keep books and
records which are accurate in all material respects and (ii) maintain
internal accounting controls which provide reasonable assurance that
(A) transactions are executed in accordance with management's
authorization, and (B) transactions are recorded as necessary to permit
preparation of their financial statements and to maintain
accountability for their assets.
(xxxi) Foreign Corrupt Practices Act. Neither the Company nor
the Operating Partnership, nor any director, officer, agent, employee
or other person associated with or acting on behalf of the Company or
the Operating Partnership, has used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful
payment to any
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foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
(xxxii) Representations in Formation Documents. All of the
representations and warranties of the Predecessor Entities and their
affiliates, the Company and the Operating Partnership contained in the
Formation Documents are true and correct in all material respects.
(xxxiii) Americans with Disabilities Act. The Company, the
Operating Partnership, the Subsidiaries, and the Predecessor Entities
are currently in substantial compliance with all presently applicable
provisions of the Americans with Disabilities Act, except where such a
failure to comply would not result in a Material Adverse Effect.
(xxxiv) Tax Opinion. The Company has received an opinion of
Battle Fowler LLP, as special tax counsel to the Company, as to certain
federal income tax matters described in the Prospectus and the
Underwriters will be entitled to rely on such opinion.
(xxxv) Insurance. Upon consummation of the Formation
Transactions, the Company, the Operating Partnership and each of the
Subsidiaries will be insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which they will be engaged;
and none of the Company, the Operating Partnership or any of the
Subsidiaries has any reason to believe that any of them will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business.
(xxxvi) Mortgages and Deeds of Trust. Except as set forth in
the Registration Statement and the Prospectuses, the mortgages and
deeds of trust encumbering the properties and assets described in the
Prospectus are not convertible and none of the Company, the Operating
Partnership, any of its Subsidiaries, any Predecessor Entity or, any
person affiliated therewith holds a participating interest therein, and
such mortgages and deeds of trust are not cross-defaulted or
cross-collateralized to any property not owned directly or indirectly
by the Company, the Operating Partnership, or any of its Subsidiaries.
(b) Any certificate signed by any officer of the Company or the
Operating Partnership and delivered to the Global Coordinator, the U.S.
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Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by such entity to each U.S. Underwriter as to the
matters covered thereby.
Section 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Stock. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each U.S. Underwriter, severally and not jointly, and
each U.S. Underwriter, severally and not jointly, agrees to purchase from the
Company, at the price per share set forth in the U.S. Pricing Agreement, the
number of shares of Initial U.S. Stock set forth in Schedule 1 hereto opposite
the name of such U.S. Underwriter (except as otherwise provided in the U.S.
Pricing Agreement), plus any additional number of shares of Initial U.S. Stock
which such U.S. Underwriter may become obligated to purchase pursuant to Section
10 hereof.
If the Company has elected not to rely upon Rule 430A under the 1933
Act Regulations, the initial public offering price and the purchase price per
share to be paid by the several U.S. Underwriters for the U.S. Stock have each
been determined and set forth in the U.S. Pricing Agreement, dated the date
hereof, and an amendment to the Registration Statement and the Prospectuses
reflecting such information will be filed before the Registration Statement
becomes effective.
If the Company has elected to rely upon Rule 430A under the 1933 Act
Regulations, the purchase price per share to be paid by the several U.S.
Underwriters for the U.S. Stock shall be an amount equal to the initial public
offering price, less an amount per share to be determined by agreement among the
U.S. Representatives and the Company. The initial public offering price per
share of the U.S. Stock shall be a fixed price to be determined by agreement
among the U.S. Representatives and the Company. The initial public offering
price and the purchase price, when so determined, shall be set forth in the U.S.
Pricing Agreement. If such prices have not been agreed upon and the U.S. Pricing
Agreement has not been executed and delivered by all parties thereto by the
close of business on the fourth business day following the date of this
Agreement, this Agreement shall terminate forthwith, without liability of any
party to any other party, unless otherwise agreed to by the Company and the
Representatives.
(b) Option Stock. In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the U.S. Underwriters, severally
and not jointly, to purchase up to an additional ____________ shares of U.S.
Option Stock at the price per share set forth in the U.S. Pricing Agreement. The
option hereby granted will expire 30 days after the date hereof (or, if the
Company has
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elected to rely upon Rule 430A under the 1933 Act Regulations, 30 days after the
Representation Date) and may be exercised in whole or in part from time to time
only for the purpose of covering over-allotments which may be made in connection
with the offering and distribution of the Initial U.S. Stock upon written notice
by the U.S. Representatives to the Company setting forth the number of shares of
U.S. Option Stock as to which the several U.S. Underwriters are then exercising
the option and the time, date and place of payment and delivery for such U.S.
Option Stock. Any such time and date of delivery (a "Date of Delivery") shall be
determined by the U.S. Representatives but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to the
Closing Time (nor, if such exercise is after the Closing Time, prior to the
third business day after such exercise), as hereinafter defined, unless
otherwise agreed upon by the U.S. Representatives and the Company. If the option
is exercised as to all or any portion of the U.S. Option Stock, the U.S. Option
Stock shall be purchased by the U.S. Underwriters, severally and not jointly, in
proportion to their respective Initial U.S. Stock underwriting obligations as
set forth in Schedule 1 hereto.
(c) Payment and Denominations. Payment of the purchase price for and
delivery of certificates for the Initial Stock shall be made at the offices of
Hogan & Hartson L.L.P., 555 13th Street, N.W., Washington, D.C. 20004-1109 or at
such other place as shall be agreed upon by the Global Coordinator and the
Company, at 11:00 a.m. on the third business day (or, if pricing takes place
after 4:30 p.m., on the fourth business day) following the date the Registration
Statement becomes effective, or such other time as shall be agreed upon by the
Representatives and the Company (such time and date of payment and delivery
being herein called the "Closing Time"). In addition, if any or all of the U.S.
Option Stock is purchased by the U.S. Underwriters, payment of the purchase
price for and the delivery of such U.S. Option Stock shall be made at the
above-mentioned offices of Hogan & Hartson L.L.P. or at such other place as
shall be mutually agreed upon by the Global Coordinator and the Company, on each
Date of Delivery as specified in the notice from the Global Coordinator to the
Company. Payment shall be made to the Company by wire transfer of same day funds
payable to the order of the Company, against delivery to the U.S.
Representatives for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Stock to be purchased by them. The certificates for
the Initial U.S. Stock and the U.S. Option Stock shall be in such authorized
denominations and registered in such names as the U.S. Representatives may
request in writing at least two business days before the Closing Time or each
Date of Delivery, as the case may be. It is understood that each U.S.
Underwriter has authorized the U.S. Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for the Initial
U.S. Stock and the U.S. Option Stock, if any, which it has agreed to purchase.
Merrill Lynch, individually and not as representative of the U.S. Underwriters,
may (but shall not be obligated to) make payment of the purchase price for the
U.S. Stock to be purchased by any U.S. Underwriter whose check has
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not been received by the Closing Time, but such payment shall not relieve such
U.S. Underwriter from its obligations hereunder. The certificates for the
Initial U.S. Stock and the U.S. Option Stock will be made available for
examination and packaging by the U.S. Representatives not later than 10:00 a.m.
on the last business day prior to the Closing Time or each Date of Delivery, as
the case may be.
Section 3. Covenants of the Company and the Operating Partnership. Each
of the Company and the Operating Partnership covenants with each U.S.
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests. The
Company will use its best efforts to cause the Registration Statement to become
effective as promptly as possible and will notify the Representatives promptly,
and confirm the notice in writing if requested, (i) of the effectiveness of the
Registration Statement and any amendment thereto (including any post-effective
amendment), (ii) of the receipt of any comments from the Commission with respect
to the Registration Statement, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to the
Prospectuses or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the initiation by the Commission of any proceedings for that
purpose. The Company will make every reasonable effort to prevent the issuance
of any such stop order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global Coordinator
notice of its intention to file or prepare any amendment to the Registration
Statement (including any post-effective amendment) or any amendment or
supplement to the Prospectuses (including any revised prospectus that the
Company proposes for use by the Underwriters in connection with the offering of
the Stock that differs from the prospectuses on file at the Commission at the
time the Registration Statement becomes effective, whether or not such revised
prospectuses are required to be filed pursuant to Rule 424(b) of the 1933 Act
Regulations), will furnish the U.S. Representatives with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectuses to which the U.S. Representatives or
counsel for the U.S. Underwriters shall reasonably object.
(c) Delivery of Registration Statements. The Company will deliver to
the U.S. Representatives, as soon as available, as many signed copies of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein) as the
U.S. Representatives may reasonably request (but in no event more than five) and
will
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also deliver to the U.S. Representatives as many conformed copies of the
Registration Statement as originally filed and of each amendment thereto
(excluding exhibits) as the U.S. Representatives may reasonably request. The
copies of the Registration Statement and each amendment thereto will be
identical to the electronically transmitted copies thereof filed with the
Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectus. The Company will furnish to each U.S.
Underwriter, from time to time during the period when the U.S. Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, such number of
copies of the U.S. Prospectus (as amended or supplemented) as such U.S.
Underwriter may reasonably request for the purposes contemplated by the 1933 Act
or the 1934 Act or the respective applicable rules and regulations of the
Commission thereunder. The U.S. Prospectus and any amendments or supplements
thereto will be identical to the electronically transmitted copies thereof filed
with the Commission pursuant to EDGAR, except to the extent permitted by
Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations so as to permit the completion of
the distribution of the Securities as contemplated in this Agreement, the
International Purchase Agreement and in the Prospectuses. If any event shall
occur as a result of which it is necessary, in the reasonable opinion of counsel
for the U.S. Underwriters, to amend or supplement the Prospectuses in order to
make the Prospectuses not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances existing at the time it is delivered to a
purchaser, not misleading, or in order to otherwise comply with the 1933 Act or
the 1934 Act, the Company will forthwith prepare an amendment of or supplement
to the Prospectuses (in form and substance reasonably satisfactory to counsel
for the U.S. Underwriters) which will amend or supplement the Prospectuses so
that they will not contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time they are delivered to a
purchaser, not misleading, and the Company will furnish to the U.S. Underwriters
a reasonable number of copies of such amendment or supplement.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the U.S. Underwriters, to qualify the Stock for offering and
sale under the applicable securities laws and real estate syndication laws of
such states and other jurisdictions (domestic or foreign) of the United States
as the Global Coordinator may designate; provided, however, that the Company
shall not be obligated to (i) file any general consent to service of process,
(ii) qualify as a foreign corporation in any jurisdiction in which it is not so
qualified or (iii) take any action that would subject it to income taxation in
any such jurisdiction. In each
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jurisdiction in which the Stock has been so qualified, the Company will file
such statements and reports as may be required by the laws of such jurisdiction
to continue such qualification in effect for a period of not less than one year
from the effective date of the Registration Statement and any Rule 462(b)
Registration Statement.
(g) Earning Statement. The Company will make generally available to its
security holders as soon as practicable, but not later than 90 days after the
close of the period covered thereby, an earning statement (in form complying
with the provisions of Rule 158 of the 1933 Act Regulations) covering a 12-month
period beginning not later than the first day of the Company's fiscal quarter
next following the "effective date" (as defined in such Rule 158) of the
Registration Statement.
(h) Use of Proceeds. The Company will use the net proceeds received by
it from the sale of the Stock in the manner specified in the Prospectuses under
the caption "Use of Proceeds."
(i) Listing. The Company will use its best efforts to effect the
listing of the Stock on the New York Stock Exchange.
(j) Restriction on Sale of Securities. During the period from the date
of the U.S. Pricing Agreement until 365 days after the Representation Date, the
Company and the Operating Partnership will not, without the prior written
consent of the Global Coordinator, which will not be unreasonably withheld,
directly or indirectly, sell, offer to sell, grant any option for the sale of,
or otherwise dispose of, any Common Stock or OP Units (except for Common Stock
or OP Units issued in transactions exempt from registration under the 1933 Act,
including in connection with the acquisition directly or indirectly of assets)
or any other security convertible into or exchangeable into or exercisable for
the Common Stock, otherwise than (i) in accordance with this Agreement, (ii) in
connection with the employee benefit plans and employee and director stock
option plans which are filed as exhibits to the Registration Statement, (iii)
Common Stock issued upon redemption or exchange of OP Units (provided the
recipients, if applicable, remain subject to the lock-up provisions contained in
Section 3(k) below), or (iv) as contemplated in the Prospectus.
(k) Lock-Up Agreements. Each of the Company and the Operating
Partnership will use its best efforts to cause, or have caused, each person or
entity listed on Schedule 1 to Exhibit C hereto who will hold Common Stock
(other than the Stock) or OP Units at the Closing Time to enter into agreements
substantially in the form of Exhibit C hereto (the "Lock-Up Agreements").
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(l) REIT Qualification. The Company will use its reasonable best
efforts to meet the requirements to qualify, effective beginning with the fiscal
year ending December 31, 1997, as a "real estate investment trust" under the
Code.
(m) Amendments to Prospectuses. If, at the time that the Registration
Statement becomes effective, any information shall have been omitted therefrom
in reliance upon Rule 430A of the 1933 Act Regulations, then immediately
following the execution of the U.S. Pricing Agreement, the Company will prepare
and file or transmit for filing with the Commission, in accordance with such
Rule 430A and Rule 424(b) of the 1933 Act Regulations, copies of the amended
Prospectuses, or, if required by such Rule 430A, a post-effective amendment to
the Registration Statement (including the amended Prospectuses), containing all
information so omitted.
(n) Form SR Reports. The Company will file with the Commission such
reports on Form SR as may be required pursuant to Rule 463 of the 1933 Act
Regulations.
(o) Price Stabilization or Manipulation. Except for the authorization
of actions permitted to be taken by the U.S. Underwriters as contemplated herein
or in the Prospectuses, neither the Company nor the Operating Partnership will
(i) take, directly or indirectly, any action designed to cause or to result in,
or that might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Stock, (ii) sell, bid for or purchase the Stock or pay any
person any compensation for soliciting purchases of the Stock or (iii) pay or
agree to pay to any person any compensation for soliciting another to purchase
any other securities of the Company.
(p) Reports to Global Coordinator. During the period from the Closing
Time until five years after the Closing Time, the Company will deliver to the
Global Coordinator, (i) promptly upon their becoming available, copies of all
current, regular and periodic reports of the Company mailed to its shareholders
or filed with any securities exchange or with the Commission or any governmental
authority succeeding to any of the Commission's functions, and (ii) such other
information concerning the Company, the Operating Partnership, or any Subsidiary
as the Global Coordinator may reasonably request.
(q) Accuracy of Representations. Prior to the Closing Time, the Company
and the Operating Partnership will notify the Global Coordinator in writing
immediately if any event occurs that renders any of the representations and
warranties of the Company and the Operating Partnership contained in this
Agreement or the International Purchase Agreement inaccurate or incomplete in
any respect.
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(r) Obligations under Formation Documents. Subject to the terms
thereof, the Company and the Operating Partnership will use their best efforts
to do and perform their respective obligations under the Formation Documents to
which they are parties to the extent required to consummate the transactions
contemplated thereby and all things required to be done or performed prior to
the Closing Time pursuant to this Agreement.
(s) Compliance with NASD Rules. The Company hereby agrees that it will
use its best efforts to ensure that the Reserved Stock will be restricted as
required by the National Association of Securities Dealers, Inc. (the "NASD") or
the NASD rules from sales, transfer, assignment, pledge or hypothecation for a
period of three months following the date of this Agreement. The Underwriters
will notify the Company as to which persons will need to be so restricted. Upon
such notification, the Company will direct the transfer agent to place a stop
transfer restriction upon such securities for such period of time. Should the
Company release, or seek to release, from such restrictions any of the Reserved
Stock, the Company agrees to reimburse the Underwriters for any reasonable
expenses (including, without limitation, legal expenses) they incur in
connection with such release.
Section 4. Payment of Fees and Expenses.
(a) Expenses. The Company will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including the
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing, and delivery of the Prospectuses, and
the preparation and delivery of this Agreement and the International Purchase
Agreement, the U.S. Pricing Agreement and the International Pricing Agreement
and such other documents as may be required in connection with the offering,
purchase, sale, issuance or delivery of the Stock to the Underwriters and the
transfer of the Stock between the U.S. Underwriters and the International
Managers, (iii) the preparation, issuance and delivery of the certificates for
the Stock to the Underwriters including any transfer taxes and any stamp or
other duties payable upon the sale issuance or delivery of the Stock, (iv) the
fees and disbursements of the Company's counsel, accountants, and other advisors
or agents (including transfer agents and registrars), (v) the qualification of
the Stock under state securities laws and real estate syndication laws in
accordance with the provisions of Section 3(f) hereof, including filing fees and
the fees and disbursements of counsel for the Underwriters in connection
therewith and in connection with the preparation, printing and delivery of the
Blue Sky Memorandum, and any amendment thereto, (vi) the printing and delivery
to the Underwriters of copies of the Registration Statement as originally filed
and of each amendment thereto, of the preliminary prospectuses, and of the
Prospectuses and any amendments or
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supplements thereto, (vii) the fee of the NASD, including the fees and
disbursements of counsel for the Underwriters in connection with the NASD's
review of the terms of the proposed public offering of the Stock, (viii) the
fees and expenses incurred in connection with the listing of the Common Stock on
the New York Stock Exchange, including filing and listing fees, and (ix) fees
and disbursements of counsel for the Underwriters in connection with matters
related to the Reserved Stock that are designated by the Company for sale to
employees and others.
(b) Termination of the Agreement. If this Agreement is canceled or
terminated by the U.S. Representatives in accordance with the provisions of
Section 5 or Section 9(a)(i) hereof, the Company also shall reimburse the
Underwriters for all of their out-of-pocket expenses, including the reasonable
fees and disbursements of counsel for the U.S. Underwriters.
Section 5. Conditions of U.S. Underwriters' Obligations. The
obligations of the U.S. Underwriters hereunder are subject to the accuracy, as
of the date hereof and at the Closing Time or Date of Delivery, of the
representations and warranties of the Company and the Operating Partnership
herein contained or in certificates of any officer of the Company or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company and the Operating Partnership of their respective
obligations hereunder, and to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration Statement
shall have become effective not later than 5:30 p.m. on the date hereof, or with
the consent of the Representatives, at a later time and date, not later,
however, than 5:30 p.m. on the first business day following the date hereof, or
at such later time and date as may be approved by a majority in interest of the
Underwriters; any Rule 462(b) Registration Statement shall have been filed and
become effective within the time periods specified by Rule 462(b); and at the
Closing Time or Date of Delivery no stop order suspending the effectiveness of
the Registration Statement or any Rule 462(b) Registration Statement shall have
been issued under the 1933 Act or proceedings therefor initiated or threatened
by the Commission. If the Company has elected to rely upon Rule 430A of the 1933
Act Regulations, the price of the Stock and any price-related information
previously omitted from the effective Registration Statement pursuant to such
Rule 430A shall have been transmitted to the Commission for filing pursuant to
Rule 424(b) of the 1933 Act Regulations within the prescribed time period, and
prior to the Closing Time the Company shall have provided evidence satisfactory
to the Global Coordinator of such timely filing, or a post-effective amendment
providing such information shall have been promptly filed and declared effective
in accordance with the requirements of Rule 430A of the 1933 Act Regulations.
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(b) Opinion of Counsel for Company. At the Closing Time, the
Representatives shall have received the favorable opinion, dated as of the
Closing Time, of Battle Fowler LLP, counsel for each of the Company, the
Operating Partnership, the Subsidiaries, and the Predecessor Entities, in form
and substance satisfactory to counsel for the U.S. Underwriters, together with
signed or reproduced copies of such letter for each of the other U.S.
Underwriters, to the effect set forth in Exhibit B hereto.
(c) Opinion of Counsel for Underwriters. At the Closing Time the U.S.
Representatives shall have received the favorable opinion, dated as of the
Closing Time, of Hogan & Hartson L.L.P., counsel for the U.S. Underwriters, with
respect to the matters set forth in Items (1) (first sentence only), (2) (first
sentence only), (6) (first three sentences only), (9) (with respect to this
Agreement and the U.S. Pricing Agreement only), (14) and (15) of Exhibit B
hereto and a statement similar to the statement referred to in the penultimate
paragraph of Exhibit B hereto. In giving the opinions described in paragraphs
(b) and (c) above, each counsel may rely, as to all matters governed by the laws
of jurisdictions other than the law of the State of New York, the District of
Columbia, the federal law of the United States and the General Corporation Law
of the State of Delaware, upon the opinions of counsel satisfactory to the U.S.
Representatives. Such counsel may also state that, insofar as such opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company, the Operating Partnership and the
Subsidiaries and certificates of public officials.
In giving the opinions described in paragraphs (b) and (c) above, each
counsel may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York, the District of Columbia, the federal law
of the United States and the General Corporation Law of the State of Delaware,
upon the opinions of counsel satisfactory to the U.S. Representatives. Such
counsel may also state that, insofar as such opinion involves factual matters,
they have relied, to the extent they deem proper, upon certificates of officers
of the Company, the Operating Partnership and the Subsidiaries and certificates
of public officials.
(d) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectuses, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospectus of the Company, the Operating Partnership, the Subsidiaries and the
Predecessor Entities considered as one enterprise, whether or not arising in the
ordinary course of business, and the U.S. Representatives shall have received a
certificate of the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company and appropriate officers of
the Company, as General Partner, on behalf of the Operating Partnership, dated
as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the
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representations and warranties in Section 1(a) hereof are true and correct with
the same force and effect as though expressly made at and as of Closing Time,
(iii) the Company has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied at or prior to Closing Time, and (iv)
no stop order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been instituted or are
pending or are contemplated by the Commission.
(e) Accountant's Comfort Letter. At the time of execution of this
Agreement, the U.S. Representatives shall have received from Coopers & Lybrand
L.L.P. a letter dated such date, in form and substance satisfactory to the U.S.
Representatives, containing statements and information of the type ordinarily
included in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
Registration Statement and the Prospectuses. (f) Accountant's Letter at Closing
Time. At the Closing Time, the U.S. Representatives shall have received from
Coopers & Lybrand L.L.P. a letter dated as of the Closing Time to the effect
that they reaffirm the statements made in the letter furnished pursuant to
subsection (e) of this Section 5, except that the "specified date" referred to
shall be a date not more than three business days prior to the Closing Time.
(g) Additional Documents. At the Closing Time, counsel for the U.S.
Underwriters shall have been furnished with such documents and opinions as they
may reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Stock as herein contemplated and related proceedings,
or in order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein contained, and
all proceedings taken by the Company in connection with the issuance and sale of
the Stock as herein contemplated shall be reasonably satisfactory in form and
substance to the U.S. Representatives and counsel for the U.S. Underwriters.
(h) Approval of Listing. At or prior to the Closing Time, the Common
Stock shall have been duly listed, subject to official notice of issuance, on
the New York Stock Exchange.
(i) No Objection. At or prior to the Closing Time, the NASD shall have
confirmed that it has not raised any objection with respect to the fairness and
reasonableness of the underwriting terms and arrangements.
(j) Lock-Up Agreements. At the Closing Time, the U.S. Representatives
shall have received the Lock-Up Agreements.
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(k) Formation Transactions. At or prior to the Closing Time, all of the
Formation Transactions shall have occurred.
(l) Over-Allotment Option. If the U.S. Underwriters exercise their
option provided in Section 2(b) hereof to purchase all or any portion of the
U.S. Option Stock, the representations and warranties of the Company and the
Operating Partnership contained herein and the statements in any certificates
furnished by the Company and the Operating Partnership hereunder shall be true
and correct as of each Date of Delivery, and the U.S. Representatives shall have
received:
(i) A certificate of the Chief Executive Officer of the
Company and the Operating Partnership and the chief financial or chief
accounting officer of each such entity, dated such Date of Delivery,
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(d) hereof remains true and correct as of such Date of
Delivery.
(ii) The favorable opinion of Battle Fowler LLP, counsel for
each of the Company and the Operating Partnership, in form and
substance satisfactory to counsel for the Underwriters, dated such Date
of Delivery, relating to the Option Stock and otherwise to the same
effect as the opinion and statement required by Section 5(b) hereof.
(iii) The favorable opinion of Hogan & Hartson L.L.P., counsel
for the U.S. Underwriters, dated such Date of Delivery, relating to the
U.S. Option Stock and otherwise to the same effect as the opinion and
statement required by Section 5(c) hereof.
(iv) A letter from Coopers & Lybrand L.L.P., in form and
substance satisfactory to the U.S. Representatives, dated such Date of
Delivery, substantially the same in scope and substance as the letter
furnished to the U.S. Representatives pursuant to Section 5(f) hereof,
except that the "specified date" in the letter furnished pursuant to
this Section 5(m)(iv) shall be a date not more than three business days
prior to such Date of Delivery.
(m) The Company shall have furnished the U.S. Representatives a letter
of Landauer Associates, Inc., addressed to the U.S. Underwriters and dated each
Date of Delivery (i) confirming that they are independent real estate service
experts retained by the Company, and (ii) confirming the conclusions and
findings of such firm, with respect to the information and other matters
contained in the Registration Statement (or filed as an exhibit thereto)
attributed to them.
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(n) The Company and a lender shall have entered into a definitive
agreement for the Term Loan (as defined in the Prospectuses).
(o) The Concurrent Private Placement (as defined in the Prospectuses)
shall have been consummated.
(p) Termination of Agreement. If any condition specified in this
Section 5 shall not have been fulfilled when and as required to be fulfilled,
this Agreement may be terminated by the U.S. Representatives by notice to the
Company at any time at or prior to the Closing Time or Date of Delivery, and
such termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 6, 7 and 8 shall
survive such termination and remain in full force and effect.
Section 6. Indemnification.
(a) Indemnification of U.S. Underwriters. Each of the Company and the
Operating Partnership agrees, jointly and severally, to indemnify and hold
harmless each U.S. Underwriter and each person, if any, who controls any U.S.
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act, and any director, officer, employee or affiliate thereof, as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
information deemed to be part of the Registration Statement pursuant to
Rule 430A(b) of the 1933 Act Regulations, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or
the Prospectuses (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that
neither the Company nor the Operating Partnership shall be required
under this subsection (i) to indemnify any U.S. Underwriter with
respect to any loss, liability, claim, damage or expense to the extent
such loss, liability, claim, damage or expense arises out of any untrue
statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to
the Company by any U.S. Underwriter, concerning such U.S. Underwriter
furnished to the Company through the U.S.
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Representatives by or on behalf of any U.S. Underwriter, expressly for
use in the Registration Statement (or any amendment thereto) or the
Prospectuses (or any amendment or supplement thereto), provided,
further that the foregoing indemnification with respect to any
preliminary prospectus shall not inure to the benefit of any U.S.
Underwriter (or any person controlling such U.S. Underwriter) from whom
the person asserting any such losses, claims, damages or liabilities
purchased any of the Stock if a copy of the Prospectuses (as then
amended or supplemented by the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on
behalf of such U.S. Underwriter to such person, if such is required by
law, at or prior to the written confirmation of the sale of such Stock
to such person and if the Prospectuses (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage or
liability.
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of the Formation
Transactions (including the transactions contemplated by the Formation
Documents);
(iii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever for which indemnification is provided under
subsection (i) or (ii) above, if such settlement is effected with the
written consent of the Company and the Operating Partnership; and
(iv) against any and all expense whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel
chosen by the U.S. Representatives) reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceedings by any governmental agency or body,
commenced or threatened, or any claim whatsoever for which
indemnification is provided under subsection (i) or (ii) above, to the
extent that any such expense is not paid under subsection (i), (ii) or
(iii) above.
(b) Indemnification of Company, Directors, and Officers. Each U.S.
Underwriter severally agrees to indemnify and hold harmless the Company and the
Operating Partnership, and each person, if any, who controls the Company or the
Operating Partnership within the meaning of Section 15 of the 1933 Act or
Section
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20 of the 1934 Act, and any director, officer, employee or affiliate thereof,
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsections (a)(i), (iii) and (iv) of this Section 6, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or any preliminary prospectus or the U.S. Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by any U.S. Underwriter, or concerning such
U.S. Underwriter furnished to the Company through the U.S. Representatives by or
on behalf of any U.S. Underwriter, expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectuses (or any amendment or
supplement thereto). The Company acknowledges that (i) the statements set forth
in the last paragraph of the cover page, (ii) the names of the U.S.
Representatives appearing on the front cover page and the back cover page of the
U.S. Prospectus, (iii) the paragraph regarding stabilization on the inside cover
page of the U.S. Prospectus and in the first (including the list of names of the
U.S. Underwriters and numbers of shares of Stock to be purchased by the U.S.
Underwriters), second, eighth and tenth through thirteenth paragraphs under the
caption "Underwriting" in the U.S. Prospectus constitute the only information
furnished in writing by or on behalf of any U.S. Underwriter expressly for use
in the Registration Statement (or any amendment thereto) or the U.S. Prospectus
(or any amendment or supplement thereto).
(c) Actions Against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
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body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iv) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Stock. In connection with the offer
and sale of the Reserved Stock, the Company agrees, promptly upon a request in
writing, to indemnify and hold harmless the Underwriters from and against any
and all losses, liabilities, claims, damages and expenses incurred by them as a
result of the failure of eligible employees and persons having business
relationships with the Company to pay for and accept delivery of Reserved Stock
which, by the end of the first business day following the date of this
Agreement, were subject to a properly confirmed agreement to purchase.
Section 7. Contribution. If the indemnification provided for in Section
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages and
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Operating Partnership, on the one hand, and the U.S. Underwriters, on the other
hand, from the offering of the Stock pursuant to this Agreement or (ii) if the
allocation by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the Operating
Partnership, on the one hand, and of the U.S. Underwriters, on the other hand,
in connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
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The relative benefits received by the Company, on the one hand, and the
U.S. Underwriters, on the other hand, in connection with the offering of the
Stock pursuant to this Agreement shall be deemed to be in the same respective
proportions as the total net proceeds from the offering of such U.S. Stock
(before deducting expenses) received by the Company and the total underwriting
discount received by the U.S. Underwriters, in each case as set forth on the
cover of the U.S. Prospectus, bear to the aggregate initial public offering
price of such U.S. Stock as set forth on such cover.
The relative fault of the Company, on the one hand, and the U.S.
Underwriters, on the other hand, shall be determined by reference to, among
other things, whether any such untrue of alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or by the U.S. Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Operating Partnership and the U.S. Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the U.S. Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the U.S. Stock underwritten by it and distributed to the
public was offered to the public exceeds the amount of any damages which such
U.S. Underwriter has otherwise been required to pay by reason of any such untrue
or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and
37
<PAGE> 38
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The U.S. Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of shares of Stock set forth opposite their respective
names in Schedule 1 to this Agreement, and not joint.
Section 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement and the U.S. Pricing Agreement, or contained in certificates of
officers of the Company or the Operating Partnership submitted pursuant hereto,
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or any controlling person,
or by or on behalf of the Company or the Operating Partnership, and shall
survive delivery of the Stock to the U.S. Underwriters.
Section 9. Termination of Agreement.
(a) The U.S. Representatives may terminate this Agreement, by notice to
the Company, at any time at or prior to the Closing Time or Date of Delivery,
(i) if there has been, since the date of this Agreement or since the respective
dates as of which information is given in the U.S. Prospectus, any Material
Adverse Change, (ii) if there has occurred any material adverse change in the
financial markets in the United States or any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political,
financial, or economic conditions in each case, the effect of which is such as
to make it, in the U.S. Representatives' reasonable judgment, impracticable to
market the Stock or enforce contracts for the sale of the Stock, (iii) if
trading in the Common Stock has been suspended or limited by the Commission or
the New York Stock Exchange, or if trading generally on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ Stock Market has been
suspended, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by either of said exchanges or by such
system or by order of the Commission, the NASD or any other governmental
authority, or (iv) if a banking moratorium has been declared by either federal,
New York or Maryland authorities, or (v) pursuant to Section 10(b) below.
(b) If this Agreement is terminated pursuant to this Section 9, such
termination shall be without liability of any party to any other party except as
provided in Sections 4 and 10 hereof and provided further that Sections 1, 4, 6,
7, and 8 hereof shall survive such termination and remain in full force and
effect.
38
<PAGE> 39
Section 10. Default by One or More of the U.S. Underwriters. If one or
more of the U.S. Underwriters shall fail at the Closing Time to purchase the
Stock which it or they are obligated to purchase under this Agreement and the
U.S. Pricing Agreement (the "Defaulted Stock"), the U.S. Representatives shall
have the right, within 24 hours thereafter, to make arrangements for one or more
of the non-defaulting U.S. Underwriters, or any other underwriters, to purchase
all, but not less than all, of the Defaulted Stock in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of shares of Defaulted Stock does not exceed
10% of the number of shares of U.S. Stock to be purchased on such date
pursuant to this Agreement, the non-defaulting U.S. Underwriters shall
be obligated, severally and not jointly, to purchase the full amount
thereof in the proportions that their respective underwriting
obligations under the Agreement bear to the underwriting obligations of
all non-defaulting U.S. Underwriters.
(b) if the number of shares of Defaulted Stock exceeds 10% of
the number or shares of U.S. Stock to be purchased on such date
pursuant to this Agreement, such Agreement (or, with respect to the
U.S. Underwriters' exercise of any applicable over-allotment option for
the purchase of U.S. Option Stock on a Date of Delivery after the
Closing Time, the obligations of the U.S. Underwriters to purchase, and
the Company to sell, such U.S. Option Stock on such Date of Delivery)
shall terminate without liability on the part of any non-defaulting
U.S. Underwriter.
No action taken pursuant to this Section 10 shall relieve any
defaulting U.S. Underwriter from liability in respect of its default.
In the event of any such default which does not result in (i) a
termination of this Agreement or (ii) in the case of a Date of Delivery after
the Closing Time, a termination of the obligations of the U.S. Underwriters and
the Company with respect to the related U.S. Option Stock, as the case may be,
either the U.S. Representatives or the Company shall have the right to postpone
the Closing Time or the relevant Date of Delivery, as the case may be, for a
period not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectuses or in any other documents or
arrangements.
Section 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representatives c/o Merrill Lynch at
39
<PAGE> 40
Merrill Lynch World Headquarters, North Tower, World Financial Center, New York,
New York 10281-1305, attention of John Brady, Director; notices to either the
Company or the Operating Partnership shall be directed to it at 120 West 45th
Street, 24th Floor, New York, New York 10036, attention of Lawrence H. Feldman,
Chairman, Chief Executive Officer and President.
Section 12. Parties. This Agreement and the U.S. Pricing Agreement
shall each inure to the benefit of and be binding upon the parties hereto and
thereto and their respective successors. Nothing expressed or mentioned in this
Agreement or the U.S. Pricing Agreement is intended or shall be construed to
give any person, firm or corporation, other than the U.S. Underwriters and the
Company and the Operating Partnership and their respective successors and the
controlling persons and officers and trustees referred to in Sections 6 and 7
and their successors, heirs and legal representatives, any legal or equitable
right, remedy or claim under or in respect of this Agreement or the U.S. Pricing
Agreement or any provision herein or therein contained. This Agreement and the
U.S. Pricing Agreement and all conditions and provisions hereof and thereof are
intended to be for the sole and exclusive benefit of the parties hereto and
thereto and their respective successors and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Stock from any
U.S. Underwriter shall be deemed to be a successor by reason merely of such
purchase.
Section 13. Governing Law and Time. THIS AGREEMENT AND THE PRICING
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID
STATE. SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
Section 14. Effect of Headings. The Article, Section and Sub-Section
headings herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
40
<PAGE> 41
If the foregoing is in accordance with your understanding of our
agreement please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the U.S. Underwriters, the Company and the Operating Partnership in
accordance with its terms.
Very truly yours,
TOWER REALTY TRUST, INC.
By:_________________________________
Lawrence H. Feldman
Chairman, Chief Executive Officer
and President
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc.
General Partner
By:_________________________________
Lawrence H. Feldman
Chairman, Chief Executive Officer
and President
41
<PAGE> 42
Confirmed and Accepted, as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
LEGG MASON WOOD WALKER INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:_________________________________
Authorized Representative
For themselves and as U.S. Representatives of the other
U.S. Underwriters named in Schedule 1 hereto
42
<PAGE> 43
SCHEDULE 1
<TABLE>
<CAPTION>
Underwriter Number of Shares
Common Stock
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................
Legg Mason Wood Walker Incorporated.............
Morgan Stanley & Co. Incorporated...............
Prudential Securities Incorporated..............
Smith Barney Inc................................
Total .................................
</TABLE>
<PAGE> 44
EXHIBIT A
8,080,000 SHARES
TOWER REALTY TRUST, INC.
(a Maryland corporation)
Common Stock
($.01 Par Value Per Share)
U.S. PRICING AGREEMENT
September , 1997
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
LEGG MASON WOOD WALKER INCORPORATED
MORGAN STANLEY & CO., INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
as Representatives of the several Underwriters
c/o MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Dear Ladies and Gentlemen:
Reference is made to the U.S. Purchase Agreement, dated _____________,
1997 (the "U.S. Purchase Agreement"), relating to the purchase by the several
U.S. Underwriters named in Schedule 1 thereto, for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Legg Mason Wood Walker, Incorporated, Prudential
Securities Incorporated and Smith Barney Inc. are acting as U.S. Representatives
(the "U.S. Representatives"), of the above Common Stock (the "Stock") of Tower
Realty Trust, Inc. (the "Company").
<PAGE> 45
Pursuant to Section 2 of the U.S. Purchase Agreement, the Company
agrees with each Underwriter as follows:
1. The initial public offering price per share for the Stock,
determined as provided in said Section 2, shall be $_____.
2. The purchase price per share for the Stock to be paid by the several
U.S. Underwriters shall be $______, being an amount equal to the
initial public offering price set forth above less $_____ per share.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
TOWER REALTY TRUST, INC.
By:________________________________
Lawrence H. Feldman
Chairman, Chief Executive Officer
and President
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
LEGG MASON WOOD WALKER INCORPORATED
MORGAN STANLEY & CO., INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
BY: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:_________________________________________
Authorized Representative
For themselves and as U.S. Representatives of the other
U.S. Underwriters named in Schedule 1 hereto
2
<PAGE> 46
EXHIBIT B
(1) The Company has been duly organized and is validly
existing as a corporation with transferable shares of stock and is in
good standing under the laws of the State of Maryland with all power
and authority to hold its properties, conduct the business in which it
is engaged or proposes to engage as described in the Prospectus and to
enter into and perform its obligations under the Purchase Agreement,
the Pricing Agreement, and the Formation Documents to which it is a
party. The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which
such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure to so qualify or be in good standing would not result in a
Material Adverse Effect.
(2) The Operating Partnership has been duly formed and is
validly existing as a limited partnership in good standing under the
Delaware Revised Uniform Limited Partnership Act (the "Delaware Act")
with partnership power and authority to own, lease and operate its
Properties, to conduct the business in which it is engaged or proposes
to engage as described in the Prospectus and to enter into and perform
its obligations under the Purchase Agreement and the Formation
Documents to which it is a party. The Operating Partnership is duly
qualified or registered as a foreign partnership to transact business
and is in good standing in each jurisdiction in which such
qualification or registration is required, except where the failure to
so qualify or be in good standing would not result in a material
Adverse Effect. The Company is the sole general partner of the
Operating Partnership and immediately after the Closing Time, will be
the holder of ____________ OP Units, or approximately ___________
percent (____%) of the OP Units in the Partnership.
(3) Each of the Subsidiaries has been duly organized and is
validly existing as a partnership, corporation or limited liability
company in good standing under the laws of its respective jurisdiction
of organization, with all power and authority to own, lease and operate
its Properties, to conduct the business in which it is engaged or
proposes to engage as described in the Prospectus, and to enter into
and perform its obligations under the Purchase Agreement and the
Formation
<PAGE> 47
Documents to which it is a party. Each of the Subsidiaries is duly
qualified or registered as a foreign partnership, corporation or
limited liability company to transact business and is in good standing
in each jurisdiction in which such qualification or registration is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure to so qualify would
not result in a Material Adverse Effect. Each of the partnership or
operating agreements of the Subsidiaries is in full force and effect.
(4) Each of the Predecessor Entities has been duly formed and
is validly existing as a partnership, corporation, or limited liability
company in good standing under the laws of its state of formation, with
power and authority to own, lease and operate its properties, to
conduct the business in which it is engaged and to enter into and
perform its respective obligations under the Formation Documents to
which it is a party. Each Predecessor Entity is duly qualified or
registered to transact business and is in good standing in each
jurisdiction in which such qualification or registration is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify would not
result in a Material Adverse Effect.
(5) The numbers of authorized, issued and outstanding shares
of Common Stock of the Company are as set forth in the Prospectus under
"Capitalization" and the shares of issued and outstanding Common Stock
have been duly authorized and validly issued, are fully paid and
non-assessable and have been offered and sold in compliance with all
applicable federal and state laws (including, without limitation,
federal and state securities laws) and, to the knowledge of counsel,
all foreign laws, and none of such shares of Capital Stock were issued
in violation of preemptive or other similar rights of any
securityholder of the Company. No shares of capital stock of the
Company are reserved for any purpose except in connection with (A)
Formation Transactions, (B) the 1997 Stock Incentive Plan and the
Non-Employee Directors' Incentive Plan of the Company as described in
the Prospectus, and (C) the possible issuance of Common Stock upon the
redemption of OP Units pursuant to the Partnership Agreement. Except
for OP Units and Common Stock issuable upon the exercise of options or
upon conversion of outstanding debt of the Company as described in the
Prospectus, there are no outstanding securities convertible into or
exchangeable for any stock of the Company and no outstanding
2
<PAGE> 48
options, rights (preemptive or otherwise) or warrants to purchase or to
subscribe for such stock or any other securities of the Company; and a
sufficient number of shares of Common Stock has been duly reserved by
the Company for the issuances contemplated by clauses (A) - (C).
(6) The shares of Initial Stock have been duly authorized for
issuance and sale to the Underwriters pursuant to the Purchase
Agreement and when issued and delivered by the Company pursuant to the
Purchase Agreement against payment of the consideration set forth in
the Pricing Agreement, will be validly issued, fully paid and
non-assessable. The terms of the Common Stock conform to all statements
and descriptions related thereto contained in the Prospectus and such
description conforms, in all material respects, to the rights set forth
in the stock certificates defining the same. The form of stock
certificate evidencing the Common Stock is in due and proper form and
complies with all applicable legal requirements. The issuance of the
Stock is not subject to any preemptive or other similar rights. No
holder of Common Stock will be subject to personal liability by reason
of being such a holder. Other than as disclosed in the Prospectus,
there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file a registration statement under the 1933 Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company the include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration
statement filed by the Company under the 1933 Act.
(7) The OP Units issued in the Formation Transactions,
including, without limitation, the OP Units issued to the Company, have
been duly authorized for issuance by the Operating Partnership to the
holders thereof, and when issued and delivered by the Operating
Partnership pursuant to the Formation Documents, will be validly issued
and fully paid. The OP Units were offered and sold at or prior to the
Closing Time in compliance with all applicable federal and state laws
(including, without limitation, federal and state securities laws) and,
to the knowledge of counsel, all foreign laws. The terms of the OP
Units conform to all statements and descriptions related thereto
contained in the Prospectus.
3
<PAGE> 49
(8) To the knowledge of counsel, none of the Company, the
Operating Partnership, any Subsidiary or any Predecessor Entity is in
violation of its charter, bylaws, certificate of limited partnership or
partnership or limited liability company agreement, as the case may be,
and none of the Company, the Operating Partnership, any Subsidiary or
any Predecessor Entity is in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
Instruments and Agreements that are described or referred to in the
Registration Statement or Prospectus or filed as an exhibit to the
Registration Statement.
(9) Each of the Purchase Agreement, the Pricing Agreement and
each of the Formation Documents was duly and validly authorized,
executed and delivered by the Company, the Operating Partnership, each
Subsidiary and each Predecessor Entity, as applicable, and, assuming
due authorization, execution and delivery by any other party thereto,
each of the Formation Documents is a valid and binding agreement of
such party, enforceable against such party in accordance with its
terms, except as such enforceability may be (1) limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium and other similar
laws affecting the rights and remedies of creditors generally and (2)
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(10) The execution and delivery of the Purchase Agreement, the
Pricing Agreement, and the Formation Documents, the performance of the
obligations set forth therein, and the consummation of the transactions
contemplated thereby or in the Prospectus by the Company, the Operating
Partnership, the Subsidiaries and the Predecessor Entities, as
applicable, did not, do not and will not conflict with or constitute a
breach or violation of, or default or Repayment Event under or result
in the creation or imposition of any lien, charge or encumbrance upon
any assets, properties or operations of the Company, the Operating
Partnership, any Subsidiary or any Predecessor Entity pursuant to: (a)
any of the Formation Documents; (b) to the knowledge of counsel,
assuming the application of the proceeds of the Offering to discharge
certain loan obligations as set forth under "Use of Proceeds" in the
Prospectus, any of the Agreements and Instruments except for (i)
contracts or other agreements that are terminable at will or are
terminable by the other party thereto on not more than 30
4
<PAGE> 50
days' notice and (ii) operating, service, equipment or other similar
contracts entered into in the ordinary course, provided that any
contract or agreement excepted in (i) above, and the contracts excepted
in (ii) above, are not material to the condition, financial or
otherwise, or the earnings, assets, business affairs or business
prospects of the contract party; (c) the charter, bylaws, limited
liability company agreement, certificate of limited partnership or
partnership agreement, as the case may be, of the Company, the
Operating Partnership, any Subsidiary or any Predecessor Entity; or (d)
to the knowledge of counsel, any applicable law, rule, order,
administrative regulation or administrative or court decree, except
that no opinion is expressed under this clause (d) as to the Purchase
Agreement or the Pricing Agreement with respect to federal, state or
foreign securities laws.
(11) To the knowledge of counsel, there is no action, suit,
proceeding, inquiry or investigation before or by any court or
governmental agency or body, domestic or foreign, now pending or
threatened against or affecting the Company, the Operating Partnership,
any Subsidiary, any Predecessor Entity, any Property or any officer or
director of the Company that is required to be disclosed in the
Registration Statement (other than as disclosed therein) or that, if
determined adversely to the Company, the Operating Partnership, any
Subsidiary, any Predecessor Entity, any Property or any such officer or
director, could reasonably be expected to materially and adversely
affect the consummation of the Formation Transactions. All descriptions
in the Registration Statement of contracts and other documents to which
the Company, the Operating Partnership any Subsidiary, or any
Predecessor Entity is a party are accurate in all material respects. To
the knowledge of counsel, there are no contracts or documents of the
Company, the Operating Partnership, any Subsidiary or any Predecessor
Entity which are required to be filed as exhibits to the Registration
Statement by the 1933 Act or by the 1933 Act Regulations which have not
been filed as exhibits to the Registration Statement.
(12) None of the Company, the Operating Partnership, any
Subsidiary or any Predecessor Entity is an "investment company" within
the meaning of the 1940 Act.
(13) All filings with, authorizations, approvals, consents
licenses, orders, registrations, qualifications, or decrees of any
5
<PAGE> 51
court or governmental authority or agency that are necessary in
connection with the offering, issuance or sale of the Stock under this
Agreement or the consummation of any other part of the Formation
Transactions have been obtained, except such as may be required under
the 1933 Act or the 1933 Act Regulations or state securities or real
estate syndication laws. All authorizations, consents and approvals of
all non-governmental persons necessary to consummate the Formation
Transactions have been obtained.
(14) The Registration Statement has been declared effective
under the 1933 Act and, to the knowledge of counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission.
(15) At the time the Registration Statement became effective
and at the Representation Date, the Registration Statement (other than
the financial statements and supporting schedules included therein, as
to which no opinion need be rendered) complied as to form in all
material respects with the requirements of the 1933 Act and the 1933
Act Regulations.
(16) To the knowledge of counsel, there are no statutes or
regulations that are required to be described in the Prospectus that
are not described as required.
(17) The statements contained in the Prospectus under the
caption "Federal Income Tax Consequences" and "Risk Factors -- Tax
Risks," insofar as they describe federal statutes, rules and
regulations, are correct in all material respects and constitute a fair
summary of the federal income tax considerations that are material to a
holder of Common Stock, and the opinion of such counsel filed as
Exhibit 8.1 to the Registration Statement is confirmed and the
Underwriters may rely upon such opinion as if it were addressed to
them. The information in the Prospectus under the captions "Description
of Capital Stock" and "Shares Available for Future Sale," to the extent
that it constitutes matters of law or legal conclusions, has been
reviewed by such counsel and is correct in all material respects. The
statements contained in the Prospectus under the heading "Certain
Provisions of Maryland Law and the Company's Charter and Bylaws,"
insofar as they describe Maryland statutory law are correct in all
material respects.
6
<PAGE> 52
(18) The issuance of securities described in Item 33 of the
Registration Statement were and are not required to be registered under
the 1933 Act.
(19) Commencing with the Company's short taxable year ending
December 31, 1997, the Company will qualify to be taxed as a REIT
pursuant to sections 856 through 860 of the Internal Revenue Code (the
"Code"), and the Company's proposed method of operation will enable it
to continue to meet the requirements for qualification an taxation as a
REIT under the Code. The Operating Partnership and each partnership
which is a subsidiary of either the Company or the Operating
Partnership will be treated for federal income tax purposes as a
partnership and not as an association taxable as a corporation or as a
publicly traded partnership.
In giving its opinion required by Section 5(b), such counsel
shall additionally state that nothing has come to the attention of such
counsel that causes it to believe that the Registration Statement
(except for financial statements and schedules and other financial data
included therein, as to which counsel need make no statement), at the
time such Registration Statement became effective and at the
Representation Date or as of the date of such opinion, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or the Prospectus (except for financial
statements and schedules and other financial data included therein, as
to which counsel need make no statement), as of its date and at the
Representation Date or as of the date of such opinion, included an
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In giving its opinion, such counsel may rely, (A) as to all
matters of fact, upon certificates and written statements of officers
and employees of and accountants for each of the Company, the Operating
Partnership, the Subsidiaries or the Predecessor Entities and (B) as to
the qualification and good standing of each of the Company, the
Operating Partnership, the Subsidiaries or the Predecessor Entities to
do business in any jurisdiction, upon certificates of appropriate
government officials or opinions of counsel in such jurisdictions,
which
7
<PAGE> 53
opinions shall be in form and substance reasonably satisfactory to
counsel for the Underwriters.
8
<PAGE> 54
EXHIBIT C
July ___, 1997
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
LEGG MASON WOOD WALKER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
as Representatives of the several Underwriters
c/o MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Re: Tower Realty Trust, Inc. and Tower Realty Operating Partnership, L.P.
(collectively, the "Company")
Ladies and Gentlemen:
The undersigned, a security holder of the Company understands that
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Legg Mason Wood Walker Incorporated, Prudential Securities
Incorporated, and Smith Barney Inc. (collectively, the "Representatives")
propose to enter into a Purchase Agreement (the "Purchase Agreement") with the
Company providing for the public offering in the United States and Canada (the
"Offering") of common stock, $.01 par value per share ("Common Stock"), of Tower
Realty Trust, Inc.. In recognition of the benefit that such an offering will
confer upon the undersigned as a security holder of the Company, and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the undersigned agrees with each of the several Underwriters named
in the Purchase Agreement that, during a period of one year from the date of the
Purchase Agreement , the undersigned will not, without the prior written consent
of Merrill Lynch, directly or indirectly (i) offer, pledge (except for a bona
fide pledge to a signatory to this letter, as identified on Schedule 1 hereto,
or any affiliate of any such signatory), sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option right or warrant for the sale of, or otherwise dispose of or transfer any
Common Stock or units of ownership interest in Tower Realty Operating
Partnership, L.P. ("Units") or any other security or other instrument which by
its terms is convertible into, exercisable or exchangeable for Common Stock,
whether now owned or hereafter acquired by the undersigned or with respect to
which the undersigned has or hereafter acquires the
<PAGE> 55
power of disposition, or file any registration statement under the Securities
Act of 1933, as amended, with respect to any of the foregoing or (ii) enter into
any swap or any other agreement or any transaction that transfers in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction is to be settled by delivery
of Common Stock or other securities, in cash or otherwise.
Very truly yours,
By:________________________________
Name:
2
<PAGE> 1
Exhibit 3.2
TOWER REALTY TRUST, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
TOWER REALTY TRUST, INC., a Maryland corporation, having its
principal office in the State of Maryland c/o Ballard Spahr Andrews & Ingersoll,
300 East Lombard Street, Baltimore, Maryland 21202, Attention: James J. Hanks,
Jr. (hereafter referred to as the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland (the "Department") that:
FIRST: The Corporation desires to and does hereby amend and
restate its charter as currently in effect and as hereinafter provided. The
provisions set forth in these Articles of Amendment and Restatement are all of
the provisions of the charter of the Corporation as currently in effect.
SECOND: The following provisions are all the provisions of the
charter currently in effect and as hereinafter amended:
ARTICLE I
INCORPORATOR
The undersigned, James J. Hanks, Jr., whose address is c/o
Ballard Spahr Andrews & Ingersoll, 300 East Lombard Street, Baltimore, Maryland
21202, being at least 18 years of age, does hereby form a corporation under the
general laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is:
Tower Realty Trust, Inc.
ARTICLE III
PURPOSE
The purposes for which the Corporation is formed are to engage
in any lawful act or activity (including, without limitation or obligation,
engaging in business as a real estate investment trust under the Internal
Revenue Code of 1986, as amended, or any successor statute (the "Code")) for
which corporations may be organized under the general laws of the State of
Maryland as now or hereafter in force. For purposes of these Articles, "REIT"
means a real estate investment trust under Sections 856 through 860 of the Code.
<PAGE> 2
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the Corporation in the
State of Maryland is c/o Ballard Spahr Andrews & Ingersoll, 300 East Lombard
Street, Baltimore, Maryland 21202, Attention: James J. Hanks, Jr. The name of
the resident agent of the Corporation in the State of Maryland is James J.
Hanks, Jr., c/o Ballard Spahr Andrews & Ingersoll, 300 East Lombard Street,
Baltimore, Maryland 21202. The resident agent is a citizen of and resides in the
State of Maryland.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
Section 5.1 Number of Directors. The business and affairs of
the Corporation shall be managed under the direction of the Board of Directors.
The authorized number of directors of the Corporation initially shall consist of
not less than three, the minimum number required by the Maryland General
Corporation Law (the "MGCL"), and not more than 15 persons, which number may be
increased or decreased pursuant to the Bylaws. The names of the directors who
shall serve until the first annual meeting of stockholders and until their
successors are duly elected and qualify are:
Lawrence H. Feldman
Lester S. Garfinkel
These directors may increase the number of directors and may fill any vacancy,
whether resulting from an increase in the number of directors or otherwise, on
the Board of Directors occurring before the first annual meeting of stockholders
in the manner provided in the Bylaws.
Section 5.2 Classified Board. The directors of the Corporation
(other than any directors who may be elected by holders of preferred stock as
may be provided from time to time by the board of directors) shall be and are
hereby divided into three Classes, designated "Class I," "Class II" and "Class
III," respectively. The number of directors in each such class shall be as
nearly equal as possible. Each director shall serve for a term ending on the
date of the third Annual Meeting of Stockholders following the Annual Meeting at
which such director was elected, provided, however, that each initial director
in Class I shall serve for a term ending on the date of the Annual Meeting held
in 1998; each initial director in Class II shall serve for a term ending on the
date of the Annual Meeting held in 1999; and each initial director in Class III
shall serve for a term ending on the date of the Annual Meeting held in 2000.
Section 5.3 Extraordinary Actions. Except as otherwise
specifically provided herein, notwithstanding any provision of law permitting or
requiring any action to be taken or authorized by the affirmative vote of the
holders of a greater number of votes, any such action shall be effective and
valid if taken or authorized by the affirmative vote of holders of shares
entitled to cast a majority of all the votes entitled to be cast on the matter.
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<PAGE> 3
Section 5.4 Authorization by Board of Stock Issuance. The
Board of Directors may authorize the issuance from time to time of shares of
stock of the Corporation of any class or series, whether now or hereafter
authorized, or securities or rights convertible into shares of its stock of any
class or series, whether now or hereafter authorized, for such consideration as
the Board of Directors may deem advisable (or without consideration in the case
of a stock split or stock dividend), subject to such restrictions or
limitations, if any, as may be set forth in the charter or the Bylaws.
Section 5.5 No Preemptive Rights. Except as may be provided by
the Board of Directors in setting the terms of classified or reclassified shares
of stock pursuant to Section 6.4, no holder of shares of stock of the
Corporation shall, as such holder, have any preemptive right to purchase or
subscribe for any additional shares of stock of the Corporation or any other
security of the Corporation which it may issue or sell.
Section 5.6 Indemnification and Advance of Expenses. a. The
Corporation shall have the power, to the maximum extent permitted by Maryland
law in effect from time to time, to obligate itself to indemnify, and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to, (a) any individual who is a present or former director or officer of the
Corporation or (b) any individual who, while a director or officer of the
Corporation and at the request of the Corporation, serves or has served as a
director, officer, partner or trustee of another corporation, real estate
investment trust, partnership, limited liability company, association, joint
venture, trust, employee benefit plan or any other enterprise from and against
any claim or liability to which such person may become subject or which such
person may incur by reason of his status as a present or former director or
officer of the Corporation. The Corporation shall have the power, with the
approval of the Board of Directors, to provide such indemnification and
advancement of expenses to a person who served a predecessor of the Corporation
in any of the capacities described in (a) or (b) above and to any employee or
agent of the Corporation or a predecessor of the Corporation.
b. Neither the amendment nor repeal of Section 5.6 of
this Article V, nor the adoption or amendment of any other provision of the
charter or the Bylaws of the Corporation inconsistent with Section 5.6 of this
Article V, shall apply to or affect in any respect the applicability of the
provisions of Section 5.6 of this Article V with respect to any act or failure
to act which occurred prior to such amendment, repeal or adoption.
c. The Corporation may, to the fullest extent
permitted by law, purchase and maintain insurance on behalf of any such person
against any liability which may be asserted against such person, as described in
Section 5.6(a) of this Article V, and on any obligation of the Corporation to
indemnify or advance expenses pursuant to the charter or Bylaws of the
Corporation or any resolution of the Board of Directors or contract to which the
Corporation is a party.
d. The rights provided herein shall not be deemed to
limit the right of the Corporation to indemnify or advance expenses to any other
person to the fullest extent permitted by law, nor shall it be deemed exclusive
of any other rights to which any person seeking indemnification or advances of
expenses from the Corporation may be entitled under any agreement, the Bylaws of
the Corporation, a resolution of Stockholders or the Board of Directors, or
otherwise, both as to action in such person's official capacity and as to action
in another capacity while holding such office.
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<PAGE> 4
e. To the maximum extent that Maryland law in effect
from time to time permits limitation of the liability of directors and officers,
no director or officer of the Corporation shall be liable to the Corporation or
its Stockholders for money damages.
Section 5.7 Determinations by Board. The determination as to
any of the following matters, made in good faith by or pursuant to the direction
of the Board of Directors consistent with the charter and in the absence of
actual receipt of an improper benefit in money, property or services or active
and deliberate dishonesty established by a court, shall be final and conclusive
and shall be binding upon the Corporation and every holder of shares of its
stock: the amount of the net income of the Corporation for any period and the
amount of assets at any time legally available for the payment of dividends,
redemption of its stock or the payment of other distributions on its stock; the
amount of paid-in surplus, net assets, other surplus, annual or other net
profit, net assets in excess of capital, undivided profits or excess of profits
over losses on sales of assets; the amount, purpose, time of creation, increase
or decrease, alteration or cancellation of any reserves or charges and the
propriety thereof (whether or not any obligation or liability for which such
reserves or charges shall have been created shall have been paid or discharged);
the fair value, or any sale, bid or asked price to be applied in determining the
fair value, of any asset owned or held by the Corporation; and any other matter
relating to the acquisition, holding and disposition of any assets by the
Corporation or generally to the business and affairs of the Corporation.
Section 5.8 REIT Qualification. The Corporation shall elect to
qualify for federal income tax treatment as a REIT and the Board of Directors
shall use its reasonable best efforts to take such actions as are necessary or
appropriate to preserve the status of the Corporation as a REIT. The Board of
Directors also may determine that compliance with any restriction or limitation
on stock ownership and transfers set forth in Article VII is no longer required
for REIT qualification.
Section 5.9 Removal of Directors. Subject to the rights of
holders of one or more classes or series of Preferred Stock to elect one or more
directors, any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause and then only by the affirmative vote of
the holders of at least a majority of the votes entitled to be cast in the
election of directors. For the purpose of this paragraph, "cause" shall mean
with respect to any particular director a final judgment of a court of competent
jurisdiction holding that such director caused demonstrable material harm to the
Corporation through bad faith or active and deliberate dishonesty.
Section 5.10 Independent Directors.
a. Notwithstanding anything herein to the contrary,
at all times (except during a period not to exceed 60 days following the death,
resignation, incapacity or removal from office of a director prior to expiration
of the director's term of office), a majority of the Board of Directors shall be
comprised of persons (each such person an "Independent Director") who are not
(i) officers or employees of the Corporation or Tower Realty Operating
Partnership, L.P. (the "Operating Partnership") or any subsidiary of the
Corporation or the Operating Partnership, or (ii) Affiliates (as hereinafter
defined) of the Corporation or the Operating Partnership.
b. For purposes of this Section 5.10, "Affiliate" of
the Corporation or the Operating Partnership shall mean (i) any Person that,
directly or indirectly, controls or is controlled by or is under common control
with the Corporation or the Operating Partnership (excluding directors and
Persons serving in similar capacities who are not otherwise an Affiliate of the
Corporation or the Operating
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<PAGE> 5
Partnership). The term "Person" means and includes any natural person,
corporation, partnership, association, trust, limited liability company or any
other legal entity. For purposes of this definition, "control" (including the
correlative meanings of the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, through the ownership of voting securities,
partnership interests or other equity interests.
c. Notwithstanding anything herein to the contrary,
no term or provision of this Section 5.10 of Article V may be added, amended or
repealed in any respect without the affirmative vote of all the Independent
Directors.
Section 5.11 Reserved Powers of Directors. The enumeration and
definition of particular powers of the Board of Directors included in this
Article V shall in no way be limited or restricted by reference to or inference
from the terms of any other clause of this or any other provision of the charter
of the Corporation, or construed or deemed by inference or otherwise in any
manner to exclude or limit the powers conferred upon the Board of Directors
under the general laws of the State of Maryland as now or hereafter in force.
ARTICLE VI
SHARES OF STOCK
Section 6.1 Authorized Shares. The Corporation has authority
to issue 150,000,000 shares of common stock, $0.01 par value per share ("Common
Stock"), and 50,000,000 shares of preferred stock, $0.01 par value per share
("Preferred Stock"). The aggregate par value of all authorized shares of stock
having par value is $2,000,000.
Section 6.2 Common Stock. Subject to the provisions of Article
VII, each share of Common Stock shall entitle the holder thereof to one vote.
The Board of Directors may reclassify any unissued shares of Common Stock from
time to time into one or more classes or series of stock.
Section 6.3 Preferred Stock. The Board of Directors may
classify any unissued shares of Preferred Stock and reclassify any previously
classified but unissued shares of Preferred Stock of any series from time to
time, into one or more series of stock.
Section 6.4 Classified or Reclassified Shares. Prior to
issuance of classified or reclassified shares of any class or series, the Board
of Directors by resolution shall: (a) designate that class or series to
distinguish it from all other classes and series of stock of the Corporation;
(b) specify the number of shares to be included in the class or series; (c) set
or change, subject to the provisions of Article VII and subject to the express
terms of any class or series of stock of the Corporation outstanding at the
time, the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms and
conditions of redemption for each class or series; and (d) cause the Corporation
to file articles supplementary with the State Department of Assessments and
Taxation of Maryland ("SDAT"). Any of the terms of any class or series of stock
set or changed pursuant to clause (c) of this Section 6.4 may be made dependent
upon facts or events ascertainable outside the charter (including determinations
by the Board of Directors or other facts or events within the control of the
Corporation) and may vary among holders thereof, provided that the manner in
which such facts, events
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<PAGE> 6
or variations shall operate upon the terms of such class or series of stock is
clearly and expressly set forth in the articles supplementary filed with the
SDAT.
Section 6.5 Charter and Bylaws. All persons who shall acquire
stock in the Corporation shall acquire the same subject to the provisions of the
charter and the Bylaws.
ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 7.1 Definitions. For the purpose of this Article VII,
the following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of shares of
Equity Stock by a Person, whether the interest in such shares is held directly
or indirectly (including by a nominee), and shall include shares of Equity Stock
that would be treated or owned either directly or indirectly through the
application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of
the Code. The terms "Beneficial Owner," "Beneficially Owns," "Beneficially Own,"
and "Beneficially Owned" shall have correlative meanings.
"Beneficiary" shall mean, with respect to any Trust, one or
more organizations described in each of Section 170(b)(1)(a) (other than clauses
(vii) or (viii) thereof) and Section 170(c)(2) of the Code that are named by the
Corporation as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section 7.9.1 of Article VII hereof.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Constructive Ownership" shall mean ownership of shares of
Equity Stock by a Person, whether the interest in such shares is held directly
or indirectly (including by a nominee), and shall include shares of Equity Stock
that would be treated as owned either directly or indirectly through the
application of Section 318 of the Code, as modified by Section 856(d)(5) of the
Code. The terms "Constructive Owner," "Constructively Owns," "Constructively
Own," and "Constructively Owned" shall have correlative meanings.
"Equity Stock" shall mean all classes or series of stock of
the Corporation, including, without limitation, Common Stock and Preferred
Stock.
"Initial Public Offering" means the sale of shares of Common
Stock pursuant to the Corporation's first effective registration statement for
such shares of Common Stock filed under the Securities Act of 1933, as amended.
"Look-Through Entity" shall mean an entity (i) that is looked
through for purposes of the "closely held" test in Section 856(h) of the Code
and (ii) each beneficial owner of which would satisfy the Ownership Limit if
such beneficial owner owned directly its proportionate share of the shares of
Equity Stock that are held by the Look-Through Entity, which, by way of example,
could include (i) a pension trust that qualifies for look-through treatment
under Section 856(h)(3) of the Code, (ii) an entity that qualifies as a
regulated investment company under Section 851 of the Code, or (iii) a
corporation.
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<PAGE> 7
"Look-Through Ownership Limit" shall mean 15% of the number of
outstanding shares of each class or series of Equity Stock.
"Market Price" on any date shall mean the average of the
Closing Price for the five consecutive Trading Days ending on such date. The
"Closing Price" on any date shall mean the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the shares of Equity
Stock are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares of Equity Stock are listed or admitted to trading or, if the shares of
Equity Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price, or if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation System or,
if such system is no longer in use, the principal other automated quotations
system that may then be in use or, if the shares of Equity Stock are not quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the shares of Equity
Stock selected by the Board of Directors.
"Non-Transfer Event" shall mean an event, other than a
purported Transfer, that would cause any Person to Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Ownership Limit or
Look-Through Ownership Limit, as applicable, including, but not limited to, the
granting of any option or entering into any agreement for the sale, transfer or
other disposition of shares of Equity Stock or the sale, transfer, assignment or
other disposition of any securities or rights convertible into or exchangeable
for shares of Equity Stock.
"Operating Partnership" shall mean Tower Realty Operating
Partnership, L.P., a Delaware limited partnership.
"Ownership Limit" shall mean 9.8% of the number or value,
whichever is more restrictive, of the outstanding shares of each class or series
of Equity Stock.
"Permitted Transferee" shall mean any Person designated as a
Permitted Transferee in accordance with the provisions of Section 7.9.5 of
Article VII hereof.
"Person" shall mean an individual, corporation, partnership,
estate, trust, a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity and also includes a "group" as that
term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended.
"Prohibited Owner" shall mean, with respect to any purported
Transfer or Non-Transfer Event, any Person who, but for the provisions of
Section 7.3 of Article VII hereof, would Beneficially Own or Constructively Own
shares of Equity Stock in excess of the Ownership Limit or Look-Through
Ownership Limit, and if appropriate in the context, shall also mean any Person
who would own record title to shares of Equity Stock.
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<PAGE> 8
"Restriction Termination Date" shall mean the first day after
the date of the Initial Public Offering on which this Article VII has been
amended in accordance with Section 7.12 of this Article VII in order to
terminate the REIT status of the Corporation.
"Shares-in-Trust" shall mean any shares of Equity Stock
designated Shares-in-Trust pursuant to Section 7.3 of Article VII hereof.
"Tower Realty Trust Operating Partnership Agreement" shall
mean the Agreement of Limited Partnership of the Operating Partnership, as it
may be amended or amended and restated from time to time.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Equity Stock are listed or admitted
to trading is open for the transaction of business or, if the shares of Equity
Stock are not listed or admitted to trading on any national securities exchange,
shall mean any day other than a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law or
executive order to close.
"Transfer" (as a noun) shall mean any issuance, sale,
transfer, gift, assignment, devise or other disposition of shares of Equity
Stock, whether voluntary or involuntary, whether of record, constructively or
beneficially and whether by operation of law or otherwise. "Transfer" (as a
verb) shall have the correlative meaning.
"Trust" shall mean any separate trust created pursuant to
Section 7.3 of Article VII hereof and administered in accordance with the terms
of Section 7.9 of Article VII hereof, for the exclusive benefit of any
Beneficiary.
"Trustee" shall mean any Person or entity unaffiliated with
both the Corporation and any Prohibited Owner, such Trustee to be designated by
the Corporation to act as trustee of any Trust, or any successor trustee
thereof.
Section 7.2 Restriction on Transfers.
a. Subject to Section 7.8 of Article VII hereof, and
except as provided in Section 7.7 of Article VII hereof, from the date of the
Initial Public Offering and prior to the Restriction Termination Date, (i) no
Person shall Beneficially Own or Constructively Own outstanding shares of Equity
Stock in excess of the Ownership Limit; and (ii) any Transfer that, if
effective, would result in any Person Beneficially Owning or Constructively
Owning shares of Equity Stock in excess of the Ownership Limit shall be void ab
initio as to the Transfer of that number of shares of Equity Stock which would
be otherwise Beneficially Owned or Constructively Owned by such Person in excess
of the Ownership Limit and the intended transferee shall acquire no rights in
such excess shares of Equity Stock.
b. Subject to Section 7.8 of Article VII hereof, from
the date of the Initial Public Offering and prior to the Restriction Termination
Date, any Transfer (whether or not such Transfer is the result of a transaction
entered into through the facilities of the New York Stock Exchange or any other
national securities exchange or automated inter-dealer quotation system) that,
if effective, would result in shares of Equity Stock being Beneficially Owned by
fewer than 100 Persons (determined without reference to any rules of
attribution) shall be void ab initio as to the Transfer of that number of shares
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<PAGE> 9
which would be otherwise beneficially owned (determined without reference to any
rules of attribution) by the transferee, and the intended transferee shall
acquire no rights in such shares of Equity Stock.
c. From the date of the Initial Public Offering and
prior to the Restriction Termination Date, any Transfer of shares of Equity
Stock that, if effective, would result in the Corporation being "closely held"
within the meaning of Section 856(h) of the Code shall be void ab initio as to
the Transfer of that number of shares of Equity Stock which would cause the
Corporation to be "closely held" within the meaning of Section 856(h) of the
Code, and the intended transferee shall acquire no rights in such shares of
Equity Stock.
d. From the date of the Initial Public Offering and
prior to the Restriction Termination Date, any Transfer of shares of Equity
Stock that, if effective, would cause the Corporation to Constructively Own 9.9%
or more of the ownership interests in a tenant of the real property of the
Corporation, the Operating Partnership or any direct or indirect subsidiary
(including, without limitation, partnerships and limited liability companies) of
the Corporation or the Operating Partnership (a "Subsidiary"), within the
meaning of Section 856(d)(2)(B) of the Code, shall be void ab initio as to the
Transfer of that number of shares of Equity Stock which would cause the
Corporation to Constructively Own 9.9% or more of the ownership interests in a
tenant of the Corporation's, the Operating Partnership's or a Subsidiary's real
property, within the meaning of Section 856(d)(2)(B) of the Code, and the
intended transferee shall acquire no rights in such excess shares of Equity
Stock.
Section 7.3 Transfer to Trust.
a. If, notwithstanding the other provisions contained
in this Article VII, at any time after the Initial Public Offering and prior to
the Restriction Termination Date, there is a purported Transfer (whether or not
such Transfer is the result of a transaction entered into through the facilities
of the New York Stock Exchange or any other national securities exchange or
automated inter-dealer quotation system) or Non-Transfer Event such that any
Person would either Beneficially Own or Constructively Own shares of Equity
Stock in excess of the Ownership Limit (or, in the case of a Look- Through
Entity, either Beneficially Own or Constructively Own shares of Equity Stock in
excess of the Look-Through Ownership Limit), then, (i) except as otherwise
provided in Section 7.7 of Article VII hereof, the purported transferee shall
acquire no right or interest (or, in the case of a Non-Transfer Event, the
Person holding record title to the shares of Equity Stock Beneficially Owned or
Constructively Owned by such Beneficial Owner or Constructive Owner, shall cease
to own any right or interest) in such number of shares of Equity Stock which
would cause such Beneficial Owner or Constructive Owner to Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Ownership Limit or
the Look-Through Ownership Limit, as applicable, (ii) such number of shares of
Equity Stock in excess of the Ownership Limit or the Look-Through Ownership
Limit, as applicable (rounded up to the nearest whole share) shall be designated
Shares-in-Trust and, in accordance with the provisions of Section 7.9 of Article
VII hereof, transferred automatically and by operation of law to the Trust to be
held in accordance with that Section 7.9 of Article VII, and (iii) the
Prohibited Owner shall submit such number of shares of Equity Stock to the
Corporation for registration in the name of the Trustee. Such transfer to a
Trust and the designation of shares as Shares-in-Trust shall be effective as of
the close of business on the business day prior to the date of the Transfer or
Non-Transfer Event, as the case may be.
b. If, notwithstanding the other provisions contained
in this Article VII, at any time after the Initial Public Offering and prior to
the Restriction Termination Date, there is a purported
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<PAGE> 10
Transfer or Non-Transfer Event that, if effective, would (i) result in the
shares of Equity Stock being beneficially owned by fewer than 100 Persons
(determined without reference to any rules of attribution), (ii) result in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code, or (iii) cause the Corporation to Constructively Own 9.9% or more of the
ownership interests in a tenant of the Corporation's, the Operating
Partnership's or a Subsidiary's real property, within the meaning of Section
856(d)(2)(B) of the Code, then (x) the purported transferee shall not acquire
any right or interest (or, in the case of a Non-Transfer Event, the Person
holding record title of the shares of Equity Stock with respect to which such
Non-Transfer Event occurred, shall cease to own any right or interest) in such
number of shares of Equity Stock, the ownership of which by such purported
transferee or record holder would (A) result in the shares of Equity Stock being
beneficially owned by fewer than 100 Persons (determined without reference to
any rules of attribution), (B) result in the Corporation being "closely held"
within the meaning of Section 856(h) of the Code, or (C) cause the Corporation
to Constructively Own 9.9% or more of the ownership interests in a tenant of the
Corporation's, the Operating Partnership's or a Subsidiary's real property,
within the meaning of Section 856(d)(2)(B) of the Code, (y) such number of
shares of Equity Stock (rounded up to the nearest whole share) shall be
designated Shares-in-Trust and, in accordance with the provisions of Section 7.9
of Article VII hereof, transferred automatically and by operation of law to the
Trust to be held in accordance with that Section 7.9 of Article VII, and (z) the
Prohibited Owner shall submit such number of shares of Equity Stock to the
Corporation for registration in the name of the Trustee. Such transfer to a
Trust and the designation of shares as Shares-in-Trust shall be effective as of
the close of business on the business day prior to the date of the Transfer or
Non-Transfer Event, as the case may be.
Section 7.4 Remedies For Breach. If the Corporation, or its
designee, shall at any time determine in good faith that a Transfer has taken
place in violation of Section 7.2 of Article VII hereof or that a Person intends
to acquire or has attempted to acquire Beneficial Ownership or Constructive
Ownership of any shares of Equity Stock in violation of Section 7.2 of Article
VII hereof, the Corporation shall take such action as it deems advisable to
refuse to give effect to or to prevent such Transfer or acquisition, including,
but not limited to, refusing to give effect to such Transfer on the books of the
Corporation or instituting proceedings to enjoin such Transfer or acquisition.
Section 7.5 Notice of Restricted Transfer. Any Person who
acquires or attempts to acquire shares of Equity Stock in violation of Section
7.2 of Article VII hereof, or any Person who owned shares of Equity Stock that
were transferred to the Trust pursuant to the provisions of Section 7.3 of
Article VII hereof, shall immediately give written notice to the Corporation of
such event and shall provide to the Corporation such other information as the
Corporation may request in order to determine the effect, if any, of such
Transfer or Non-Transfer Event, as the case may be, on the Corporation's status
as a REIT.
Section 7.6 Owner Required to Provide Information. From the
date of the Initial Public Offering and prior to the Restriction Termination
Date:
a. Every Beneficial Owner or Constructive Owner of
more than 5%, or such lower percentages as required pursuant to regulations
under the Code (currently Regulation Section1.857-8(d)), of the outstanding
shares of all classes of stock of the Corporation shall, within 30 days after
January 1 of each year, provide to the Corporation a written statement or
affidavit stating the name and address of such Beneficial Owner or Constructive
Owner, the number of shares of Equity Stock Beneficially Owned or Constructively
Owned, and a description of how such shares are held. Each such Beneficial Owner
or Constructive Owner shall provide to the Corporation such additional
information as the Corporation may
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request in order to determine the effect, if any, of such Beneficial Ownership
or Constructive Ownership on the Corporation's status as a REIT and to ensure
compliance with the Ownership Limit or the Look- Through Ownership Limit, as
applicable.
b. Each Person who is a Beneficial Owner or
Constructive Owner of shares of Equity Stock and each Person (including the
stockholder of record) who is holding shares of Equity Stock for a Beneficial
Owner or Constructive Owner shall provide to the Corporation a written statement
or affidavit stating such information as the Corporation may request in order to
determine the Corporation's status as a REIT and to ensure compliance with the
Ownership Limit or the Look-Through Ownership Limit, as applicable.
Section 7.7 Exception. The Ownership Limit shall not apply to
the acquisition of shares of Equity Stock by an underwriter that participates in
a public offering of such shares for a period of 90 days following the purchase
by such underwriter of such shares provided that the restrictions contained in
Section 7.2 of Article VII hereof will not be violated following the
distribution by such underwriter of such shares. The Board of Directors, in its
sole and absolute discretion, may except a Person from the Ownership Limit or
the Look-Through Ownership Limit, if (i) such Person is not (A) an individual
for purposes of Code Section 542(a)(2), as modified by Code Section 856(h) or
(B) treated as the owner of such stock for purposes of Code Section 542(a)(2),
as modified by Code Section 856(h) and the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain that no Person's Beneficial or Constructive Ownership of such shares
of Equity Stock will violate Section 7.2(b), 7.2(c) or 7.2(d) of Article VII
hereof, (ii) such Person does not and represents that it will not Beneficially
Own shares of Equity Stock to the extent that such Beneficial Ownership of
Equity Stock would result in the Corporation being "closely held" within the
meaning of Section 856(h) of the Code, or otherwise failing to qualify as a REIT
(including, but not limited to, Beneficial or Constructive Ownership that would
result in the Corporation Constructively Owning an interest in a tenant of the
Corporation (or a tenant of any entity owned or controlled by the Corporation)
that would cause the Corporation, the Operating Partnership or a Subsidiary to
Constructively Own more than a 9.9% interest in such tenant), and the Board of
Directors obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain this fact, and (iii) such Person agrees that
any violation or attempted violation of such representations or undertakings (or
other action which is contrary to the restrictions contained in Sections 7.2
through 7.6 of this Article VII) will result in such shares of Equity Stock that
are in excess of the Ownership Limit being designated as Shares-in-Trust in
accordance with the provisions of section 7.3 of Article VII hereof. The Board
of Directors shall except a Person from the Ownership Limit if the Person
satisfies the Board of Directors, in its sole and absolute discretion, that (a)
such Person qualifies to be treated as a Look-Through Entity, (b) satisfies the
requirements of (i), (ii), and (iii) above, and (c) does not Beneficially Own
shares of Equity Stock in excess of the Look-Through Ownership Limit. The Board
of Directors may, in its sole and absolute discretion, permit a Look-Through
Entity to own shares of Equity Stock in excess of the Look-Through Ownership
Limit if the Look-Through Entity satisfies the Board of Directors that such
share ownership will not adversely affect the Corporation's ability to qualify
as a REIT. In exercising its discretion under this Section 7.7, the Board of
Directors may, but is not required to, obtain a ruling from the Internal Revenue
Service or an opinion of counsel, in either case in form and substance
satisfactory to the Board of Directors, as it may deem necessary or desirable in
order to maintain the Corporation's status as a REIT and, in addition, may
obtain such representations and warrants from the Look-Through Entity that it
may deem necessary or desirable under the circumstances.
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Section 7.8 New York Stock Exchange Transactions.
Notwithstanding any provision contained herein to the contrary, nothing in these
Articles of Amendment and Restatement shall preclude the settlement of any
transaction entered into through the facilities of the New York Stock Exchange,
Inc. The fact that the settlement of any transaction occurs shall not negate the
effect of any other provision of this Article VII and any transferee in such a
transaction shall be subject to all of the provisions and limitations set forth
in this Article.
Section 7.9 Shares-in-Trust.
Section 7.9.1 Trust. Any shares of Equity Stock
transferred to a Trust and designated Shares-in-Trust pursuant to Section 7.3 of
Article VII hereof shall be held for the exclusive benefit of the Beneficiary.
The Corporation shall name a Beneficiary for each Trust within five days after
the establishment thereof. Any transfer to a Trust, and subsequent designation
of shares of Equity Stock as Shares-in-Trust, pursuant to Section 7.3 of Article
VII hereof shall be effective as of the close of business on the business day
prior to the date of the Transfer or Non-Transfer Event that results in the
transfer to the Trust. Shares-in-Trust shall remain issued and outstanding
shares of Equity Stock of the Corporation and shall be entitled to the same
rights and privileges on identical terms and conditions as are all other issued
and outstanding shares of Equity Stock of the same class and series. When
transferred to a Permitted Transferee in accordance with the provisions of
Section 7.9.5 of Article VII hereof, such Shares-in-Trust shall cease to be
designated as Shares-in-Trust.
Section 7.9.2 Dividend Rights. The Trust, as record
holder of Shares-in-Trust, shall be entitled to receive all dividends and
distributions as may be authorized by the Board of Directors on such shares of
Equity Stock and shall hold such dividends or distributions in trust for the
benefit of the Beneficiary. The Prohibited Owner with respect to Shares-in-Trust
shall repay to the Trust the amount of any dividends or distributions received
by it that (i) are attributable to any shares of Equity Stock designated
Shares-in-Trust and (ii) the record date of which was on or after the date that
such shares became Shares-in-Trust. The Corporation shall take all measures that
it determines reasonably necessary to recover the amount of any such dividend or
distribution paid to a Prohibited Owner, including, if necessary, withholding
any portion of future dividends or distributions payable on shares of Equity
Stock Beneficially Owned or Constructively Owned by the Person who, but for the
provisions of Section 7.3 of Article VII hereof, would Constructively Own or
Beneficially Own the Shares-in-Trust; and, as soon as reasonably practicable
following the Corporation's receipt or withholding thereof, paying over to the
Trust for the benefit of the Beneficiary the dividends so received or withheld,
as the case may be.
Section 7.9.3 Rights Upon Liquidation. In the event
of any voluntary or involuntary liquidation, dissolution or winding-up, or any
distribution of the assets of, the Corporation, each holder of Shares-in-Trust
shall be entitled to receive, ratably with each other holder of shares of Equity
Stock of the same class or series, that portion of the assets of the Corporation
which is available for distribution to the holders of such class or series of
shares of Equity Stock. The Trust shall distribute to the Prohibited Owner the
amounts received upon such liquidation, dissolution, or winding-up, or
distribution; provided, however, that the Prohibited Owner shall not be entitled
to receive amounts pursuant to this Section 7.9.3 of Article VII in excess of,
in the case of a purported Transfer in which the Prohibited Owner gave value for
shares of Equity Stock and which Transfer resulted in the transfer of the shares
to the Trust, the price per share, if any, such Prohibited Owner paid for the
shares of Equity Stock and, in the case of a Non- Transfer Event or Transfer in
which the Prohibited Owner did not give value for such shares (e.g., if the
shares were received through a gift or devise) and which Non-Transfer Event or
Transfer, as the case may
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<PAGE> 13
be, resulted in the transfer of shares to the Trust, the price per share equal
to the Market Price on the date of such Non-Transfer Event or Transfer. Any
remaining amount in such Trust shall be distributed to the Beneficiary.
Section 7.9.4 Voting Rights. The Trustee shall be entitled to
vote all Shares-in-Trust. Any vote by a Prohibited Owner as a holder of shares
of Equity Stock prior to the discovery by the Corporation that the shares of
Equity Stock are Shares-in-Trust shall, subject to applicable law, be rescinded
and be void ab initio with respect to such Shares-in-Trust and be recast by the
Trustee, in its sole and absolute discretion; provided, however, that if the
Corporation has already taken irreversible corporate action based on such vote,
then the Trustee shall not have the authority to rescind and recast such vote.
The Prohibited Owner shall be deemed to have given, as of the close of business
on the business day prior to the date of the purported Transfer or Non-Transfer
Event that results in the transfer to the Trust of shares of Equity Stock under
Section 7.3 of Article VII hereof, an irrevocable proxy to the Trustee to vote
the Shares-in-Trust in the manner in which the Trustee, in its sole and absolute
discretion, desires.
Section 7.9.5 Designation of Permitted Transferee. The Trustee
shall have the exclusive and absolute right to designate a Permitted Transferee
of any and all Shares-in-Trust. In an orderly fashion so as not to materially
adversely affect the Market Price of the Shares-in-Trust, the Trustee shall
designate any Person as Permitted Transferee, provided, however, that (i) the
Permitted Transferee so designated purchases for valuable consideration (whether
in a public or private sale) the Shares-in-Trust and (ii) the Permitted
Transferee so designated may acquire such Shares-in-Trust without such
acquisition resulting in a transfer to a Trust and the redesignation of such
shares of Equity Stock so acquired as Shares-in-Trust under Section 7.3 of
Article VII hereof. Upon the designation by the Trustee of a Permitted
Transferee in accordance with the provisions of this Section 7.9.5 of Article
VII, the Trustee shall (i) cause to be transferred to the Permitted Transferee
that number of Shares-in-Trust acquired by the Permitted Transferee, (ii) cause
to be recorded on the books of the Corporation that the Permitted Transferee is
the holder of record of such number of shares of Equity Stock, (iii) cause the
Shares-in-Trust to be canceled, and (iv) distribute to the Beneficiary any and
all amounts held with respect to the Shares-in-Trust after making the payment to
the Prohibited Owner pursuant to Section 7.9.6 of Article VII hereof.
Section 7.9.6 Compensation to Record Holder of Shares of
Equity Stock that Become Shares-in-Trust. Any Prohibited Owner shall be entitled
(following discovery of the Shares-in-Trust and subsequent designation of the
Permitted Transferee in accordance with Section 7.9.5 of Article VII hereof or
following the acceptance of the offer to purchase such shares in accordance with
Section 7.9.7 of Article VII hereof) to receive from the Trustee following the
sale or other disposition of such Shares-in-Trust the lesser of (i) in the case
of (a) a purported Transfer in which the Prohibited Owner gave value for shares
of Equity Stock and which Transfer resulted in the transfer of the shares to the
Trust, the price per share, if any, such Prohibited Owner paid for the shares of
Equity Stock, or (b) a Non-Transfer Event or Transfer in which the Prohibited
Owner did not give value for such shares (e.g., if the shares were received
through a gift or devise) and which Non-Transfer Event or Transfer, as the case
may be, resulted in the transfer of shares to the Trust, the price per share
equal to the Market Price on the date of such Non-Transfer Event or Transfer,
and (ii) the price per share received by the Trustee from the sale or other
disposition of such Shares-in-Trust in accordance with Section 7.9.5 or 7.9.6 of
Article VII hereof. Any amounts received by the Trustee in respect of such
Shares-in-Trust and in excess of such amounts to be paid the Prohibited Owner
pursuant to this Section 7.9.6 shall be distributed to the Beneficiary in
accordance with the provisions of Section 7.9.5 of Article VII hereof. Each
Beneficiary and Prohibited Owner waives any and all claims that he may have
against the Trustee and the Trust arising out of the disposition of Shares-in-
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<PAGE> 14
Trust, except for claims arising out of the gross negligence or willful
misconduct of, or any failure to make payments in accordance with this Section
7.9.6, by such Trustee or the Corporation.
Section 7.9.7 Purchase Right in Shares-in-Trust.
Shares-in-Trust shall be deemed to have been offered for sale to the
Corporation, or its designee, at a price per share equal to the lesser of (i)
the price per share in the transaction that created such Shares-in-Trust (or, in
the case of devise, gift or Non- Transfer Event, the Market Price at the time of
such devise, gift or Non-Transfer Event) and (ii) the Market Price on the date
the Corporation, or its designee, accepts such offer. Subject to Section 7.9.6
of Article VII hereof, the Corporation shall have the right to accept such offer
for a period of ninety days after the latter of (i) the date of the Non-Transfer
Event or purported Transfer which resulted in such Shares-in- Trust and (ii) the
date the Corporation determines in good faith that a Transfer or Non-Transfer
Event resulting in Shares-in-Trust has occurred, if the Corporation does not
receive a notice of such Transfer or Non-Transfer Event pursuant to Section 7.5
of Article VII hereto.
Section 7.10 Remedies Not Limited. Subject to Section 7.8 of
Article VII hereof, nothing contained in this Article VII shall limit the
authority of the Corporation to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its stockholders by
preservation of the Corporation's status as a REIT and to ensure compliance with
the Ownership Limit or the Look- Through Ownership Limit, as applicable.
Section 7.11 Legend. Each certificate for shares of Equity
Stock shall substantially bear the following legend:
"The shares represented by this certificate are subject to
restrictions on transfer for the purpose of the Corporation's
maintenance of its status as a real estate investment trust
under the Internal Revenue Code of 1986, as amended (the
"Code"). No Person may (i) Beneficially Own or Constructively
Own shares of Equity Stock in excess of 9.8% of the number or
value of outstanding shares of any class of Equity Stock (or,
in the case of a Look-Through Entity, in excess of 15% of the
number or value of outstanding shares of any class of Equity
Stock), (ii) beneficially own shares of Equity Stock that
would result in the shares of Equity Stock being beneficially
owned by fewer than 100 Persons (determined without reference
to any rules of attribution), (iii) Beneficially Own shares of
Equity Stock that would result in the Corporation being
"closely held" under Section 856(h) of the Code, or (iv)
Constructively Own shares of Equity Stock that would cause the
Corporation to Constructively Own 9.9% or more of the
ownership interests in a tenant of the Corporation's, the
Operating Partnership's or a Subsidiary's real property,
within the meaning of Section 856(d)(2)(B) of the Code. Any
Person who attempts to Beneficially Own or Constructively Own
shares of Equity Stock in excess of the above limitations must
immediately notify the Corporation in writing. If the
restrictions above are violated, the shares of Equity Stock
represented hereby will be transferred automatically and by
operation of law to a Trust and shall be designated
Shares-in-Trust. The foregoing summary does not purport to be
complete and is qualified in its entirety by reference to, and
all capitalized terms in this legend have the
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<PAGE> 15
meanings defined in, the Corporation's charter, as the same
may be amended from time to time, a copy of which, including
the restrictions on transfer, will be sent without charge to
each Stockholder who so requests."
Instead of the foregoing legend, the certificate may state
that the Corporation will furnish a full statement about certain restrictions on
transferability on request and without charge.
Section 7.12 Amendment. Notwithstanding any other provisions
of the charter or the Bylaws of the Corporation (and notwithstanding that some
lesser percentage may be specified by law, the charter or the Bylaws of the
Corporation), the provisions of this Article VII shall not be amended, altered,
changed or repealed without the affirmative vote of all the Independent
Directors and the holders of not less than two-thirds of the outstanding shares
of stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
Section 7.13 General Provisions
Section 7.13.1 Interpretation and Ambiguities. The
Board shall have the power to interpret and to construe the provisions of this
Article VII, and in the case of an ambiguity in the application of any of the
provisions of this Article VII including any definition contained in Section
7.1, the Board shall have the power to determine the application of the
provisions of this Article VII with respect to any situation based on the facts
known to it, and any such interpretation, construction or determination shall be
final and binding on all interested parties, including the Stockholders.
Section 7.13.2 Severability. If any provision of this
Article VII or any application of any such provision is determined to be void,
invalid or unenforceable by any court having jurisdiction over the issue, the
validity and enforceability 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 VIII
AMENDMENTS
Section 8.1 Right to Amend Articles. The Corporation reserves
the right from time to time to make any amendment to its charter, now or
hereafter authorized by law, including any amendment altering the terms or
contract rights, as expressly set forth in this charter, of any shares of
outstanding stock. All rights and powers conferred by the charter on
stockholders, directors and officers are granted subject to this reservation.
Section 8.2 Certain Amendments Requiring Special Stockholder
Vote. No amendment of this charter of the Corporation may be made unless the
same is approved by the board of directors in accordance with Section 2-604 of
the Maryland General Corporation Law and the charter and thereafter approved by
the shareholders. In addition to any other vote of the shareholders that is
required by applicable law, the affirmative vote of two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote on such
amendment, voting together as a single class, and the affirmative vote of
two-thirds of the outstanding shares of each class entitled to vote thereon as a
class, shall be required
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<PAGE> 16
to amend any provisions of this Charter (except to amend any provision of this
Charter relating to the authority of the Corporation to issue shares of its
Capital Stock, including, without limitation Article VI, Section 1, only a
majority rather than two-thirds shall be needed).
ARTICLE IX
AMENDMENT OF BYLAWS
Section 9.1 Amendment by Directors. Except as otherwise
provided by law, the Bylaws of the Corporation may be amended or repealed by the
board of directors by the affirmative vote of a majority of the directors then
in office.
Section 9.2 Amendment by Stockholders. The Bylaws of the
Corporation may be amended or repealed at any annual meeting of stockholders, or
at any special meeting of stockholders called for such purpose, by the
affirmative vote of at least a majority of the outstanding shares of capital
stock of the Corporation entitled to vote on such amendment or repeal, voting
together as a single class.
ARTICLE X
LIMITATION OF LIABILITY
To the maximum extent that Maryland law in effect from time to
time permits limitation of the liability of directors and officers of a
corporation, no director or officer of the Corporation shall be liable to the
Corporation or its stockholders for money damages. Neither the amendment nor
repeal of this Article X, nor the adoption or amendment of any other provision
of the charter or Bylaws inconsistent with this Article X, shall apply to or
affect in any respect the applicability of the preceding sentence with respect
to any act or failure to act which occurred prior to such amendment, repeal or
adoption.
THIRD: The amendment to and restatement of the charter as
hereinabove set forth have been duly advised by the Board of Directors and
approved by the stockholders of the Corporation as required by law.
FOURTH: The current address of the principal office of the
Corporation is as set forth in Article IV of the foregoing amendment and
restatement of the charter.
FIFTH: The name and address of the Corporation's current
resident agent is as set forth in Article IV of the foregoing amendment and
restatement of the charter.
SIXTH: The number of directors of the Corporation and the
names of those currently in office are as set forth in Article V of the
foregoing amendment and restatement of the charter.
SEVENTH: The total number of shares of stock which the
Corporation had authority to issue immediately prior to this amendment and
restatement was 1,000, par value $0.01 per share, all of one class. The
aggregate par value of all shares of stock having par value was $10.
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<PAGE> 17
EIGHTH: The total number of shares of stock which the
Corporation has authority to issue pursuant to the foregoing amendment and
restatement of the charter is 200,000,000, consisting of 150,000,000 shares of
Common Stock, $0.01 par value per share, and 50,000,000 shares of Preferred
Stock, $0.01 par value per share. The aggregate par value of all authorized
shares of stock having par value is $3,500,000.
NINTH: The undersigned President acknowledges these Articles
of Amendment and Restatement to be the corporate act of the Corporation and as
to all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles
of Amendment and Restatement to be signed in its name and on its behalf by its
President and attested to by its Secretary on this _____ day of ____________,
199_.
ATTEST: TOWER REALTY TRUST, INC.
By: (SEAL)
- ---------------------------- -------------------------------
Secretary President
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<PAGE> 1
Exhibit 3.4
TOWER REALTY TRUST, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be located at such place or places as the Board of Directors may
designate. The initial principal office of the Corporation shall be 125 West
45th Street, New York, New York 10036.
Section 2. ADDITIONAL OFFICES. The Corporation may have additional
offices at such places as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders for
the election of directors and the transaction of any business within the powers
of the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of May in each year; commencing with the first annual
meeting of stockholders which shall be held in May 1998.
Section 3. SPECIAL MEETINGS. The president, chief executive officer or
Board of Directors may call special meetings of the stockholders. Special
meetings of stockholders shall also be called by the secretary of the
Corporation upon the written request of the holders of shares entitled to cast
not less than twenty-five percent (25%) of all the votes entitled to be cast at
such meeting. Such request shall state the purpose of such meeting and the
matters proposed to be acted on at such meeting. The secretary shall inform such
stockholders of the
<PAGE> 2
reasonably estimated cost of preparing and mailing notice of the meeting and,
upon payment to the Corporation by such stockholders of such costs, the
secretary shall give notice to each stockholder entitled to notice of the
meeting.
Section 4. NOTICE. Not less than ten nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail or by presenting it to such stockholder personally or by leaving it at
his residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail addressed to the
stockholder at his post office address as it appears on the records of the
Corporation, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except as otherwise set forth in Section 12(a) and
except for such business as is required by any statute to be stated in such
notice. No business shall be transacted at a special meeting of stockholders
except as specifically designated in the notice.
Section 6. ORGANIZATION. At every meeting of stockholders, the
chairman of the board, if there be one, shall conduct the meeting or, in the
case of vacancy in office or absence of the chairman of the board, one of the
following officers present shall conduct the meeting in the order stated: the
vice chairman of the board, if there be one, the president, the vice presidents
in their order of rank and seniority, or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman, and the
secretary, or, in his absence, an assistant secretary, or in the absence of both
the secretary and assistant secretaries, a person appointed by the chairman
shall act as secretary.
Section 7. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the charter of the
Corporation for the vote necessary for the adoption of any measure. If, however,
such quorum shall not be present at any meeting of the stockholders, the
stockholders entitled to vote at such meeting, present in person or by proxy,
shall have the power to adjourn the meeting from time to time to a date not more
than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 8. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share
2
<PAGE> 3
may be voted for as many individuals as there are directors to be elected and
for whose election the share is entitled to be voted. A majority of the votes
cast at a meeting of stockholders duly called and at which a quorum is present
shall be sufficient to approve any other matter which may properly come before
the meeting, unless more than a majority of the votes cast is required by
statute or by the charter of the Corporation. Unless otherwise provided in the
charter, each outstanding share, regardless of class, shall be entitled to one
vote on each matter submitted to a vote at a meeting of stockholders.
Section 9. PROXIES. A stockholder may vote the stock owned of record
by him, either in person or by proxy executed in writing by the stockholder or
by his duly authorized attorney in fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
Section 10. (a) VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the
Corporation registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by an office thereof, a general
partner or trustee thereof, as the case may be, or a proxy appointed by any of
the foregoing individuals, unless some other person who has been appointed to
vote such stock pursuant to a bylaw or a resolution of the governing body of
such corporation or other entity or agreement of the partners of a partnership
presents a certified copy of such bylaw, resolution or agreement, in which case
such person may vote such stock. Any director or other fiduciary may vote stock
registered in his name as such fiduciary, either in person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding shares
at any given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
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(b) EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE.
Notwithstanding any other provision of the charter of the Corporation or these
Bylaws, Title 3, Subtitle 7 of the Corporations and Associations Article of the
Annotated Code of Maryland (or any successor statute) shall not apply to any
acquisition by any person of shares of stock of the Corporation. This section
may be repealed, in whole or in part, at any time, whether before or after an
acquisition of control shares and, upon such repeal, may, to the extent provided
by any successor bylaw, apply to any prior or subsequent control share
acquisition.
(c) Exemption From Business Combination Statute. Notwithstanding
any other provision of the charter of the Corporation or these Bylaws, Title 3,
Subtitle 6 of the Corporations and Associations Article of the Annotated Code of
Maryland (or any successor statute) shall not apply to any acquisition by any
person of shares of stock of the Corporation. This section may be repealed, in
whole or in part, at any time, whether before or after an acquisition of control
shares and, upon such repeal, may, to the extent provided by any successor
bylaw, apply to any prior or subsequent control share acquisition.
Section 11. INSPECTORS. At any meeting of stockholders, the chairman
of the meeting may appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented at
the meeting based upon their determination of the validity and effect of
proxies, count all votes, report the results and perform such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the stockholders.
Each report of an inspector shall be in writing and signed by him or by
a majority of them if there is more than one inspector acting at such meeting.
If there is more than one inspector, the report of a majority shall be the
report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
Section 12. NOMINATIONS AND STOCKHOLDER BUSINESS
(a) Annual Meetings of Stockholders. (1) Nominations of persons
for election to the Board of Directors and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders
(i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction
of the Board of Directors or (iii) by any stockholder of the Corporation who was
a stockholder of record both at the time of giving of notice provided for in
this Section 12(a) and at the time of the annual meeting of stockholders, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this Section 12(a).
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause (iii) of
paragraph (a)(1) of this Section 12, the stockholder must have given timely
notice thereof in writing to the secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to the secretary at the
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principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that 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 stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th 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. Such stockholder's notice shall set
forth (i) as to each person whom the stockholder 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 (the "Exchange Act")
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (ii) as to any other
business that the stockholder 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 stockholder and of the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (x) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (y) the number of shares
of each class of stock of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this Section 12 to the contrary, in the event that the
number of directors to be elected to the Board of Directors is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the Corporation
at least 70 days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 12(a) shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record both at the time of giving of notice
provided for in this Section 12(b) and at the time of the special meeting, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 12(b). In the event the Corporation calls a special
meeting
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of stockholders for the purpose of electing one or more directors to the Board
of Directors, any such stockholder may nominate a person or persons (as the case
may be) for election to such position as specified in the Corporation's notice
of meeting, if the stockholder's notice containing the information required by
paragraph (a)(2) of this Section 12 shall be delivered to the secretary at the
principal executive offices of the Corporation not earlier than the 90th day
prior to such special meeting and not later than the close of business on the
later of the 60th day prior to such special meeting or the tenth day following
the day on which public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at
such meeting.
(c) General. (1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 12. The presiding officer of the meeting shall have
the power and duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in this Section 12 and, if any proposed nomination or business is not in
compliance with this Section 12, to declare that such defective nomination or
proposal be disregarded.
(2) For purposes of this Section 12, "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Section 12, a stockholder shall also comply with all applicable requirements of
state law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 12. Nothing in this Section 12
shall be deemed to affect any rights of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
Section 13. VOTING BY BALLOT. Voting on any question or in any
election may be viva voce unless the presiding officer shall order or any
stockholder shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors.
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Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting
or at any special meeting called for that purpose, a majority of the entire
Board of Directors may establish, increase or decrease the number of directors,
provided that the number thereof shall never be less than the minimum number
required by the Maryland General Corporation Law, nor more than 15, and further
provided that the tenure of office of a director shall not be affected by any
decrease in the number of directors.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board
of Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. The
Board of Directors may provide, by resolution, the time and place, either within
or without the State of Maryland, for the holding of regular meetings of the
Board of Directors without other notice than such resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the chairman of the board,
president or by a majority of the directors then in office. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Maryland, as the place for
holding any special meeting of the Board of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile transmission,
United States mail or courier to each director at his business or residence
address. Notice by personal delivery, by telephone or a facsimile transmission
shall be given at least two days prior to the meeting. Notice by mail shall be
given at least five days prior to the meeting and shall be deemed to be given
when deposited in the United States mail properly addressed, with postage
thereon prepaid. Telephone notice shall be deemed to be given when the director
is personally given such notice in a telephone call to which he is a party.
Facsimile transmission notice shall be deemed to be given upon completion of the
transmission of the message to the number given to the Corporation by the
director and receipt of a completed answer-back indicating receipt. Neither the
business to be transacted at, nor the purpose of, any annual, regular or special
meeting of the Board of Directors need be stated in the notice, unless
specifically required by statute or these Bylaws.
Section 6. QUORUM. A majority of the directors shall constitute a
quorum for transaction of business at any meeting of the Board of Directors,
provided that, if less than a majority of such directors are present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice, and provided further that if, pursuant to the
charter of the Corporation or these Bylaws, the vote of a majority of a
particular group of directors is required for action, a quorum must also include
a majority of such group.
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The directors present at a meeting which has been duly called
and convened may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
Section 7. VOTING. The action of the majority of the directors present
at a meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable statute.
Section 7A. APPROVAL OF CERTAIN CONTRACTS. Any action pertaining to
any transaction in which the Company is purchasing, selling, leasing or
mortgaging any real estate asset, making a joint venture investment or engaging
in any other transaction in which a director or officer of the Company, or
affiliated contract manager of any property of the Company or any affiliate of
the foregoing, has any direct or indirect interest other than as a result of
such person's status as a director, officer or stockholder of the Company, must
be approved by the affirmative vote of a majority of the Independent Directors
even if the Independent Directors constitute less than a quorum.
Section 7B. EXERCISE OF CERTAIN OPTION CONTRACTS. The exercise by the
Company of its rights, pursuant to the terms and provisions of the Phoenix Land
Parcel Option Contract, dated September 12, 1997, must be approved by the
unanimous affirmative vote of the Independent Directors, even if the Independent
Directors constitute less than a quorum.
Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting
by means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.
Section 10. VACANCIES. If for any reason any or all the directors
cease to be directors, such event shall not terminate the Corporation or affect
these Bylaws or the powers of the remaining directors hereunder (even if fewer
than three directors remain). Any vacancy on the Board of Directors for any
cause other than an increase in the number of directors shall be filled by a
majority of the remaining directors, although such majority is less than a
quorum. Any vacancy in the number of directors created by an increase in the
number of directors may be filled by a majority vote of the entire Board of
Directors. Any individual so elected as director shall hold office until the
next annual meeting of stockholders and until his successor is elected and
qualifies.
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Section 11. COMPENSATION. Directors shall not receive any stated
salary for their services as directors but, by resolution of the Board of
Directors, may receive fixed sums per year and/or per meeting and/or per visit
to real property or other facilities owned or leased by the Corporation and for
any service or activity they performed or engaged in as directors. Directors may
be reimbursed for expenses of attendance, if any, at each annual, regular or
special meeting of the Board of Directors or of any committee thereof and for
their expenses, if any, in connection with each property visit and any other
service or activity they performed or engaged in as directors; but nothing
herein contained shall be construed to preclude any directors from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 12. LOSS OF DEPOSITS. No director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.
Section 13. SURETY BONDS. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 14. RELIANCE. Each director, officer, employee and agent of
the Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.
Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility to devote their full time to
the affairs of the Corporation. Any director or officer, employee or agent of
the Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or in
competition with those of or relating to the Corporation.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors
may appoint from among its members an Executive Committee, an Audit Committee, a
Compensation Committee, a Nominating Committee and other committees, composed of
two or more directors, to serve at the pleasure of the Board of Directors. If
appointed, the members of the Audit Committee and Compensation Committee shall
at all
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times consist solely of Independent Directors (i.e., a director of the
Corporation who is not an officer or employee of the Corporation, any affiliate
of an officer or employee or any affiliate of any advisor to the Corporation
under an advisory agreement, any lessee of any property of the Corporation any
subsidiary of the Corporation or any partnership which is an affiliate of, the
Corporation).
Section 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given in
the same manner as notice for special meetings of the Board of Directors. A
majority of the members of the committee shall constitute a quorum for the
transaction of business at any meeting of the committee. The act of a majority
of the committee members present at a meeting shall be the act of such
committee. The Board of Directors may designate a chairman of any committee, and
such chairman or any two members of any committee may fix the time and place of
its meeting unless the Board shall otherwise provide. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint another director to act in
the place of such absent member. Each committee shall keep minutes of its
proceedings.
Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is signed
by each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.
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ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
include a chief executive officer, a president, a secretary and a treasurer and
may include a chairman of the board, a vice chairman of the board, one or more
vice presidents, a chief operating officer, a chief financial officer, one or
more assistant secretaries and one or more assistant treasurers. In addition,
the Board of Directors may from time to time appoint such other officers with
such powers and duties as they shall deem necessary or desirable. The officers
of the Corporation shall be elected annually by the Board of Directors at the
first meeting of the Board of Directors held after each annual meeting of
stockholders, except that the chief executive officer may appoint one or more
vice presidents, assistant secretaries and assistant treasurers. If the election
of officers shall not be held at such meeting, such election shall be held as
soon thereafter as may be convenient. Each officer shall hold office until his
successor is elected and qualifies or until his death, resignation or removal in
the manner hereinafter provided. Any two or more offices except president and
vice president may be held by the same person. In its discretion, the Board of
Directors may leave unfilled any office except that of president, treasurer and
secretary. Election of an officer or agent shall not of itself create contract
rights between the Corporation and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the chairman of the board, the
president or the secretary. Any resignation shall take effect at any time
subsequent to the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The acceptance
of a resignation shall not be necessary to make it effective unless otherwise
stated in the resignation. Such resignation shall be without prejudice to the
contract rights, if any, of the Corporation.
Section 3. VACANCIES. A vacancy in any office may be filled by the
Board of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may
designate a chief executive officer. In the absence of such designation, the
chairman of the board shall be the chief executive officer of the Corporation.
The chief executive officer shall have general responsibility for implementation
of the policies of the Corporation, as determined by the Board of Directors, and
for the management of the business and affairs of the Corporation.
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Section 5. CHIEF OPERATING OFFICER. The Board of Directors may
designate a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may
designate a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate a chairman of the board. The chairman of the board shall preside over
the meetings of the Board of Directors and of the stockholders at which he shall
be present. The chairman of the board shall perform such other duties as may be
assigned to him or them by the Board of Directors.
Section 8. PRESIDENT. The president or chief executive officer, as the
case may be, shall in general supervise and control all of the business and
affairs of the Corporation. In the absence of a designation of a chief operating
officer by the Board of Directors, the president shall be the chief operating
officer. He may execute any deed, mortgage, bond, contract or other instrument,
except in cases where the execution thereof shall be expressly delegated by the
Board of Directors or by these Bylaws to some other officer or agent of the
Corporation or shall be required by law to be otherwise executed; and in general
shall perform all duties incident to the office of president and such other
duties as may be prescribed by the Board of Directors from time to time.
Section 9. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors. The Board of
Directors may designate one or more vice presidents as executive vice president
or as vice president for particular areas of responsibility.
Section 10. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of the seal of
the Corporation; (d) keep a register of the post office address of each
stockholder which shall be furnished to the secretary by such stockholder; (e)
have general charge of the share transfer books of the Corporation; and (f) in
general perform such other duties as from time to time may be assigned to him by
the chief executive officer, the president or by the Board of Directors.
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Section 11. TREASURER. The treasurer shall have the custody of the
funds and securities of the Corporation and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. In the absence of a designation of a chief financial officer by
the Board of Directors, the treasurer shall be the chief financial officer of
the Corporation.
The treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at the
regular meetings of the Board of Directors or whenever it may so require, an
account of all his transactions as treasurer and of the financial condition of
the Corporation.
If required by the Board of Directors, the treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.
The assistant secretaries and assistant treasurers, in general, shall perform
such duties as shall be assigned to them by the secretary or treasurer,
respectively, or by the president or the Board of Directors. The assistant
treasurers shall, if required by the Board of Directors, give bonds for the
faithful performance of their duties in such sums and with such surety or
sureties as shall be satisfactory to the Board of Directors.
Section 13. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that he is also a director.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any officer
or agent to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Corporation and such authority may be general
or confined to specific instances. Any agreement, deed, mortgage, lease or other
document executed by one or more of the directors or by an authorized person
shall be valid and binding upon the Board of Directors and upon the Corporation
when authorized or ratified by action of the Board of Directors.
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Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or agent of the
Corporation in such manner as shall from time to time be determined by the Board
of Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.
ARTICLE VII
STOCK
Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile. Certificates
shall be consecutively numbered; and if the Corporation shall, from time to
time, issue several classes of stock, each class may have its own number series.
A certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing shares
which are restricted as to their transferability or voting powers, which are
preferred or limited as to their dividends or as to their allocable portion of
the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Corporation has authority to issue stock of more than one
class, the certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of stock and, if the Corporation is authorized to issue any preferred or
special class in series, the differences in the relative rights and preferences
between the shares of each series to the extent they have been set and the
authority of the Board of Directors to set the relative rights and preferences
of subsequent series. In lieu of such statement or summary, the certificate may
state that the Corporation will furnish a full statement of such information to
any stockholder upon request and without charge. If any class of stock is
restricted by the Corporation as to transferability, the certificate shall
contain a full statement of the restriction or state that the Corporation will
furnish information about the restrictions to the stockholder on request and
without charge.
Section 2. TRANSFERS. Upon surrender to the Corporation or the
transfer agent of the Corporation of a stock certificate duly endorsed or
accompanied by proper evidence of
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succession, assignment or authority to transfer, the Corporation shall issue a
new certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
The Corporation shall be entitled to treat the holder of
record of any share of stock as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share or on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
State of Maryland.
Notwithstanding the foregoing, transfers of shares of any
class of stock will be subject in all respects to the charter of the Corporation
and all of the terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the
Board of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, an officer designated by the Board of Directors
may, in his discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or the owner's
legal representative to advertise the same in such manner as he shall require
and/or to give bond, with sufficient surety, to the Corporation to indemnify it
against any loss or claim which may arise as a result of the issuance of a new
certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or determining stockholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in any
case, shall not be prior to the close of business on the day the record date is
fixed and shall be not more than 90 days and, in the case of a meeting of
stockholders, not less than ten days, before the date on which the meeting or
particular action requiring such determination of stockholders of record is to
be held or taken.
In lieu of fixing a record date, the Board of Directors may
provide that the stock transfer books shall be closed for a stated period but
not longer than 20 days. If the stock transfer books are closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.
If no record date is fixed and the stock transfer books are
not closed for the determination of stockholders, (a) the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day
15
<PAGE> 16
on which the notice of meeting is mailed or the 30th day before the meeting,
whichever is the closer date to the meeting; and (b) the record date for the
determination of stockholders entitled to receive payment of a dividend or an
allotment of any other rights shall be the close of business on the day on which
the resolution of the directors, declaring the dividend or allotment of rights,
is adopted.
When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except when (i) the
determination has been made through the closing of the transfer books and the
stated period of closing has expired or (ii) the meeting is adjourned to a date
more than 120 days after the record date fixed for the original meeting, in
either of which case a new record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of Directors
may issue fractional stock or provide for the issuance of scrip, all on such
terms and under such conditions as they may determine. Notwithstanding any other
provision of the charter or these Bylaws, the Board of Directors may issue units
consisting of different securities of the Corporation. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Corporation, except that the Board of Directors may provide that for a
specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix
the fiscal year of the Corporation by a duly adopted resolution.
16
<PAGE> 17
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon the
stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the charter of the Corporation.
Dividends and other distributions may be paid in cash, property or stock of the
Corporation, subject to the provisions of law and the charter.
Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the Board
of Directors may from time to time adopt, amend, revise or terminate any policy
or policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the adoption of
a seal by the Corporation. The seal shall contain the name of the Corporation
and the year of its incorporation and the words "Incorporated Maryland." The
Board of Directors may authorize one or more duplicate seals and provide for the
custody thereof.
Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf
17
<PAGE> 18
of the Corporation.
ARTICLE XII
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland Law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of his service
in that capacity, or (b) any individual who, while a director of the Corporation
and at the request of the Corporation, serves or has served another corporation,
real estate investment trust, partnership, joint venture, trust, employee
benefit plan or other enterprise and who is made a party to the proceeding by
reason of his service in that capacity. The Corporation may, with the approval
of its Board of Directors, provide such indemnification and advance for expenses
to a person who served a predecessor of the Corporation in any of the capacities
described in (a) or (b) above and to any employee or agent of the Corporation or
a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of
the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any meeting need be set forth in the waiver of notice, unless specifically
required by statute. The attendance of any person at any meeting shall
constitute a waiver of notice of such meeting, except where such person attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
18
<PAGE> 19
ARTICLE XIV
AMENDMENT OF BYLAWS
The Board of Directors shall have the power to adopt, alter or repeal
any provision of these Bylaws and to make new Bylaws. In addition, any provision
of these Bylaws may be adopted, altered or repealed by the affirmative vote of
the shareholders of at least a majority of the votes entitled to be cast.
19
<PAGE> 1
Exhibit 4.1
[TOWER REALTY TRUST, INC. LOGO]
[STATUE OF LIBERTY ART]
INCORPORATED UNDER THE LAWS
OF THE STATE OF MARYLAND
SEE REVERSE FOR IMPORTANT NOTICE
ON TRANSFER RESTRICTIONS AND
OTHER INFORMATION
CUSIP 89185E 10 9
This Certifies that
is the owner of
FULLY-PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $0.01 PER SHARE, OF
Tower Realty Trust, Inc. (the "Corporation") transferable on the books of the
Corporation by the holder hereof in person or by its duly authorized attorney,
upon surrender of this Certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be held subject to all of the
provisions of the Articles of Incorporation of the Corporation (the "Charter")
and the Bylaws of the Corporation and any amendments thereto. This Certificate
is not valid unless countersigned and registered by the Transfer Agent and
Registrar.
In Witness Whereof, the Corporation has caused this Certificate to be
executed on its behalf by its duly authorized officers.
Dated:
[TOWER REALTY TRUST, INC. CORPORATE SEAL, 1997]
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY /s/
(NEW YORK, NY) TRANSFER AGENT Chairman of the Board,
AND REGISTRAR Chief Executive Officer and President
BY
/s/ SUSAN COX
AUTHORIZED SIGNATURE Secretary
<PAGE> 2
IMPORTANT NOTICE
The Corporation will furnish to any stockholder, on request and
without charge, a full statement of the information required by Section
2-211(b) of the Corporations and Associations Article of the Annotated Code of
Maryland with respect to the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends and
other distributions, qualifications and terms and conditions of redemption of
the stock of each class which the Corporation has authority to issue and, if
the Corporation is authorized to issue any preferred or special class in
series, (i) the differences in the relative rights and preferences between the
shares of each series to the extent set, and (ii) the authority of the Board of
Directors to set such rights and preferences of subsequent series. The foregoing
summary does not purport to be complete and is subject to and qualified in its
entirety by reference to the Articles of Incorporation of the Corporation (the
"Charter"), a copy of which will be sent without charge to each stockholder who
so requests. Such request must be made to the Secretary of the Corporation at
its principal office or to the Transfer Agent.
The shares of Common Stock represented by this certificate are subject
to restrictions on transfer for the purpose of the Corporation's maintenance of
its status as a real estate investment trust under the Internal Revenue Code of
1986, as amended (the "Code"). No Person may (i) Beneficially Own or
Constructively Own shares of Equity Stock in excess of 9.8% of the number or
value of outstanding shares of any class of Equity Stock (or, in the case of a
Look-Through Entity, in excess of 15% of the number or value of outstanding
shares of any class of Equity Stock), (ii) Beneficially Own shares of Equity
Stock that would result in the shares of Equity Stock being beneficially owned
by fewer than 100 Persons (determined without reference to any rules of
attribution), (iii) Beneficially Own shares of Equity Stock that would result
in the Corporation being "closely held" under Section 856(h) of the Code, or
(iv) Constructively Own shares of Equity Stock that would cause the Corporation
to Constructively Own 9.9% or more of the ownership interests in a tenant of
the Corporation's, the Operating Partnership's or a Subsidiary's real
property, within the meaning of Section 856(d)(2)(B) of the Code. Any Person who
attempts to Beneficially Own or Constructively Own shares of Equity Stock in
excess of the above limitations must immediately notify the Corporation in
writing. If the restrictions above are violated, the shares of Equity Stock
represented hereby will be transferred automatically and by operation of law to
a trust and shall be designated Shares-in-Trust. All capitalized terms in this
legend have the meanings defined in the Corporation's Charter, as the same may
be further amended from time to time, a copy of which, including the
restrictions on transfer, will be sent without charge to each Stockholder who
so requests. Such request must be made to the Secretary of the Corporation at
its principal office or to the Transfer Agent.
------------
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN
OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A
CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
------------
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT - Custodian
----------- -------------
(Custodian) (Minor)
under Uniform Gifts to Minors
Act of
-------------------
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, hereby sell, assign and transfer unto
-----------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
shares of Common Stock of the Corporation
- --------------------------------------
represented by this Certificate, and do hereby irrevocably constitute and
appoint , Attorney
--------------------------------------------------------------
to transfer the said shares of Common Stock on the books of the Corporation,
with full power of substitution in the premises.
<PAGE> 1
Exhibit 10.5
TOWER REALTY TRUST, INC.
1997 INCENTIVE PLAN
<PAGE> 2
ARTICLE I
DEFINITIONS...........................................................1
1.1 Affiliate........................................................1
1.2 Agreement........................................................1
1.3 Award............................................................1
1.4 Board............................................................1
1.5 Code.............................................................1
1.6 Committee........................................................1
1.7 Common Stock.....................................................1
1.8 Company..........................................................1
1.9 Exchange Act.....................................................1
1.10 Fair Market Value...............................................1
1.11 Incentive Award.................................................2
1.12 Option..........................................................2
1.13 Participant.....................................................2
1.14 Performance Shares..............................................2
1.15 Permitted Family Members........................................2
1.16 Plan............................................................2
1.17 Stock Award.....................................................2
1.18 Ten Percent Shareholder.........................................2
ARTICLE II
PURPOSES..............................................................2
ARTICLE III
ADMINISTRATION........................................................3
ARTICLE IV
ELIGIBILITY...........................................................4
ARTICLE V
STOCK SUBJECT TO PLAN.................................................4
5.1 Shares Issued....................................................4
5.2 Aggregate Limit..................................................4
5.3 Reallocation of Shares...........................................4
ARTICLE VI
OPTIONS...............................................................5
6.1 Award............................................................5
6.2 Option Price.....................................................5
6.3 Maximum Option Period............................................5
6.4 Nontransferability...............................................5
6.5 Transferable Options.............................................5
i
<PAGE> 3
6.6 Employee Status..................................................6
6.7 Exercise.........................................................6
6.8 Payment..........................................................6
6.9 Shareholder Rights...............................................6
6.10 Disposition of Stock............................................6
ARTICLE VII
STOCK AWARDS..........................................................7
7.1 Award............................................................7
7.2 Vesting..........................................................7
7.3 Performance Objectives...........................................7
7.4 Employee Status..................................................7
7.5 Shareholder Rights...............................................7
ARTICLE VIII
PERFORMANCE SHARE AWARDS..............................................8
8.1 Award............................................................8
8.2 Earning the Award................................................8
8.3 Payment..........................................................8
8.4 Shareholder Rights...............................................8
8.5 Nontransferability...............................................8
8.6 Transferable Performance Shares..................................9
8.7 Employee Status..................................................9
ARTICLE IX
INCENTIVE AWARDS......................................................9
9.1 Award............................................................9
9.2 Terms and Conditions.............................................9
9.3 Nontransferability..............................................10
9.4 Transferable Incentive Awards...................................10
9.5 Employee Status.................................................10
9.6 Shareholder Rights..............................................10
ARTICLE X
ADJUSTMENT UPON CHANGE IN COMMON STOCK...............................10
ARTICLE XI
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES; GOVERNING LAW.........................11
ARTICLE XII
GENERAL PROVISIONS...................................................12
12.1 Effect on Employment and Service...............................12
ii
<PAGE> 4
12.2 Unfunded Plan..................................................12
12.3 Rules of Construction..........................................12
ARTICLE XIII
AMENDMENT............................................................12
ARTICLE XIV
DURATION OF PLAN.....................................................12
ARTICLE XV
EFFECTIVE DATE OF PLAN...............................................13
iii
<PAGE> 5
ARTICLE I
DEFINITIONS
1.1 Affiliate means any "subsidiary" or "parent" corporation
(within the meaning of Section 424 of the Code) of the Company.
1.2 Agreement means a written agreement (including any
amendment or supplement thereto) between the Company and a Participant
specifying the terms and conditions of a Stock Award, an award of Performance
Shares or an Option or Incentive Award granted to such Participant.
1.3 Award means any of an Incentive Award, an Option, an award
of Performance Shares, or a Stock Award.
1.4 Board means the Board of Directors of the Company.
1.5 Code means the Internal Revenue Code of 1986, and any
amendments thereto.
1.6 Committee means the Compensation Committee of the Board or
a subcommittee thereof comprised of at least two (2) directors each of whom is a
non-employee director within the meaning of Securities and Exchange Commission
Rule 16b-3.
1.7 Common Stock means the common stock, $0.01 par value, of
the Company.
1.8 Company means Tower Realty Trust, Inc., a Maryland
corporation.
1.9 Exchange Act means the Securities Exchange Act of 1934, as
amended and as in effect on the effective date of this Plan.
1.10 Fair Market Value means, on any given date, the current
fair market value of the shares of Common Stock as determined below:
If the Common Stock is not listed on an established stock
exchange, the Fair Market Value shall be the average of the final bid and asked
quotations on the over-the-counter market in which the Common Stock is traded
or, if applicable, the reported "closing" price of a share of Common Stock in
the New York over-the-counter market as reported by the National Association of
Securities Dealers, Inc. If the Common Stock is listed on one or more
established stock exchanges, Fair Market Value shall be deemed to be the highest
closing price of a share of Common Stock reported on any such exchange. In any
case, if no sale of Common Stock is made on any stock exchange or
over-the-counter market on that date, then Fair Market Value shall be determined
as of the next preceding day on which there was a sale. If the Common Stock is
not traded, Fair Market Value shall be determined by the Board using any
reasonable method in good faith.
<PAGE> 6
1.11 Incentive Award means an award which, subject to such
terms and conditions as may be prescribed by the Administrator, entitles the
Participant to receive a cash payment from the Company or an Affiliate.
1.12 Option means a stock option that entitles the holder to
purchase from the Company a stated number of shares of Common Stock at the price
set forth in an Agreement.
1.13 Participant means an employee of the Company or an
Affiliate, including an employee who is a member of the Board, or an individual
whose efforts contribute to the performance or success of the Company or an
Affiliate, who satisfies the requirements of Article IV and is selected by the
Committee to receive a Stock Award, an Option, an Incentive Award, an award of
Performance Shares or a combination thereof.
1.14 Performance Shares means an award, in the amount
determined by the Committee and specified in an Agreement, stated with reference
to a specified number of shares of Common Stock, that entitles the holder to
receive a payment for each specified share equal to the Fair Market Value of
Common Stock on the date of payment.
1.15 Permitted Family Members shall have the meaning set forth
in Section 6.5.
1.16 Plan means the Tower Realty Trust, Inc. 1997 Incentive
Plan.
1.17 Stock Award means Common Stock awarded to a Participant
under Article VIII.
1.18 Ten Percent Shareholder means any individual owning more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of an Affiliate. An individual shall be considered to
own any voting stock owned (directly or indirectly) by or for his brothers,
sisters, spouse, ancestors or lineal descendants and shall be considered to own
proportionately any voting stock owned (directly or indirectly) by or for a
corporation, partnership, estate or trust of which such individual is a
shareholder, partner or beneficiary.
ARTICLE II
PURPOSES
The Plan is intended to assist the Company and its Affiliates
in recruiting and retaining individuals with ability and initiative by enabling
such persons to participate in the future success of the Company and its
Affiliates and to associate their interests with those of the Company and its
stockholders. The Plan is intended to permit the grant of both Options
qualifying under Section 422 of the Code ("incentive stock options") and Options
not so qualifying, and the grant of Stock Awards, Performance Shares and
Incentive Awards. No
2
<PAGE> 7
Option that is intended to be an incentive stock option shall be invalid for
failure to qualify as an incentive stock option. The proceeds received by the
Company from the sale of Common Stock pursuant to this Plan shall be used for
general corporate purposes.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Committee. The Committee
shall have authority to grant Stock Awards, Performance Shares, Incentive Awards
and Options upon such terms (not inconsistent with the provisions of this Plan)
as the Committee may consider appropriate. Such terms may include conditions (in
addition to those contained in this Plan) on the exercisability of all or any
part of an Option or on the transferability or forfeitability of a Stock Award,
Incentive Award or Performance Shares. Notwithstanding any such conditions, the
Committee may, in its discretion, accelerate the time at which any Option may be
exercised, or the time at which a Stock Award may become transferable or
nonforfeitable or the time at which an Incentive Award or Performance Shares may
be settled. In addition, the Committee shall have complete authority to
interpret all provisions of this Plan; to prescribe the form of Agreements; to
adopt, amend, and rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of any specific power
to the Committee shall not be construed as limiting any power or authority of
the Committee. Any decision made, or action taken, by the Committee or in
connection with the administration of this Plan shall be final and conclusive.
Neither the Committee nor any member of the Committee shall be liable for any
act done in good faith with respect to this Plan or any Agreement, Option, Stock
Award, Incentive Award or award of Performance Shares. All expenses of
administering this Plan shall be borne by the Company.
The Committee, in its discretion, may delegate to one or more
officers of the Company all or part of the Committee's authority and duties with
respect to grants and awards to individuals who are not subject to the reporting
and other provisions of Section 16 of the Exchange Act; provided, however, the
Committee shall not delegate its authority (i) to appoint delegates or its
authority to amend or revoke any delegation, (ii) under Articles X and XI hereof
and (iii) to accelerate the exercisability of Options, the transferability of
Stock Awards or the time at which Incentive Awards or awards of Performance
Shares may be settled. The Committee may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of
the Committee's delegate or delegates that were consistent with the terms of the
Plan.
ARTICLE IV
ELIGIBILITY
Any employee of the Company or an Affiliate (including a
corporation that becomes an Affiliate after the adoption of this Plan) or a
person whose efforts contribute to the
3
<PAGE> 8
performance or success of the Company or an Affiliate (including a corporation
that becomes an Affiliate after the adoption of this Plan) is eligible to
participate in this Plan if the Committee, in its sole discretion, determines
that such person has contributed significantly or can be expected to contribute
significantly to the profits or growth of the Company or an Affiliate. Directors
of the Company who are employees of the Company or an Affiliate may be selected
to participate in this Plan. However, no person may participate in the 1997 Plan
while he is a member of the Committee.
ARTICLE V
STOCK SUBJECT TO PLAN
5.1 Shares Issued. Upon the award of shares of Common Stock
pursuant to a Stock Award or the settlement of a Performance Share award, the
Company may issue shares of Common Stock from its authorized but unissued Common
Stock. Upon the exercise of an Option, the Company may deliver to the
Participant (or the Participant's broker if the Participant so directs), shares
of Common Stock from its authorized but unissued Common Stock.
5.2 Aggregate Limit. The maximum aggregate number of shares of
Common Stock that may be issued pursuant to Awards granted under the Plan shall
be the sum of (i) 9.5 percent of the total number of issued and outstanding
shares of Common Stock (on a fully diluted basis assuming the exchange of all
securities convertible into Common Stock) on the date of the closing of the
initial public offering of the Company's Common Stock plus (ii) as of January 1,
1998, 9.5 percent of any net increase since the Company's initial public
offering in the total number of shares of Common Stock actually outstanding (on
a fully diluted basis); plus (iii) as of each January 1 thereafter, 9.5 percent
of any net increase since the preceding January 1 in the total number of shares
of Common Stock actually outstanding (on a fully diluted basis). Notwithstanding
the foregoing, the maximum number of shares of Stock for which incentive stock
options may be granted under the Plan shall not exceed 1,000,000 shares of
Common Stock. The maximum aggregate number of shares that may be issued under
this Plan shall be subject to adjustment as provided in Article IX.
5.3 Reallocation of Shares. If an Award is terminated (for any
reason other than its exercise), forfeited or expires unexercised, the number of
shares of Common Stock allocated to the Award or portion thereof which was
terminated, forfeited or expired unexercised may be reallocated to other Awards
to be granted under this Plan.
ARTICLE VI
OPTIONS
6.1 Award. In accordance with the provisions of Article IV,
the Committee will designate each individual to whom an Option is to be granted
and will specify the number of
4
<PAGE> 9
shares of Common Stock covered by such awards; provided, however, that no
individual may be granted Options in any calendar year covering more than
250,000 shares of Common Stock.
6.2 Option Price. The price per share for Common Stock
purchased on the exercise of an Option shall be determined by the Committee on
the date of grant; provided, however, that the price per share for Common Stock
purchased on the exercise of any Option shall not be less than the Fair Market
Value on the date of grant. Notwithstanding the preceding sentence, the price
per share for Common Stock purchased on the exercise of any Option that is an
incentive stock granted to an individual who is a Ten Percent Shareholder on the
date such option is granted, shall not be less than one hundred ten (110%)
percent of the Fair Market Value on the date the Option is granted.
6.3 Maximum Option Period. The maximum period in which an
Option may be exercised shall be determined by the Committee on the date of
grant, except that no Option that is an incentive stock option shall be
exercisable after the expiration of ten years from the date such Option was
granted. In the case of an incentive stock option that is granted to a
Participant who is a Ten Percent Shareholder on the date of grant, such Option
shall not be exercisable after the expiration of five years from the date of
grant. The terms of any Option that is an incentive stock option may provide
that it is exercisable for a period less than such maximum period.
6.4 Nontransferability. Except as provided in Section 6.5,
each Option granted under this Plan shall be nontransferable except by will or
by the laws of descent and distribution. During the lifetime of the Participant
to whom the option is granted, the Option may be exercised only by the
Participant. No right or interest of a Participant in any Option shall be liable
for, or subject to, any lien, obligation, or liability of such Participant.
6.5 Transferable Options. Section 6.4 to the contrary
notwithstanding, if the Agreement provides, an Option that is not an incentive
stock option may be transferred by a Participant to the Participant's children,
grandchildren, spouse, one or more trusts for the benefit of such family members
or a partnership in which such family members are the only partners
(collectively, "Permitted Family Members"); provided, however, that the
Participant may not receive any consideration for the transfer. The holder of an
Option transferred pursuant to this section shall be bound by the same terms and
conditions that governed the Option during the period that it was held by the
Participant.
6.6 Employee Status. For purposes of determining the
applicability of Section 422 of the Code (relating to incentive stock options),
or in the event that the terms of any Option provide that it may be exercised
only during employment or within a specified period of time after termination of
employment, the Committee may decide to what extent leaves of absence for
5
<PAGE> 10
governmental or military service, illness, temporary disability, or other
reasons, shall not be deemed interruptions of continuous employment.
6.7 Exercise. Subject to the provisions of this Plan and the
applicable Agreement, an Option shall become exercisable in such installments
(which need not be equal) and at such times as may be designated by the
Committee and set forth in the Agreement; provided, however, that incentive
stock options (granted under the Plan and all plans of the Company and its
Affiliates) may not be first exercisable in a calendar year for stock having a
Fair Market Value (determined as of the date an option is granted) exceeding
$100,000. To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the Option expires in accordance with Section 6.3
hereof. An Option granted under this Plan may be exercised with respect to any
number of whole shares less than the full number for which the Option could be
exercised. A partial exercise of an Option shall not affect the right to
exercise the Option from time to time in accordance with this Plan and the
applicable Agreement with respect to the remaining shares subject to the Option.
6.8 Payment. Unless otherwise provided by the Agreement,
payment of the Option price shall be made in cash or a cash equivalent
acceptable to the Committee. If the Agreement provides, payment of all or part
of the Option price may be made by surrendering shares of Common Stock to the
Company. If Common stock is used to pay all or part of the Option price, the sum
of the cash and cash equivalent and the Fair Market Value (determined as of the
day preceding the date of exercise) of the shares surrendered must not be less
than the Option price of the shares for which the Option is being exercised.
6.9 Shareholder Rights. No Participant shall have any rights
as a shareholder with respect to shares subject to his Option until the date of
exercise of such Option.
6.10 Disposition of Stock. A Participant shall notify the
Company of any sale or other disposition of Common Stock acquired pursuant to an
Option that was an incentive stock option if such sale or disposition occurs:
(i) within two years of the grant of an Option
or
(ii) within one year of the issuance of the
Common Stock to the Participant.
Such notice shall be in writing and directed to the Secretary of the Company.
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<PAGE> 11
ARTICLE VII
STOCK AWARDS
7.1 Award. In accordance with the provisions of Article IV,
the Committee will designate each individual to whom a Stock Award is to be made
and will specify the number of shares of Common Stock covered by such awards;
provided, however, that no individual may receive Stock Awards with respect to
more than 100,000 shares of Common Stock in any calendar year.
7.2 Vesting. The Committee, on the date of the award, may
prescribe that a Participant's rights in the Stock Award shall be forfeitable or
otherwise restricted for a period of time or subject to such conditions as may
be set forth in the Agreement. Except with respect to Stock Awards any portion
of which are immediately vested, the period of restriction shall be at least
three years; provided, however, that the minimum period of restriction shall be
at least one year in the case of a Stock Award that will become transferable and
nonforfeitable on account of the satisfaction of performance objectives
prescribed by the Committee.
7.3 Performance Objectives. In accordance with Section 7.2,
the Committee may prescribe that Stock Awards will be vested based on objectives
stated with respect to the Company's, an Affiliate's or an operating unit's
return on equity, earnings per share, total earnings, earnings growth, return on
capital, return on assets, funds from operations or Fair Market Value. If the
Committee, on the date of award, prescribes that a Stock Award shall become
nonforfeitable and transferable only upon the attainment of performance
objectives stated with respect to one or more of the foregoing criteria, the
shares subject to such Stock Award shall become nonforfeitable and transferable
only to the extent that the Committee certifies that such objectives have been
achieved.
7.4 Employee Status. In the event that the terms of any Stock
Award provide that shares may become transferable and nonforfeitable thereunder
only after completion of a specified period of employment, the Committee may
decide in each case to what extent leaves of absence for governmental or
military service, illness, temporary disability, or other reasons shall not be
deemed interruptions of continuous employment.
7.5 Shareholder Rights. Prior to their forfeiture (in
accordance with the applicable Agreement and while the shares of Common Stock
granted pursuant to the Stock Award may be forfeited or are nontransferable), a
Participant will have all rights of a shareholder with respect to a Stock Award,
including the right to receive dividends and vote the shares; provided, however,
that during such period (i) a Participant may not sell, transfer, pledge,
exchange, hypothecate, or otherwise dispose of shares of Common Stock granted
pursuant to a Stock Award, (ii) the Company shall retain custody of the
certificates evidencing shares of Common Stock granted pursuant to a Stock
Award, and (iii) the Participant will deliver to the Company a stock power,
endorsed in blank, with respect to each Stock Award. The limitations set forth
in the preceding
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<PAGE> 12
sentence shall not apply after the shares of Common Stock granted under the
Stock Award are transferable and are no longer forfeitable.
ARTICLE VIII
PERFORMANCE SHARE AWARDS
8.1 Award. In accordance with the provisions of Article IV,
the Committee will designate each individual to whom an award of Performance
Shares is to be made and will specify the number of shares of Common Stock
covered by such awards; provided, however, that no Participant may receive an
award of Performance Shares in any calendar year for more than 25,000 shares of
Common Stock.
8.2 Earning the Award. The Committee, on the date of the grant
of an award, may prescribe that the Performance Shares, or portion thereof, will
be earned, and the Participant will be entitled to receive payment pursuant to
the award of Performance Shares only upon the satisfaction of certain
requirements or the attainment of certain objectives. By way of example and not
of limitation, the restrictions may provide that Performance Shares will be
forfeited without payment if the Participant separates from the service of the
Company and its Affiliates before the expiration of a stated term or unless the
Company, an Affiliate or an operating unit achieves objectives stated with
reference to the Company's, an Affiliate's or an operating unit's return on
equity, earnings per share, total earnings, earnings growth, return on capital,
return on assets, funds from operations or Fair Market Value. If the Committee,
on the date of award, prescribes that no payments will be made with respect to
Performance Shares unless performance objectives stated with respect to the
foregoing criteria are attained, no such payment will be made unless, and then
only to the extent that, the Committee certifies that such objectives have been
achieved.
8.3 Payment. In the discretion of the Committee, the amount
payable when an award of Performance Shares is earned may be settled in cash, by
the issuance of Common Stock or a combination of cash and Common Stock. A
fractional share shall not be deliverable when an award of Performance Shares is
earned, but a cash payment will be made in lieu thereof.
8.4 Shareholder Rights. No Participant shall, as a result of
receiving an award of Performance Shares, have any rights as a shareholder until
and to the extent that the award of Performance Shares is earned and settled by
the issuance of Common Stock. After an award of Performance Shares is earned, if
settled completely or partially in Common Stock, a Participant will have all the
rights of a shareholder with respect to such Common Stock.
8.5 Nontransferability. Except as provided in Section 8.6,
Performance Shares granted under this Plan shall be nontransferable except by
will or by the laws of descent and distribution. No right or interest of a
Participant in any Performance Shares shall be liable for, or subject to, any
lien, obligation, or liability of such Participant.
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<PAGE> 13
8.6 Transferable Performance Shares. Section 8.5 to the
contrary notwithstanding, the Committee may grant Performance Shares which are
transferable to Permitted Family Members to the extent that, and on such terms
and conditions as may be permitted by, Securities Exchange Commission Rule 16b-3
as in effect from time to time. The holder of Performance Shares transferred
pursuant to this section shall be bound by the same terms and conditions that
governed the Performance Shares during the period that they were held by the
Participant.
8.7 Employee Status. In the event that the terms of any
Performance Share award provide that no payment will be made unless the
Participant completes a stated period of employment, the Committee may decide to
what extent leaves of absence for government or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions of
continuous employment.
ARTICLE IX
INCENTIVE AWARDS
9.1 Award. In accordance with the provisions of Article IV,
the Committee shall designate Participants to whom Incentive Awards are made.
All Incentive Awards shall be finally determined exclusively by the Committee
under the procedures established by the Committee; provided, however, that no
Participant may receive an Incentive Award payment in any calendar year that
exceeds the lesser of (i) one hundred (100%) percent of the Participant's base
salary (prior to any salary reduction or deferral elections) as of the date of
grant of the Incentive Award or (ii) $250,000.
9.2 Terms and Conditions. The Committee, at the time an
Incentive Award is made, shall specify the terms and conditions which govern the
award. Such terms and conditions shall prescribe that the Incentive Award shall
be earned only to the extent that the Company, an Affiliate or an operating
unit, during a performance period of at least one year, achieves objectives
stated with respect to the Company's, an Affiliate's or an operating unit's
return on equity, earnings per share, total earnings, earnings growth, return on
capital, return on assets, funds from operations or Fair Market Value. Such
terms and conditions also may include other limitations on the payment of
Incentive Awards including, by way of example and not of limitation,
requirements that the Participant complete a specified period of employment with
the Company or an Affiliate or that the Company, an Affiliate, or the
Participant attain stated objectives or goals (in addition to those prescribed
in accordance with the preceding sentence) as a prerequisite to payment under an
Incentive Award. The Committee, at the time an Incentive Award is made, shall
also specify when amounts shall be payable under the Incentive Award and whether
amounts shall be payable in the event of the Participant's death, disability, or
retirement. No payment shall be made under
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<PAGE> 14
an Incentive Award except to the extent that the Committee certifies that the
objectives governing such award have been achieved.
9.3 Nontransferability. Except as provided in Section 9.4,
Incentive Awards granted under this Plan shall be nontransferable except by will
or by the laws of descent and distribution. No right or interest of a
Participant in an Incentive Award shall be liable for, or subject to, any lien,
obligation, or liability of such Participant.
9.4 Transferable Incentive Awards. Section 9.3 to the contrary
notwithstanding, the Committee may grant Incentive Awards which are transferable
to Permitted Family Members to the extent that, and on such terms and conditions
as may be permitted by, Securities Exchange Commission Rule 16b-3 as in effect
from time to time. The holder of an Incentive Award transferred pursuant to this
section shall be bound by the same terms and conditions that governed the
Incentive Award during the period that it was held by the Participant.
9.5 Employee Status. If the terms of an Incentive Award
provide that a payment will be made thereunder only if the Participant completes
a stated period of employment, the Committee may decide to what extent leaves of
absence for governmental or military service, illness, temporary disability or
other reasons shall not be deemed interruptions of continuous employment.
9.6 Shareholder Rights. No Participant shall, as a result of
receiving an Incentive Award, have any rights as a shareholder of the Company or
any Affiliate on account of such award.
ARTICLE X
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options, Stock Awards
and Performance Shares may be granted under this Plan, the terms of outstanding
Stock Awards, Options, Performance Share awards and Incentive Awards, and the
per individual limitations on the number of shares for which Options, Stock
Awards and Performance Shares may be granted, shall be adjusted as the Committee
shall determine to be equitably required in the event that there is an increase
or reduction in the number of shares of Common Stock, or any change (including,
but not limited to, a change in value) in the shares of Common Stock or exchange
of shares of Common Stock for a different number or kind of shares or other
securities of the Company by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, spin-off, split-up, subdivision or
consolidation of shares, extraordinary dividend, change in corporate structure
or otherwise. Any determination made under this Article X by the Committee shall
be final and conclusive.
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<PAGE> 15
The issuance by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, for cash or
property, or for labor or services, either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the maximum number of shares as to which Options, Stock Awards and
Performance Shares may be granted, the per individual limitations on the number
of shares for which Options, Stock Awards and Performance Shares may be granted
or the terms of outstanding Stock Awards, Options, Incentive Awards or
Performance Shares.
The Committee may make Stock Awards and may grant Options,
Incentive Awards and Performance Shares in substitution for performance shares,
phantom shares, stock awards, stock options, stock appreciation rights, or
similar awards held by an individual who becomes an employee of the Company or
an Affiliate in connection with a transaction described in the first paragraph
of this Article X. Notwithstanding any provision of the Plan (other than the
limitation of Section 5.2), the terms of such substituted Stock Awards, Option,
Incentive Awards or Performance Share grants shall be as the Committee, in its
discretion, determines is appropriate.
ARTICLE XI
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES; GOVERNING LAW
No Option shall be exercisable, no Common Stock shall be
issued, no certificates for shares of Common Stock shall be delivered, and no
payment shall be made under this Plan except in compliance with all applicable
federal and state laws and regulations (including, without limitation,
withholding tax requirements), any listing agreement to which the Company is a
party, and the rules of all domestic stock exchanges on which the Company's
shares may be listed. The Company shall have the right to rely on an opinion of
its counsel as to such compliance. Any share certificate issued to evidence
Common Stock when a Stock Award is granted or for which an option is exercised
or a Performance Share settled may bear such legends and statements as the
Committee may deem advisable to assure compliance with federal and state laws
and regulations. No Option shall be exercisable, no Stock Award shall be
granted, no Common Stock shall be issued, no certificate for shares shall be
delivered, and no payment shall be made under this Plan until the Company has
obtained such consent or approval as the Committee may deem advisable from
regulatory bodies having jurisdiction over such matters. Except as to matters of
federal law, this Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of New York
without giving effect to conflicts of law principles.
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<PAGE> 16
ARTICLE XII
GENERAL PROVISIONS
12.1 Effect on Employment and Service. Neither the adoption of
this Plan, its operation, nor any documents describing or referring to this Plan
(or any part thereof) shall confer upon any individual any right to continue in
the employ or service of the Company or an Affiliate or in any way affect any
right and power of the Company or an Affiliate to terminate the employment or
service of any individual at any time with or without assigning a reason
therefor.
12.2 Unfunded Plan. The Plan, insofar as it provides for
grants, shall be unfunded, and the Company shall not be required to segregate
any assets that may at any time be represented by grants under this Plan. Any
liability of the Company to any person with respect to any grant under this Plan
shall be based solely upon any contractual obligations that may be created
pursuant to this Plan. No such obligation of the Company shall be deemed to be
secured by any pledge of, or other encumbrance on, any property of the Company.
12.3 Rules of Construction. Headings are given to the articles
and sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
ARTICLE XIII
AMENDMENT
The Board may amend or terminate this Plan from time to time;
provided, however, that no amendment may become effective until shareholder
approval would be required to be approved by shareholders under Section 422 of
the Code with respect to incentive stock options or the rules of the stock
exchange on which the shares of Common Stock are listed. is obtained if the
amendment (i) materially increases the aggregate number of shares of Common
Stock that may be issued under the Plan or (ii) would be required to be approved
by shareholders under Section 422 of the Code with respect to incentive stock
options or the rules of the stock exchange on which the shares of Common Stock
are listed. No amendment shall, without a Participant's consent, adversely
affect any rights of such Participant under any outstanding Stock Award, Option,
Incentive Award or Performance Share award outstanding at the time such
amendment is made.
ARTICLE XIV
DURATION OF PLAN
No Stock Award, Option, Incentive Award or Performance Share
award may be granted under this Plan more than ten years after the earlier of
the date this Plan is adopted by the Board or the date this Plan is approved by
stockholders in accordance with Article XV. Stock
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<PAGE> 17
Awards, Options, Incentive Awards and Performance Share awards granted before
that date shall remain valid in accordance with their terms.
ARTICLE XV
EFFECTIVE DATE OF PLAN
Options, Incentive Awards and Performance Share awards may be
granted under this Plan upon its adoption by the Board, provided that no Option,
Incentive Award or Performance Share award shall be effective or exercisable
unless this Plan is approved by a majority of the votes entitled to be cast by
the Company's stockholders, voting either in person or by proxy, at a duly held
stockholders' meeting or by unanimous consent of the Company's stockholders.
Stock Awards may be granted under this Plan upon the later of its adoption by
the Board or its approval by stockholders in accordance with the preceding
sentence.
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<PAGE> 1
Exhibit 10.6
TOWER REALTY TRUST, INC.
NON-EMPLOYEE DIRECTORS' INCENTIVE PLAN
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 Board means the Board of Directors of the Company.
1.2 Committee means the committee appointed by the Board to
administer the Plan.
1.3 Common Stock means the common stock of the Company.
1.4 Company means Tower Realty Trust, Inc., a Maryland
corporation.
1.5 Fair Market Value means, on any given date, the current
fair market value of a share of Common Stock as determined pursuant to
subsection (a) or (b) below.
(a) The Fair Market Value on the First Award Date
for Founding Directors shall be the initial public offering price of the Common
Stock.
(b) Except as provided in subsection (a), Fair
Market Value shall be determined as follows: if the Common Stock is not listed
on an established stock exchange, Fair Market Value shall be the average of the
final bid and asked quotations on the over-the-counter market in which the
Common Stock is traded or, if applicable, the reported "closing" price of a
share of Common Stock in the New York over-the-counter market as reported by the
National Association of Securities Dealers, Inc. If the Common Stock is listed
on one or more established stock exchanges, Fair Market Value shall be deemed to
be the highest closing price of a share of Common Stock reported on any of such
exchanges. In any case, if no sale of Common Stock is made on any stock exchange
or over-the-counter market on that date, then Fair Market Value shall be
determined as of the next preceding day on which there was a sale.
<PAGE> 3
1.6 First Award Date means (i) with respect to Founding
Directors, the date that the registration statement relating to the Company's
initial public offering of Common Stock is declared effective by the Securities
and Exchange Commission, and (ii) with respect to Non-Founding Directors, the
date of the meeting of the Company's shareholders at which the Non-Founding
Director is first elected to the Board.
1.7 Founding Director means a Participant who is a member of
the Board on the date that the registration statement relating to the Company's
initial public offering of Common Stock is declared effective by the Securities
and Exchange Commission.
1.8 Internal Revenue Code means the Internal Revenue Code of
1986, as amended.
1.9 Non-Founding Director means a Participant who is not a
Founding Director.
1.10 Option means a stock option that entitles the holder to
purchase shares of Common Stock from the Company on the terms set forth in
Article IV of this Plan.
1.11 Participant means a member of the Board who, on the First
Award Date or applicable Award Date, is not an employee or officer of the
Company or any "subsidiary" or "parent" corporation of the Company within the
meaning of Section 424 of the Internal Revenue Code.
1.12 Plan means the Tower Realty Trust, Inc. Non-Employee
Directors' Incentive Plan.
2
<PAGE> 4
ARTICLE II
PURPOSES
The Plan is intended to (i) assist the Company in recruiting
and retaining non-employee directors and (ii) promote a greater identity of
interest between Participants and stockholders by enabling Participants to
participate in the Company's future success.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Committee. The Committee
shall have complete authority to interpret all provisions of the Plan; to adopt,
amend, and rescind rules and regulations pertaining to the administration of the
Plan and to make all other determinations necessary or advisable for the
administration of the Plan. The express grant in the Plan of any specific power
to the Committee shall not be construed as limiting any power or authority of
the Committee. Any decision made, or action taken, by the Committee in
connection with the administration of the Plan shall be final and conclusive. No
member of the Committee shall be liable for any act done in good faith with
respect to the Plan. All expenses of administering the Plan shall be borne by
the Company.
ARTICLE IV
OPTIONS
4.1 Grant of Options. Each Participant shall be granted an
Option for 20,000 shares of Common Stock on the applicable First Award Date. All
Options shall be evidenced by
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<PAGE> 5
Agreements that shall be subject to the applicable provisions of this Plan and
to such other provisions as the Committee may adopt which are not inconsistent
with the provisions of this Plan.
4.2 Option Price. The price per share of Common Stock
purchased on the exercise of an Option shall be the Fair Market Value on the
date that the Option is granted.
4.3 Maximum Option Period. The maximum period during which an
Option may be exercised shall be ten years from the date of grant.
4.4 Exercise of Options. All Options granted under the Plan
shall vest in five equal annual installments (4,000 shares each) beginning on
the first anniversary of the date of grant (each, a "Vesting Date"), provided
the Participant continues to serve as a director of the Company on such Vesting
Date.
4.5 Effect of Termination of Services or Death. If a
Participant ceases to serve as a director of the Company for any reason, the
Options that have been previously granted to that Participant and that are not
vested as of that date shall be forfeited. Options that have vested as of the
date of such cessation of services may be exercised by the Participant, in
accordance with and subject to the terms of the Plan, after the date such
Participant ceases to be a director of the Company. If a Participant dies, the
Options that have been previously granted to that Participant and that are
vested as of the date of death may be exercised by the administrator of the
Participant's estate, or by the person to whom such Options are transferred by
will or the laws of descent and distribution. In no event, however, may any
Option be exercised after the expiration date of such Option. Any Option or
portion thereof that is not exercised during the applicable
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<PAGE> 6
time period specified above shall be deemed terminated at the end of the
applicable time period for purposes of Article V hereof.
4.6 Payment of Option Price. Payment of the Option price shall
be made in cash, cash equivalent acceptable to the Committee, by the surrender
of shares of Common Stock, or a combination thereof. If shares of Common Stock
are surrendered in payment of the Option price, the shares surrendered must have
an aggregate Fair Market Value (determined as of the day preceding the exercise
date) that, together with any cash or cash equivalent paid, is not less than the
Option price for the number of shares of Common Stock for which this Option is
being exercised.
4.7 Nontransferability. Each Option granted under this Plan
shall be nontransferable except by will or by the laws of descent and
distribution. During the lifetime of the Participant to whom an Option is
granted, the Option may be exercised only by the Participant. No right or
interest of a Participant in any Option shall be liable for, or subject to, any
lien, obligation, or liability of such Participant.
4.8 Shareholder Rights. No Participant shall have any rights
as a shareholder with respect to shares of Common Stock subject to his or her
Option until the date of exercise of such option.
5
<PAGE> 7
ARTICLE V
STOCK SUBJECT TO PLAN
5.1 Shares Issued. Upon the exercise of an Option, the Company
may deliver to the Participant (or the Participant's broker if the Participant
so directs), shares of Common Stock from its authorized but unissued Common
Stock.
5.2 Aggregate Limit. The maximum aggregate number of shares of
Common Stock that may be issued under this Plan is 200,000 shares. The maximum
aggregate number of shares that may be issued under this Plan shall be subject
to adjustment as provided in Article VI.
5.3 Reallocation of Shares. If an Option is terminated, in
whole or in part, for any reason other than its exercise, the number of shares
of Common Stock allocated to the Option or portion thereof may be reallocated to
other Options to be granted under this Plan.
ARTICLE VI
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The provisions of this Plan and the terms of outstanding
Options shall be adjusted as the Committee shall determine to be equitably
required in the event that there is an increase or reduction in the number of
shares of Common Stock, or any change (including, but not limited to, a change
in value) in the shares of Common Stock or exchange of shares of Common Stock
for a different number or kind of shares or other securities of the Company by
reason of a reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, subdivision or consolidation of shares,
extraordinary dividend, change in corporate structure or
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<PAGE> 8
otherwise. Any determination made under this Article VI by the Committee shall
be final and conclusive.
The issuance by the Company of shares of any class, or
securities convertible into shares of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares of obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the
provisions of this Plan or the terms of outstanding Options.
ARTICLE VII
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES; GOVERNING LAW
No Common Stock shall be issued and no certificates for shares
of Common Stock shall be delivered under the Plan except in compliance with all
applicable federal and state laws and regulations, any listing agreement to
which the Company is a party, and the rules of all domestic stock exchanges on
which the Company's Common Stock may be listed. The Company shall have the right
to rely on an opinion of its counsel as to such compliance. Any certificate
issued to evidence Common Stock issued upon the exercise of an Option granted
under the Plan may bear such legends and statements as the Committee may deem
advisable to assure compliance with federal and state laws and regulations. No
Common Stock shall be issued and no certificate for shares of Common Stock shall
be delivered upon the exercise of an Option granted under the Plan until the
Company has obtained such consent or approval as the Committee may deem
7
<PAGE> 9
advisable from regulatory bodies having jurisdiction over such matters. Except
as to matters of federal law, this Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of the
State of New York without giving effect to conflicts of law principles.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Unfunded Plan. The Plan, insofar as it provides for
awards, shall be unfunded, and the Company shall not be required to segregate
any assets that may at any time be represented by awards under the Plan. Any
liability of the Company to any person with respect to any award to be made
under the Plan shall be based solely upon any contractual obligations that may
be created pursuant to the Plan. No such obligation of the Company shall be
deemed to be secured by any pledge of, or other encumbrance on, any property of
the Company.
8.2 Rules of Construction. Headings are given to the articles
and sections of the Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
8
<PAGE> 10
ARTICLE IX
AMENDMENT
The Board may amend from time to time or terminate the Plan at
any time; provided, however, that no amendment may become effective until
shareholder approval is obtained if the amendment (i) materially increases the
aggregate number of shares of Common Stock that may be issued under this Plan
(other than an adjustment authorized under Article VI), or (ii) would be
required to be approved by shareholders under the rules of the stock exchange on
which the shares of Common Stock are listed. No amendment shall, without a
Participant's consent, adversely affect any rights of such Participant under any
outstanding Option or award of shares with Common Stock.
ARTICLE X
DURATION OF PLAN
No Option or award of Common Stock may be made under this Plan
after December 31, 2007. Options and awards of Common Stock made before that
date shall remain valid in accordance with their terms.
9
<PAGE> 11
ARTICLE XII
EFFECTIVE DATE OF PLAN
Options may be granted under this Plan upon its adoption by
the Board, provided that no Option shall be effective or exercisable unless this
Plan is approved by a majority of the votes entitled to be cast by the Company's
stockholders, voting either in person or by proxy, at a duly held stockholders'
meeting or by unanimous consent of the Company's stockholders. Awards of Common
Stock may be granted under this Plan upon the later of its adoption by the Board
or its approval by stockholders in accordance with the preceding sentence.
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<PAGE> 1
Exhibit 10.10
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT (the "Agreement") between Tower Realty Trust,
a Maryland corporation (the "Company"), and ___________________, a director
and/or an officer of the Company (the "Indemnitee"), dated as of September ,
1997.
R E C I T A L S:
1. It is essential that the Company retain as directors and officers
the most capable persons available.
2. Both the Company and Indemnitee recognize the increased risk of
litigation and other claims being asserted against directors/officers of public
companies in today's environment.
3. The Indemnitee has agreed to serve as a director and/or an officer
of the Company.
4. The charter (the "Charter") and the Bylaws of the Company (the
"Bylaws") provide for certain indemnification of the officers and directors of
the Company.
5. In recognition of Indemnitee's need for substantial protection
against personal liability and to provide Indemnitee with specific contractual
assurance that the protection provided by the Charter will be available to
Indemnitee (regardless of, among other things, any amendment to or revocation of
the Charter or Bylaws, or any Change in Control (as herein defined)), the
Company wishes to provide in this Agreement for the indemnification of and the
advancement of expenses to Indemnitee to the fullest extent permitted by
Maryland law and as set forth in this Agreement, and, to the extent insurance is
maintained, for the continued coverage of Indemnitee under the Company's
directors' and officers' liability insurance policies.
NOW, THEREFORE, in consideration of the premises and intending to be
legally bound hereby, the parties hereto agree as follows:
Section 1. INDEMNIFICATION.
In the event that the Indemnitee was or is made a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, or is or was otherwise involved, in any threatened,
pending or completed action, suit, proceeding, arbitration, alternate dispute
resolution mechanism, or any inquiry or investigation, whether civil, criminal,
administrative or investigative (hereinafter a "Proceeding"), by reason of the
fact that the Indemnitee or a person of whom the Indemnitee is the legal
representative is or was a director, officer or employee of the Company or,
while a director or officer of the Company, is or was serving at the request of
the Company as a director, officer, partner, trustee, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such actual or threatened proceeding is alleged action or omission
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, the
Indemnitee shall be indemnified and held harmless by the Company to the fullest
extent authorized by
1
<PAGE> 2
the Maryland General Corporation Law (the "MGCL"), the Charter and the Bylaws as
the same exist or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights than said law permitted the Company to provide
prior to such amendment), against all reasonable expenses, liability and loss
(including, without limitation, attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) actually
incurred by the Indemnitee in connection therewith, and such indemnification
shall continue as to the Indemnitee if the Indemnitee ceases to be a director,
officer, employee or agent and shall inure to the benefit of the Indemnitee's
heirs, executors and administrators; provided, however, that, except as provided
in Section 2 with respect to proceedings seeking to enforce rights to
indemnification, the Company shall indemnify the Indemnitee in connection with a
proceeding (or part thereof) initiated by the Indemnitee only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Company.
Section 2. SUIT TO RECOVER.
If a claim under Section 1 is not paid in full by the Company within
forty-five days after a written claim has been received by the Company, the
Indemnitee may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
Indemnitee shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expense incurred in defending any actual or threatened
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Company) that the Indemnitee has
not met the standard of conduct which make it permissible under the MGCL for the
Company to indemnify the Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company. Neither the failure of the Company
(including its Board of Directors, independent legal counsel or stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in the MGCL, nor
an actual determination by the Company (including its Board of Directors,
independent legal counsel or stockholders) that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
Section 3. "CHANGE IN CONTROL".
Following any "change in control" of the Company of the type required
to be reported under Item 1 of Form 8-K promulgated under the Securities
Exchange Act of 1934, as amended, any determination as to entitlement to
indemnification shall be made by Independent Legal Counsel selected by the
Indemnitee, such Independent Legal Counsel to be retained by the Board of
Directors on behalf of the Company, "Independent Legal Counsel" shall mean an
attorney or firm of attorneys who shall not have otherwise performed services
for the Company or Indemnitee within the last five years (other than with
respect to matters concerning the rights of Indemnitee under this Agreement, or
of other indemnitees under similar indemnity agreements).
2
<PAGE> 3
Section 4. INSURANCE.
In the event that the Company maintains insurance to protect itself and
any director or officer of the Company against any expense, liability or loss,
such insurance shall cover the Indemnitee to at least the same extent as any
other director or officer of the Company.
Section 5. ADVANCE OF EXPENSES.
The right to indemnification conferred by this Agreement shall include
the right to be paid by the Company the reasonable expenses (including
attorney's fees) incurred in defending any actual or threatened proceeding in
advance of its final disposition; provided, however, that, if the MGCL requires,
the payment of such expenses incurred by the Indemnitee in advance of the final
disposition of any actual or threatened proceeding shall be made only upon
delivery to the Company of an undertaking, by or on behalf of the Indemnitee, to
repay all amounts so advanced if it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified under this Agreement or otherwise.
Section 6. INDEMNIFICATION FOR ADDITIONAL EXPENSES.
The Company shall indemnify Indemnitee against any and all expenses
(including reasonable attorneys' fees) and, if requested by Indemnitee, shall
(within ten business days of such request) advance such expenses to Indemnitee,
which are incurred by Indemnitee in connection with any action brought by
Indemnitee for (i) indemnification or advance payment of expenses by the Company
under this Agreement, the Charter or any other agreement, certificate of
incorporation or Company by-law now or hereafter in effect relating to claims
and/or (ii) recovery under any directors' and officers' liability insurance
policies maintained by the Company; provided, however, that the payment of
expenses incurred by Indemnitee in advance of final disposition of such action
will be made only upon receipt by the Company of an undertaking by the
Indemnitee to repay all amounts advanced if it should be ultimately determined
that the Indemnitee is not entitled to be indemnified under this Agreement or
otherwise.
Section 7. PARTIAL INDEMNITY.
If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for a portion of the expenses, judgments, fines,
penalties and amounts paid in settlement of a claim but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding
any other provision of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any or all claims or in
defense of any proceeding, including dismissal without prejudice, Indemnitee
shall be indemnified against all reasonable expenses incurred in connection
therewith.
Section 8. BURDEN OF PROOF.
In connection with any determination by the Reviewing Party or
otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the
burden of proof shall be on the Company to establish that Indemnitee is not so
entitled.
3
<PAGE> 4
"Reviewing Party" shall mean, subject to any requirement set forth in
the MGCL, any person or group of persons consisting of a member or members of
the Company's Board of Directors or any other person or body appointed by the
Board of Directors who is not a party to the particular Proceeding for which
Indemnitee is seeking indemnification, or Independent Legal Counsel, who shall
determine whether Indemnitee is entitled to be indemnified hereunder.
Section 9. NO PRESUMPTIONS.
For purposes of this Agreement, the termination of any claim, action,
suit or proceeding, by judgment, order, settlement (whether with or without
court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by applicable law. In addition,
neither the failure of a Reviewing Party to have made a determination as to
whether Indemnitee has met any particular standard of conduct or had any
particular belief,nor an actual determination by a Reviewing Party that
Indemnitee has not met such standard of conduct or did not have such belief,
prior to the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified under applicable
law, shall be a defense to Indemnitee's claim or create a presumption that
Indemnitee has not met any particular standard of conduct or did not have any
particular belief.
Section 10. NON-EXCLUSIVITY.
The rights conferred in this Agreement shall not be exclusive of any
other right which the Indemnitee may have or hereafter acquire under any
statute, provision of the Charter, Bylaws, agreement, vote of stockholders or of
disinterested directors or otherwise.
Section 11. SUBROGATION.
In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
Section 12. NO DUPLICATION OF PAYMENTS.
The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against Indemnitee to the extent
Indemnitee has otherwise actually received payment (under any insurance policy,
the Charter or otherwise) of the amounts otherwise indemnifiable hereunder.
Section 13. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors, assigns,
including any direct or indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors and personal and legal representatives. This
Agreement shall
4
<PAGE> 5
continue in effect regardless of whether Indemnitee continues to serve as an
officer or director of the Company or of any other enterprise at the Company's
request.
Section 14. SEVERABILITY.
The provisions of this Agreement shall be severable in the event that
any of the provisions hereof (including any provision within a single section,
paragraph or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable in any respect, and the validity and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired and shall remain enforceable
to the fullest extent permitted by law.
Section 15. AMENDMENT.
This Agreement may not be changed, modified or amended except
in writing signed by the parties hereto.
IN WITNESS WHEREOF, the Company and the Indemnitee have executed this
Agreement as of the day and year first above written.
COMPANY:
TOWER REALTY TRUST
By:
-----------------------------------
Name:
Title:
INDEMNITEE:
-----------------------------------
Name:
5
<PAGE> 1
Exhibit 10.11
TOWER REALTY TRUST, INC.
================================================================================
PURCHASE AGREEMENT
Dated as of March 31, 1997
================================================================================
$6,000,000
Senior Secured Convertible Notes
and
$20,000,000
Common Stock
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1 AUTHORIZATION OF SECURITIES..................................... 1
1.1 Authorization of Notes....................................... 1
1.2 Authorization of Common Stock................................ 2
SECTION 2 ISSUANCE OF NOTES............................................... 2
2.1 Purchase and Sale of Notes................................... 2
2.2 Registration, Transfer or Exchange of Notes.................. 2
2.3 Loss, Theft, Destruction or Mutilation of Notes.............. 3
2.4 Place of Payment............................................. 3
2.5 Additional Payment........................................... 3
SECTION 3 ISSUANCE OF COMMON STOCK........................................ 4
3.1 Purchase and Sale of Common Stock............................ 4
3.2 Purchase Price............................................... 4
3.3 Transfer Taxes............................................... 4
3.4 Rights of Holders............................................ 4
3.5 Lock-up...................................................... 4
SECTION 4 THE CLOSINGS.................................................... 5
4.1 The First Note Closing....................................... 5
4.2 The Second Note Closing...................................... 5
4.3 Subsequent Note Closing...................................... 6
4.4 The Stock Closing............................................ 6
SECTION 5 REPRESENTATIONS OF THE COMPANY.................................. 7
5.1 Organization................................................. 7
5.2 Authorization................................................ 7
5.3 No Conflicts or Consents..................................... 7
5.4 Enforceable Obligations...................................... 7
5.5 Capitalization............................................... 8
5.6 Shareholders and Agreements.................................. 8
5.7 Issuance of Securities....................................... 8
5.8 Subsidiaries................................................. 9
5.9 Government Regulation........................................ 9
5.10 Litigation................................................... 9
5.11 Financial Condition.......................................... 9
5.12 Title to Assets.............................................. 9
5.13 Material Contracts and Obligations........................... 9
5.14 Compliance with Laws......................................... 10
5.15 Real Property................................................ 10
5.16 Tenant Leases................................................ 11
5.17 Full Disclosure.............................................. 12
5.18 Dividends.................................................... 12
5.19 Security Interests........................................... 12
5.20 No Termination Event......................................... 13
5.21 Tax Matters.................................................. 13
5.22 Insurance.................................................... 13
5.23 Burdensome Contracts......................................... 13
5.24 Environmental Matters........................................ 13
5.25 Books and Records............................................ 14
5.26 Certain Payments............................................. 14
5.27 Labor Agreements and Actions................................. 14
5.28 ERISA........................................................ 15
5.29 Use of Proceeds; Margin Stock................................ 15
5.30 Solvency..................................................... 15
5.31 Principal Office, Etc........................................ 15
5.32 Domestically-Controlled REIT................................. 15
5.33 Pension-Held REIT............................................ 15
i
<PAGE> 3
Page
----
SECTION 6 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.................. 16
6.1 Authorization................................................ 16
6.2 Purchase Entirely for Own Account............................ 16
6.3 Accredited Investor.......................................... 16
6.4 Other Representations and Warranties......................... 16
SECTION 7 CONDITIONS TO THE OBLIGATIONS OF EACH INVESTOR.................. 17
7.1 Conditions to All Closings................................... 17
7.2 Additional Conditions to First Note Closing.................. 18
7.3 Conditions to Subsequent Note Closings....................... 20
7.4 Additional Conditions to the Second Note Closing............. 22
7.5 Conditions to the Stock Closing.............................. 23
SECTION 8 CONDITION TO THE OBLIGATIONS OF THE COMPANY..................... 25
SECTION 9 AFFIRMATIVE COVENANTS........................................... 25
9.1 Payment of Principal and Interest............................ 25
9.2 Maintenance of Existence and Rights; Conduct of Business..... 25
9.3 Financial Statements, Reports and Documents.................. 26
9.4 Notices...................................................... 27
9.5 Other Notices................................................ 27
9.6 Books and Records; Access.................................... 27
9.7 Compliance with Material Agreements.......................... 27
9.8 Compliance with Law.......................................... 28
9.9 Payment of Taxes and Other Indebtedness...................... 28
9.10 Insurance.................................................... 28
9.11 Board of Directors........................................... 28
9.12 Additional Capital........................................... 29
9.13 Use of Proceeds.............................................. 29
9.14 Further Assurances........................................... 29
9.15 Additional Collateral........................................ 29
9.16 REIT Qualification........................................... 30
9.17 Partnership Qualification.................................... 30
9.18 Domestically-Controlled REIT................................. 30
9.19 Pension-Held REIT............................................ 30
9.20 Management Company........................................... 30
9.21 Additional Capital........................................... 30
9.22 Good Faith................................................... 31
SECTION 10 NEGATIVE COVENANTS............................................. 31
10.1 Limitation on Indebtedness................................... 31
10.2 Negative Pledge.............................................. 31
10.3 Prohibition on Dividends..................................... 31
10.4 Material Agreements.......................................... 32
10.5 Certain Transactions......................................... 32
10.6 Issuance of Interests........................................ 32
10.7 Mergers and Sales of Assets.................................. 32
10.8 No Amendments................................................ 33
10.9 ERISA........................................................ 33
10.10 Contribution Agreements...................................... 33
10.11 Reference to Investors or MSAM............................... 33
SECTION 11 TERMINATION OF COVENANTS....................................... 33
SECTION 12 TERMINATION EVENTS............................................. 33
SECTION 13 REDEMPTION OF THE NOTES........................................ 36
13.1 Optional Redemption.......................................... 36
13.2 Mandatory Redemption......................................... 36
ii
<PAGE> 4
Page
----
13.3 Maturity; Surrender.......................................... 36
13.4 Remedies for Failure to Redeem............................... 37
13.5 Major Capital Events......................................... 37
SECTION 14 CONVERSION..................................................... 37
14.1 Conversion................................................... 37
14.2 Surrender of Notes; Delivery of Shares....................... 37
14.3 Effect of Conversion......................................... 38
14.4 Fractional Shares............................................ 38
14.5 Taxes on Conversion.......................................... 38
14.6 Anti-Dilution................................................ 38
SECTION 15 GUARANTEE...................................................... 38
15.1 Guarantee of Obligations..................................... 38
15.2 Costs and Expenses........................................... 39
15.3 Guarantee Absolute........................................... 39
15.4 Waivers...................................................... 39
15.5 Guarantee Not Affected by Changes............................ 39
15.6 Payments..................................................... 40
15.7 Subrogation.................................................. 40
SECTION 16 TRANSFERS...................................................... 41
16.1 Limitations on Transfer...................................... 41
16.2 Legends...................................................... 41
16.3 Rule 144A Information........................................ 41
SECTION 17 MISCELLANEOUS.................................................. 42
17.1 Indemnification.............................................. 42
17.2 Survival of the Representations and Warranties............... 43
17.3 Confidentiality.............................................. 43
17.4 Brokers...................................................... 43
17.5 Entire Agreement............................................. 44
17.6 Amendments and Waivers....................................... 44
17.7 Inaccuracy of Representations................................ 44
17.8 Time......................................................... 44
17.9 Section Headings............................................. 44
17.10 Notices...................................................... 44
17.11 Counterparts................................................. 44
17.12 Governing Law................................................ 44
17.13 Consent to Jurisdiction...................................... 44
17.14 Expenses; Documentary Taxes.................................. 45
17.15 Definitions.................................................. 45
iii
<PAGE> 5
INDEX OF EXHIBITS
Exhibit A Form of Note
Exhibit B Certificate of Incorporation of Tower Realty Trust, Inc.
Exhibit C Form of Registration Rights Agreement
Exhibit D Exceptions to Representations of the Company
Exhibit E-1 Form of Opinion of Counsel to be delivered at the First Note
Closing
Exhibit E-2 Form of Opinion of Counsel to be delivered at the Subsequent
Note Closings
Exhibit E-3 Form of Opinion of Counsel to be delivered at the Stock Closing
Exhibit F Budget
Exhibit G Form of Shareholder Pledge Agreement
Exhibit H Form of Company Pledge Agreement
Exhibit I Form of Operating Partnership Pledge Agreement
Exhibit J Form of Operating Partnership Collateral Assignment
Exhibit K Conversion Rate Formula
Exhibit L REIT Sponsors
Exhibit M Form of Company Account Pledge Agreement
Exhibit N Form of Operating Partnership Account Pledge Agreement
Exhibit O Schedule of Contribution Agreements
Exhibit P Schedule of Subsidiaries with 1995 Audited Financial Statements
Exhibit Q Form of Management Company Stock Option Agreement
Exhibit R Form of Certificate of the Chief Executive Officer of the
Company
<PAGE> 6
PURCHASE AGREEMENT (this "Agreement") made as of March 31, 1997 among TOWER
REALTY TRUST, INC., a Maryland corporation with its principal place of business
located at 120 West 45th Street, New York, New York 10036 (the "Company"), as
issuer, TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
with its principal place of business located at 120 West 45th Street, New York,
New York 10036 (the "Operating Partnership"), as guarantor (the Operating
Partnership and the Company are sometimes hereinafter collectively referred to
as the "Credit Parties"), and each of the investors signatory hereto
(collectively the "Investors"). The definitions of certain capitalized terms
used herein are set forth in Section 17.15.
In consideration of the mutual promises and agreements contained herein,
the parties hereto agree as follows:
SECTION 1 AUTHORIZATION OF SECURITIES.
1.1 Authorization of Notes. The Company has duly authorized the sale and
issuance of its senior secured convertible notes in the aggregate principal
amount of $6,000,000, in substantially the form attached hereto as Exhibit A
(each note delivered pursuant to this Agreement and each note delivered in
substitution or exchange for any such note, being hereinafter referred to as the
"Notes"). The Notes shall (i) be dated the date of issuance, (ii) bear interest
(computed on the basis of a 365-day year and the actual number of days elapsed)
from the date of issuance until the earlier of (A) maturity, (B) the date such
Notes are repaid in full or (C) the occurrence of a Termination Event at the
rate of 15% per annum payable quarterly, in arrears, on the last day of each
March, June, September and December, commencing June 30, 1997, and at maturity
(each such date being hereinafter referred to as an "Interest Payment Date"),
(iii) bear interest (computed as provided in clause (ii) above) from the earlier
of (A) maturity or (B) the occurrence of a Termination Event until the date such
Notes are repaid in full at the rate of 20% per annum payable on demand (the
"Default Rate") and (iv) mature on the Maturity Date. Until the earlier of
maturity or the occurrence of a Termination Event, the Company may at its
option, elect to add up to 50% of the amount of interest payable on any Interest
Payment Date to the then outstanding principal amount of the Notes; provided
that, if the conditions to the Second Note Closing do not occur on or prior to
June 30, 1997 but, in accordance with the definition of the term "Maturity
Date", the maturity of the Notes has been extended to December 27, 1997, the
Company shall not have the option during the period such conditions remain
unsatisfied of electing to add any portion of the interest payable on the Notes
to the principal thereof. Any such interest added to principal shall thereafter
bear interest as provided above. The Notes shall be guaranteed by the Operating
Partnership as provided in Section 15 of this Agreement and shall be secured by
the Collateral. The Notes shall be convertible into shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), as provided in
Section 14 of this Agreement and shall be redeemable as provided in Section 13
of this Agreement.
-1-
<PAGE> 7
1.2 Authorization of Common Stock. On or prior to the Stock Closing Date,
the Company will have amended its certificate of incorporation, a copy of which
is attached as Exhibit B (the "Certificate of Incorporation"), to increase its
authorized capitalization from 1,000 shares of Common Stock to such number of
shares as will be required in order for the Company to (i) make the Initial
Public Offering, (ii) issue the shares of Common Stock required to be issued
upon a conversion of the Notes and (iii) issue and sell to the Investors the
number of shares of Common Stock to be purchased by the Investors pursuant to
Section 3.1 hereof. At least 10 days prior to filing any amendment to the
Certificate of Incorporation increasing the authorized capital of the Company,
the Company shall deliver a copy thereof to MSAM for its review and the Company
shall not file any amendment to the Certificate of Incorporation to which MSAM
shall reasonably object.
SECTION 2 ISSUANCE OF NOTES.
2.1 Purchase and Sale of Notes. Subject to the terms and conditions of
this Agreement, the Company will issue and sell to each Investor, and each
Investor will purchase, Notes in an aggregate principal amount not to exceed the
amount set opposite its name under the heading "Total Commitment" on the
signature pages hereto. The obligations of each Investor are several and not
joint, and no Investor shall be liable for the acts and omissions of any other
Investor. The Investors shall not be deemed to be Affiliated shareholders or
Affiliated purchasers.
2.2 Registration, Transfer or Exchange of Notes. The Notes are issuable
only as registered Notes. The Company will keep at its principal place of
business a register in which the Company shall provide for the registration and
registration of transfer of the Notes.
Subject to Section 16.1 to this Agreement, the holder of a Note may, at
its option and either in person or by duly authorized attorney, surrender the
same at the principal place of business of the Company for registration of
transfer or exchange, accompanied, if surrendered for transfer, by a written
instrument of transfer duly executed by such holder or attorney. In case such
holder shall request a transfer or exchange of a Note, the Company shall, at its
expense, deliver to or upon such holder's order one or more Notes in the same
aggregate unpaid principal amount as the Note surrendered for transfer, each
dated the date of, or, if later, the date to which interest has been paid on,
the Note, and registered in such name or names as shall be specified by such
holder. Notes may not be transferred in denominations of less than $100,000, or
increments of $1,000 in excess thereof (provided that if the aggregate unpaid
principal amount of a Note is less than $100,000, the Company will deliver one
Note in exchange for such Note).
Prior to due presentation for registration of transfer of a Note, the
Company may deem and treat the registered holder thereof as the absolute owner
for the purpose of any notice, waiver or consent thereunder, and payment of the
Note shall be made only to or upon the order of such holder.
-2-
<PAGE> 8
2.3 Loss, Theft, Destruction or Mutilation of Notes. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of a Note, and, in the case of any such loss, theft or destruction,
upon receipt of a bond of indemnity reasonably satisfactory to the Company or,
in the case of any such mutilation, upon surrender and cancellation of the Note,
the Company will make and deliver, in lieu of such lost, stolen, destroyed or
mutilated Note, a new Note of like tenor and unpaid principal amount and dated
the date of, or, if later, the date to which interest has been paid on, the
lost, stolen, destroyed or mutilated Note. In the case of a holder of the Notes
which is an institutional investor, its own unsecured agreement of indemnity
shall be deemed satisfactory to the Company.
2.4 Place of Payment. Payments of principal, premium, if any, and interest
becoming due and payable on the Notes shall be made in New York, New York at the
principal place of business of the Company in such jurisdiction. The Company may
at any time, by notice to each holder of a Note, change the place of payment of
the Notes so long as such place of payment shall be in New York, New York at
either the principal place of business of the Company in such jurisdiction or at
the office of a bank or trust company in such jurisdiction. The foregoing
notwithstanding, so long as any Investor or any nominee of such Investor shall
be the holder of any Note, the Company will pay all sums becoming due on such
Note for principal, premium, if any, and interest by the method and at the
address specified for such purpose below such Investor's name on the signature
pages hereto or by such other method or at such other address as such Investor
shall have from time to time specified to the Company in writing for such
purpose, without the presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment in full of any Note, such
Investor shall surrender such Note for cancellation, reasonably promptly after
any such request, to the Company at its principal place of business or at the
place of payment most recently designated by the Company as provided above. The
Company will afford the benefits of this Section 2.4 to any institutional
investor that is the direct or indirect transferee of any Note purchased by any
Investor.
2.5 Additional Payment. In the event the Maturity Date is extended under
circumstances that require the Company to make an additional $600,000 payment to
the Investors, such payment shall be made to the Investors by issuing to such
Investors recourse promissory notes (the "Maturity Date Extension Notes") in a
principal amount equal to their respective pro rata share (determined according
to the principal amount of the Notes held by such Investor) of such $600,000
payment. The Maturity Date Extension Notes shall be in substantially the form of
this Note except that they shall reflect the following terms: (i) such Maturity
Date Extension Notes shall bear interest (computed on the same basis as the
Notes) at the rate of 15% per annum (20% per annum following the occurrence of a
Termination Event) payable on each Interest Payment Date; (ii) such Maturity
Date Extension Notes shall mature on the same day as the Notes, (iii) such
Maturity Date Extension Notes shall be guaranteed by the Operating Partnership
and shall be secured by the Collateral, and (iv) if the Initial Public Offering
occurs, the outstanding principal amount of such Maturity Date Extension Notes
shall be repayable by issuing to the holders thereof such number of shares of
Common Stock determined by dividing (A) the aggregate principal amount of such
Maturity Date Extension
-3-
<PAGE> 9
Notes plus all accrued but unpaid interest thereon to the date of repayment (to
the extent such interest has not been added to principal) by (B) the Mid-Point
Purchase Price. If, prior to the maturity of the Maturity Date Extension Notes,
the conditions set forth in Section 7.4 are satisfied, the Company may at its
option elect to add up to 50% of the amount of interest payable on any Interest
Payment Date to the outstanding principal amount on the Maturity Date Extension
Notes.
SECTION 3 ISSUANCE OF COMMON STOCK.
3.1 Purchase and Sale of Common Stock. Subject to the terms and conditions
of this Agreement, the Company will issue and sell to each Investor, and each
Investor will purchase at the Stock Closing, the number of shares of Common
Stock determined by multiplying (i) a fraction the numerator of which is the
aggregate principal amount of Notes purchased by such Investor and the
denominator of which is the total aggregate principal amount of Notes purchased
by all Investors and (ii) the amount obtained by dividing $20,000,000 by the
mid-point of the price range set forth in the last preliminary prospectus
circulated to the public in connection with the Initial Public Offering,
provided that the Investors may, by delivering a notice signed on their behalf
by MSAM at least three (3) days prior to the date of the Company's initial
Preliminary Prospectus, increase the amount in clause (ii) above from
$20,000,000 up to $25,000,000 (the amount determined pursuant to this clause
(ii) being hereinafter referred to as the "Aggregate Share Amount"). The
obligations of each Investor are several and not joint and no Investor shall be
liable for the acts and omissions of any other Investor. The Investors shall not
be deemed to be Affiliated shareholders or Affiliated purchasers.
3.2 Purchase Price. The purchase price for each share of Common Stock to
be purchased by the Investors shall be equal to the price per share at which
shares of the Company's Common Stock are offered to the public in the Initial
Public Offering (the "Per Share Purchase Price").
3.3 Transfer Taxes. The Company shall pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
any of the shares of Common Stock to be acquired by the Investors.
3.4 Rights of Holders. The Common Stock to be acquired by the Investors
shall have the rights, restrictions, privileges and preferences set forth in the
Certificate of Incorporation, as the same may be amended by any amendment
thereto. In addition, holders of the shares of Common Stock to be issued to the
Investors pursuant to the terms of this Agreement (or any transferee of the
Investors) will have the registration rights set forth in the Registration
Rights Agreement.
3.5 Lock-up. If required by the underwriters for the Initial Public
Offering, each of the Investors will enter into an agreement with such
underwriters agreeing not to sell or transfer
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any shares of Common Stock acquired by such Investor (subject to certain
exceptions to be negotiated with the underwriters) for a period (the "Lock-up
Period") not to exceed the lesser of (i) one year or (ii) one-half the shortest
period of time the Shareholder or any other REIT Sponsor (other than Robert M.
Adams and Richard Wisely) has agreed not to sell its shares of Common Stock.
SECTION 4 THE CLOSINGS.
4.1 The First Note Closing. The first closing of the purchase and sale of
the Notes under this Agreement shall take place at the offices of Battle Fowler,
LLP, Park Avenue Tower, 75 East 55th Street, New York, New York 10022, (the
"First Note Closing"), at 10:00 A.M. on March 27, 1997, or at such other time,
date and place as are mutually agreeable to the Company and the Investors. The
date of the First Note Closing is hereinafter referred to as the "First Note
Closing Date." At the First Note Closing, the Company shall deliver to each
Investor Notes in an aggregate principal amount set forth opposite its name
under the heading "First Note Closing Commitment" on the signature pages hereto,
issued in the name of the Investor or its nominee and in such authorized
denominations as MSAM on behalf of the Investor shall request, against payment
to the Company of the purchase price therefor, by wire transfer, check, or other
method acceptable to the Company. If on the First Note Closing Date any of the
conditions specified in Sections 7.1 or 7.2 shall not have been fulfilled, each
Investor shall, at its election, be relieved of all of its obligations under
this Agreement without thereby waiving any other rights it may have by reason of
such failure or such nonfulfillment.
4.2 The Second Note Closing. The second closing (the "Second Note
Closing") of the purchase and sale of the Notes shall take place at the offices
of Battle Fowler, LLP, Park Avenue Tower, 75 East 55th Street, New York, New
York 10022 at 10:00 A.M. (or such other time and place as are mutually agreeable
to the Company and the Investors) on such date as is specified in a written
notice delivered by the Company to MSAM at least ten (10) Business Days before
the date on which such Closing is to occur. The date of the Second Note Closing
(hereinafter referred to as the "Second Note Closing Date") must be a Business
Day occurring not later than June 15, 1997. In addition to stating the date of
the Second Note Closing, any notice delivered pursuant to this Section 4.2 must
specify the aggregate principal amount of the Notes to be issued at such Closing
(which shall be not less than $1,000,000 and in increments of $100,000 in excess
thereof) and the pro rata portion (determined according to each Investor's total
relative commitment) of such principal amount to be purchased by each Investor
at such Closing. At the Second Note Closing, the Company shall deliver to each
Investor the Notes being purchased by such Investor, issued in the name of the
Investor or its nominee and in such authorized denominations as MSAM on behalf
of the Investor shall request, against payment to the Company of the purchase
price therefor, by wire transfer, check, or other method acceptable to the
Company. If the Second Note Closing Date does not occur by June 15, 1997 or on
the Second Note Closing Date any of the conditions specified in Sections 7.1,
7.3 or 7.4 shall not have been fulfilled, each Investor shall, at its election,
be relieved of all of its obligations under
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this Agreement to purchase the Notes to be purchased at the Second Note Closing
without thereby waiving any other rights it may have by reason of such failure
or such nonfulfillment.
4.3 Subsequent Note Closing. Each subsequent Closing (each such Closing,
including the Second Note Closing, being hereinafter referred to as a
"Subsequent Note Closing") of the purchase and sale of the Notes after the
Second Note Closing shall take place at the offices of Battle Fowler, LLP, Park
Avenue Tower, 75 East 55th Street, New York, New York 10022 at 10:00 A.M. (or
such other time and place as are mutually agreeable to the Company and the
Investors) on such date as is specified in a written notice delivered by the
Company to MSAM at least ten (10) Business Days before the date on which such
Closing is to occur. The date of any Subsequent Closing (each such date,
including the Second Note Closing Date, being hereinafter referred to as a
"Subsequent Note Closing Date") must be a Business Day. In addition to stating
the date of a Subsequent Note Closing, any notice delivered pursuant to this
Section 4.3 must specify the aggregate principal amount of the Notes to be
issued at such Closing (which shall be not less than $1,000,000 and in
increments of $100,000 in excess thereof) and the pro rata portion (determined
according to each Investor's relative total commitment) of such principal amount
to be purchased by each Investor at such Closing. At each such Subsequent Note
Closing, the Company shall deliver to each Investor the Notes being purchased by
such Investor, issued in the name of the Investor or its nominee in such
authorized denominations as MSAM on behalf of such Investor shall request,
against payment to the Company of the purchase price therefor, by wire transfer,
check or other method acceptable to the Company. If on any such Subsequent Note
Closing Date any of the conditions specified in Sections 7.1 or 7.3 shall have
not been fulfilled, each Investor shall, at its election, be relieved of all of
the obligations under this Agreement to purchase the Notes to be purchased at
such Closing without thereby waiving any other rights it may have by reason of
such failure or nonfulfillment.
4.4 The Stock Closing. The closing (the "Stock Closing") of the purchase
and sale of the Common Stock contemplated under Sections 3.1 shall take place at
the same location, on the same date and at the same time as the closing of the
Initial Public Offering. The Company will deliver to MSAM at least three (3)
Business Days prior to the date of the closing of the Initial Public Offering a
notice specifying the place, date, and time of such closing. The date of the
Stock Closing is hereinafter referred to as the "Stock Closing Date". At the
Stock Closing, the Company shall deliver to each Investor certificates
representing the number of shares of Common Stock being purchased by such
Investor registered in the name of such Investor as its nominee, against payment
to the Company of the purchase price therefor, by wire transfer, check or other
method acceptable to the Company. In addition, the Company shall deliver to each
Investor certificates representing the number of shares of Common Stock into
which the Notes held by such Investor have been automatically converted as
provided in Section 14.2, registered in the name of such Investor or its
nominee, together with any cash payment required under Section 14.2, against the
surrender for cancellation of such Investor's Notes. The Company and the
Shareholder agree to make available to MSAM for inspection not less than two (2)
Business Days prior to the Stock Closing, the certificates representing the
shares of Common Stock to be acquired by the Investors. If on the Stock Closing
Date any of the
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conditions specified in Sections 7.1 or 7.5 shall have not been fulfilled, each
Investor shall, at its election, be relieved of all of its obligations under
this Agreement to purchase the Common Stock without thereby waiving any other
rights it may have by reason of such failure or such nonfulfillment.
SECTION 5 REPRESENTATIONS OF THE COMPANY.
Subject to and except as disclosed in Exhibit D hereto, the Credit
Parties, jointly and severally, represent and warrant to each Investor as
follows:
5.1 Organization. Each Credit Party and each Subsidiary is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
formation with all requisite power and authority, and all necessary licenses and
permits, to own and lease its properties and assets and to conduct its business
as presently conducted and as proposed to be conducted by it. Each Credit Party
and each Subsidiary is duly qualified to do business and is in good standing in
all states where the conduct of its business or the ownership or leasing of
property requires such qualification except where the failure to be so qualified
would not have a Material Adverse Effect.
5.2 Authorization. Each Credit Party has the right, power and authority to
execute, deliver and perform this Agreement and the Related Documents to which
it is a party. Each Credit Party has taken all corporate or partnership action
necessary to authorize the execution and delivery of this Agreement and the
Related Documents to which it is a party and to perform its obligations
contemplated hereunder and thereunder.
5.3 No Conflicts or Consents. Neither the execution, delivery or
performance of this Agreement or the Related Documents to which any Credit Party
is a party nor the consummation of the transactions contemplated hereby or
thereby, nor the compliance with the terms and provisions hereof or thereof,
will contravene or conflict with any provision of any constitution, law or
regulation to which any Credit Party or Subsidiary is subject, or any judgment,
license, order or permit applicable to any Credit Party or Subsidiary or any
indenture, loan agreement, mortgage, deed of trust, or other material agreement
or instrument to which any Credit Party or Subsidiary is a party or by which any
of his or its assets may be bound or subject, or violate any provision of the
organizational documents of any Credit Party or Subsidiary. No consent,
approval, authorization or order of any court or Governmental Authority or third
party is required in connection with the execution, delivery and performance by
any of the Credit Parties of this Agreement or any of the Related Documents to
which it is a party or for the consummation of the transactions contemplated
hereby or thereby, except those that have been obtained and are in full force
and effect.
5.4 Enforceable Obligations. This Agreement and each of the Related
Documents to which any of the Credit Parties is a party have been duly executed
and delivered by it and are its legal, valid and binding obligations,
enforceable against it in accordance with their terms
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except as such enforceability may be limited under (i) applicable bankruptcy,
insolvency, reorganization or other similar laws affecting the rights of
creditors generally, and (ii) general principles of equity.
5.5 Capitalization. The authorized capital stock of the Company consists
of 1000 shares of Common Stock, of which 1000 shares are issued and outstanding.
All of the issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
provided in this Agreement or contemplated in the Budget, (i) no subscription,
warrant, option, convertible security or other rights (contingent or otherwise)
or commitments of any character to purchase or acquire any shares of capital
stock of the Company is authorized or outstanding, (ii) the Company has no
obligation (contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets of the
Company, and (iii) the Company has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. All of the issued and outstanding shares of capital stock of
the Company have been offered, issued and sold by the Company in compliance with
applicable federal and state securities laws.
5.6 Shareholders and Agreements. All of the issued and outstanding shares
of Common Stock are owned beneficially and of record by the Shareholder. Except
(i) for the Initial Public Offering, (ii) as contemplated in the Budget or (iii)
as provided in this Agreement, there are no agreements, written or oral, between
the Company and the Shareholder or, to the best of the Company's knowledge,
between the Shareholder and any other Person relating to the acquisition
(including without limitation rights of first refusal or pre-emptive rights),
disposition, registration under the Securities Act of 1933, as amended (the
"Securities Act"), or voting of the capital stock of the Company.
5.7 Issuance of Securities. The issuance and delivery of the Notes and the
shares of Common Stock issuable to the Investors on the applicable Closing Date,
including, without limitation, those shares issuable upon conversion of the
Notes, have been duly authorized by all necessary corporate action on the part
of the Company, except for the filing of the amendment to the Certificate of
Incorporation contemplated under Section 1.2. The Notes, when issued, will have
been duly and validly authorized and issued and will constitute legal, valid and
binding obligations of the Company entitled to all the rights and benefits
provided under this Agreement and shall be enforceable against the Company in
accordance with their terms except as such enforceability may be limited under
(i) applicable bankruptcy, insolvency, reorganization or other similar laws
affecting the rights of creditors generally, and (ii) general principles of
equity. Payment of the Notes is not, and will not, be subordinate to any other
Indebtedness or obligations of the Credit Parties. The shares of Common Stock
issuable to the Investors on the Stock Closing Date, including, without
limitation, those shares issuable upon conversion of the Notes, when issued as
contemplated hereunder, will be duly and validly authorized and issued, and
fully paid and non-assessable.
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5.8 Subsidiaries. Set forth in Exhibit D is (a) the name of each entity in
which any Credit Party directly or indirectly owns an interest (collectively,
the "Subsidiaries"), and (b) each Subsidiary's jurisdiction of organization and
the percentage of equity interests owned by the applicable Credit Party (or any
Subsidiary of such Credit Party). Each Credit Party has good and marketable
title to all of the equity interests it purports to own of each Subsidiary, free
and clear in each case of any Lien (other than Permitted Liens), and all such
interests have been duly issued and are fully paid and nonassessable except as
contemplated in the organizational documents of the issuer thereof. Except as
set forth in this Agreement or contemplated in the Budget, there are no
outstanding warrants, options, or other rights or commitments of any character
to subscribe for or purchase from any Credit Party or any of their Subsidiaries,
or obligating any Subsidiary to issue, any additional equity interests or any
securities convertible into or exchangeable for such equity interests.
5.9 Government Regulation. No Credit Party or Subsidiary is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940, the Interstate Commerce Act (as
any of the preceding acts have been amended), or any other law (other than
Regulation X of the Board of Governors of the Federal Reserve) which would
regulate the incurring by such Credit Party or Subsidiary of any Indebtedness,
including but not limited to laws relating to common contract carriers or the
sale of electricity, gas, steam, water, or other public utility services.
5.10 Litigation. There are no actions, suits or legal, equitable,
arbitration or administrative proceedings pending or, to the best of any Credit
Party's knowledge, threatened against the Credit Parties or any of their
Subsidiaries which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
5.11 Financial Condition. The audited financial statements (including the
related notes and supporting schedules) for each Subsidiary listed on Exhibit P
for the 1995 fiscal year end and the unaudited financial statements (including
the related notes and supporting schedules) for each Subsidiary that owns
properties that will be contributed to the Operating Partnership in connection
with the Initial Public Offering as contemplated in the Budget for the 1996
fiscal year end present fairly in all material respects the financial condition
and results of operations of the entities purported to be shown thereby, at the
dates and for the periods indicated, and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved. Since the dates set forth in such financial
statements for the 1996 fiscal year, no event, act, condition or change has
occurred that could reasonably be expected to have a Material Adverse Effect.
5.12 Title to Assets. Each Credit Party and each Subsidiary has good and
marketable title to all of its assets free and clear of all Liens and other
encumbrances and adverse claims of any nature, except Permitted Liens and other
Liens permitted pursuant to Section 10.2.
5.13 Material Contracts and Obligations. Exhibit D sets forth a list of
all material agreements or commitments of any nature to which the Company, the
Operating Partnership or
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the Management Company is a party or by which the Company, the Operating
Partnership or the Management Company is bound, including without limitation (a)
each agreement which requires future expenditures by the Company, the Operating
Partnership or the Management Company in excess of $50,000 or which might result
in payments to the Company, the Operating Partnership or the Management Company
in excess of $50,000, (b) all employment and consulting agreements, employee
benefit, bonus, pension, profit-sharing, stock option, stock purchase and
similar plans and arrangements, and (c) any agreement with any Affiliate of the
Company, the Operating Partnership, the Management Company or the Shareholder,
including without limitation any agreement or other arrangement providing for
the furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any such person or entity. The Credit Parties
have delivered to the Investors copies of such of the foregoing agreements as
have been requested. All of such agreements and contracts are valid, binding and
in full force and effect. Neither the Management Company nor any Credit Party is
in default in any respect under contract, lease, loan agreement, indenture,
mortgage, security agreement or other agreement or obligation to which it is a
party or by which any of its properties is bound.
5.14 Compliance with Laws. Each Credit Party and each Subsidiary is in
compliance in all material respects with all laws, ordinances, rules and
regulations of governmental authorities (including, without limitation, the
Americans with Disabilities Act of 1990) and requirements of insurance bodies
applicable to the ownership, leasing, use and operation of its properties and
has obtained and fully paid for all material licenses, permits, certificates,
entitlements, grants of right and any other items and documents required by
applicable law to be obtained by him or it for the completion, ownership,
leasing, use and occupancy of his or its properties, except where the failure to
so comply or obtain would not have a Material Adverse Effect. Such licenses,
permits, certificates, entitlements, grants of right and other items and
documents are in full force and effect. No Credit Party or any Subsidiary of a
Credit Party has taken any action that would (or failed to take any action, the
omission of which would) result in the revocation or suspension of such
licenses, permits, certificates, entitlements, grants of right and other items
and documents, and no Credit Party or any Subsidiary of a Credit Party has
received any notice of any material violation from any federal, state or
municipal entity or notice of an intent by any such governmental entity to
revoke any material certificate, license, permit, entitlement or grant of right
issued by it in connection with the ownership, use and occupancy of any of its
properties, that in each case has not been cured or otherwise resolved to the
satisfaction of such governmental entity.
5.15 Real Property.
(a) Set forth in Exhibit D is a list of all real properties owned by
the Credit Parties and each Subsidiary.
(b) No eminent domain, condemnation, incorporation, annexation or
moratorium or similar proceeding has been commenced or, to the best of the
Credit Parties' knowledge, threatened by an authority having the power of
eminent domain to condemn any part
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of the properties owned by the Credit Parties or any Subsidiary. To the best of
the Credit Parties' knowledge, there are no pending or threatened governmental
rules, regulations, plans, studies or efforts, or court orders or decisions,
which do or could adversely affect the use or value of such properties for their
present use.
(c) The improvements at all properties owned by the Credit Parties
and each of the Subsidiaries are in reasonably good condition and repair,
ordinary wear and tear excepted, and have not suffered any casualty or other
material damage which has not been repaired in all material respects. To the
best of the Credit Parties' knowledge, there is no material latent or patent
structural, mechanical or other significant defect, soil condition or deficiency
in the improvements included in such properties.
(d) Each of the properties owned by the Credit Parties or any
Subsidiary has been fully assessed and is not subject to abatement. To the best
of the Credit Parties' knowledge, there are no proposed reassessments of any of
such properties by any taxing authority and there are no threatened or pending
special assessments or other actions or proceedings (other than county-wide
reassessments and/or the usual increases in millage rates that may be under
consideration by the taxing authorities in the jurisdiction where such
properties are located) that could give rise to an increase in real property
taxes or assessments against any of such properties.
(e) There are no "Significant Agreements" relating to the properties
owned by the Credit Parties or any Subsidiary, or the operations of such
properties, other than as set forth in Exhibit D. For purposes hereof,
"Significant Agreement" means and includes any of the following by which any of
such properties may otherwise be subject or bound, in each such case as amended
and currently in effect, inclusive of any waivers relating thereto:
(i) all agreements, instruments, mortgages and documents
evidencing, securing or pertaining to any Indebtedness;
(ii) all ground leases;
(iii) all management agreements; and
(iv) any other agreement, instrument or document that is
material to the property or the operations thereof.
5.16 Tenant Leases.
(a) The Credit Parties have delivered to MSAM, on behalf of the
Investors, rent rolls, certified to be true, correct and complete, for each of
the properties owned by the Credit Parties or any Subsidiary.
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(b) Each of the current leases with respect to the properties owned
by the Credit Parties or any Subsidiary (as the same have been amended or
modified to date, the "Leases") are in full force and effect and, to the
knowledge of the Credit Parties, no material uncured "event of default" (as
defined in any such Lease) has occurred and is continuing under any such Lease.
With respect to any Lease of 20,000 square feet or more: (i) no tenant has
asserted a defense to, offset or claim against its rent or the performance of
its obligations under any such Lease, (ii) no tenant has asserted a default on
the part of the landlord which would give it the right to terminate any such
Lease, (iii) there are no rights of first refusal on, or options to purchase,
any of the properties leased under any such Lease in favor of any tenant, and
(iv) no written modifications to, or agreements in principal with respect to,
any such Lease that would reduce (A) the space leased to any tenant, (B) the
amount of any tenant's rent or (C) the term of such Lease.
(c) Except for (i) security deposits or (ii) the first full month's
rent, whether or not the term of a Lease has commenced, no prepayments of rent
more than thirty (30) days in advance have been made under the Leases. No rent
or security deposits under the Leases have been assigned or encumbered, except
as security for the mortgages notes listed in Exhibit D, and there are no
agreements or understandings, written or oral, with any of the tenants other
than as set forth in the Leases. All brokerage commissions and other
compensation and fees payable by reason of the Leases have been paid in full or
will be paid in the ordinary course of business as and when due.
5.17 Full Disclosure. With respect to the representations and warranties
contained in this Agreement or in any of the Related Documents or in any
financial statements, certificates or other documents delivered in connection
herewith or therewith, there is no material fact that the Credit Parties have
not disclosed to the Investors. Neither this Agreement, the Related Documents,
the financial information referenced in Section 5.11 hereof, nor any agreement,
document, certificate or written statement delivered herewith or heretofore by
the Credit Parties to the Investors in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact or omits
to state any material fact necessary to keep the statements contained herein or
therein from being misleading in light of the circumstances under which they are
made.
5.18 Dividends. Except as otherwise permitted hereunder, the Credit
Parties have not declared, set aside, or made any payment of a Dividend.
5.19 Security Interests. Each of the Security Documents creates or will
create, as security for the obligations described therein, a valid, exclusive
and perfected first security interest in and Lien on all of the Collateral
described in such agreements in favor of the Collateral Agent, acting on behalf
of the Investors, superior and prior to the rights of all third Persons and
subject to no other Liens except Permitted Liens. No filings or recordings are
required in order to perfect the security interests created under the Security
Documents except for the filing of UCC-1 financing statements in the filing
offices listed in Exhibit D.
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5.20 No Termination Event. No Termination Event or Potential Termination
Event has occurred and is continuing, nor will the execution, delivery and
performance of this Agreement or any of the Related Documents cause any
Termination Event or Potential Termination Event to occur.
5.21 Tax Matters. The Company will at such time as it files its tax return
for its fiscal year ending December 31, 1997 properly elect to be taxed as a
real estate investment trust within the meaning of Sections 856-860 of the
Internal Revenue Code of 1986, as amended (the "Code"), and will have satisfied
all of the requirements set forth in those provisions and the regulations
thereunder to be taxed as a real estate investment trust within the meaning of
those provisions. Each Credit Party and each Subsidiary has filed all U.S.
federal, state, local, foreign and other tax returns which were required to be
filed on or before the date hereof and has paid all taxes which have become due
and payable. All such reports and returns were materially accurate and complete
when filed and reflect all taxes required to be paid for the periods reported
therein. No additional material assessments, deficiencies or penalties in
respect of taxes have been made or claimed against the Credit Parties or any
Subsidiary which remain unpaid. No tax returns or reports of the Credit Parties
or any Subsidiary are or ever have been under audit.
5.22 Insurance. Each Credit Party and Subsidiary maintains in effect with
reputable and financially sound insurers, insurance in such amounts and covering
such risks as is customarily maintained by companies engaged in similar
businesses and owning similar types of properties in the same areas as the
Credit Parties or the Subsidiaries. All such policies are in full force and
effect and all premiums thereunder have been paid to the extent due, and no
notice of cancellation has been received with respect thereto and, to the best
knowledge of the Credit Parties, no cancellation is threatened.
5.23 Burdensome Contracts. No Credit Party or Subsidiary is party to any
agreement or instrument or subject to any legislative or charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation which could reasonably be expected to have a Material Adverse Effect.
5.24 Environmental Matters. No Credit Party or any Subsidiary has (a)
caused any substance or waste that is listed or defined as hazardous or toxic
under applicable environmental laws or petroleum products (collectively
"Hazardous Materials") to be improperly maintained or disposed of on, under or
at any of its or their properties, or any part thereof, or elsewhere in a manner
which violates, or could give rise to liability under, applicable environmental
laws, or (b) failed to remediate, alter, mitigate or abate any condition
required to be remediated, altered, mitigated or abated under such environmental
laws. Except as set forth in any environmental site assessments provided by the
Credit Parties to the Investors, (i) to the knowledge of the Credit Parties,
each of their properties, and the properties of their Subsidiaries, is in
compliance, and has heretofore complied, with all environmental laws in all
material respects, (ii) to the knowledge of the Credit Parties, there has been
no discharge of Hazardous Materials by any tenant of any property owned by any
Credit Party of any of their Subsidiaries
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in quantities requiring response, remediation or removal, and (iii) no Credit
Party has received any written notice from any governmental unit or other person
or entity that it or any Subsidiary, or any of its properties or operations
conducted thereon, are not or have not been in compliance with all environmental
laws.
5.25 Books and Records. The books and records of the Credit Parties and of
the Subsidiaries accurately and fairly reflect their respective income,
expenses, assets and liabilities, and the Credit Parties and each of the
Subsidiaries maintain internal accounting controls which provide reasonable
assurance that: (a) transactions are executed in accordance with management's
authorization; (b) transactions are recorded as necessary to permit preparation
of reliable financial statements and to maintain accountability for earnings and
assets; (c) access to assets is permitted only in accordance with management's
authorization; (d) the recorded accountability of all assets is compared with
existing assets at reasonable intervals; and (e) all intercompany transactions,
charges and expenses among and between them or any of their other Affiliates are
accurately reflected in all financial statements.
5.26 Certain Payments. No Credit Party, no Subsidiary or, to the knowledge
of any Credit Party, any director, officer, agent or employee of any such
entity, or any other person or entity associated with or acting for or on behalf
of any Credit Party or any Subsidiary, including any REIT Sponsor, has directly
or indirectly (a) made any unlawful contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person or entity, private
or public, regardless of form, whether in money, property or services, (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, or (iii) to obtain special concessions or pay
for special concessions already obtained or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the Credit
Parties and the Subsidiaries, or (c) taken any other action in violation of any
provision of the Foreign Corrupt Practices Act of 1977, as amended.
5.27 Labor Agreements and Actions. No Credit Party or any Subsidiary is
bound by or subject to, any written or oral, express or implied, contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the knowledge of any Credit Party, has sought to represent any of the
employees, representatives or agents of any Credit Party or any Subsidiary.
There is no strike or other labor dispute involving any Credit Party or any
Subsidiary pending, or to the knowledge of any Credit Party, threatened, nor is
any Credit Party aware of any labor organization activity involving any of the
employees of any Credit Party or any Subsidiary. No Credit Party is aware that
any officer or key employee, or that any group of key employees, intends to
terminate his, her or their employment with any Credit Party or any Subsidiary,
nor does any Credit Party or Subsidiary have a present intention to terminate
the employment of any of the foregoing. The employment of each employee of any
Credit Party or any Subsidiary is terminable at the will of the applicable
employer without further liability of such employer to such employee except for
the payment of such employee's normal salary accrued but not paid through the
date of such termination.
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5.28 ERISA. None of the Credit Parties or any of the Subsidiaries has or
otherwise contributes to or participates in any employee benefit plan subject to
ERISA.
5.29 Use of Proceeds; Margin Stock. None of the proceeds of the sale of
the Notes will be used for the purpose of purchasing or carrying any "margin
stock" as defined in Regulations U, T, X, or G of the Board of Governors of the
Federal Reserve, or for the purpose of reducing or retiring any Indebtedness
which was originally incurred to purchase or carry "margin stock," or for any
other purpose which might constitute this transaction a "purpose credit" within
the meaning of Regulations U, T, X or G. No Credit Party is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stocks. No Credit Party or any Person acting on behalf of any Credit Party has
taken or will take any action which might cause any violation of Regulations U,
T, X, G or any other regulations of the Board of Governors of the Federal
Reserve System or any violation of Section 7 of the Securities Exchange Act of
1934, as amended ("the "Exchange Act") or any rule or regulation promulgated
thereunder, in each case as now in effect or as the same may hereinafter be in
effect.
5.30 Solvency. Each Credit Party and each Subsidiary is, and after
consummation of the transactions contemplated hereby, will be Solvent.
5.31 Principal Office, Etc. The residence or the principal office, chief
executive office and principal place of business of each of the Credit Parties
is as set forth in the preamble to this Agreement. Each of the Credit Parties
maintains its records and books at such address and does not maintain any assets
at any other location, that, individually or in the aggregate, are material to
the operation of its business except for the real property in which such Credit
Party has an interest.
5.32 Domestically-Controlled REIT. For purposes of Section 897(h) of the
Code, at all times during the period in which the Company was in existence less
than 25% in value of its capital stock has been held, directly or indirectly, by
foreign persons.
5.33 Pension-Held REIT. For purposes of Section 856(h)(3) of the Code, at
all times during the period in which the Company was in existence, no "qualified
trust" has held, directly or indirectly, more than 10% of the interests in the
Company.
5.34 Commercial Real Property. All direct and indirect interests held by
the Shareholder, the Credit Parties or any Subsidiary in any commercial real
property with a fair market value (net of Indebtedness secured by a mortgage in
the fee or leasehold asset underlying any such interest) in excess of $500,000
has been contributed to the Operating Partnership to the extent not prohibited
(and if prohibited, not capable of being waived) under the constituent documents
of the entity or entities holding or owning such interests in such commercial
real property except that no representation or warranty is made with respect to
the Scheduled Assets and Retail Properties.
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5.35 Pledgeable Equity. Pursuant to the Initial Contribution Agreements,
all the pledgeable equity (as set forth in the Budget) has been contributed to
the Operating Partnership.
SECTION 6 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
Each Investor severally, and not jointly, hereby represents and warrants
that:
6.1 Authorization. The Investor has full power and authority to enter into
this Agreement and this Agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms except as such
enforceability may be limited under (i) applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the rights of creditors
generally, and (ii) general principles of equity.
6.2 Purchase Entirely for Own Account. The Notes and the Common Stock to
be acquired by such Investor will be acquired for investment for Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same.
6.3 Accredited Investor. The Investor is an "accredited investor" within
the meaning of Rule 501 of Regulation D, under the Securities Act, as presently
in effect.
6.4 Other Representations and Warranties.
(a) The Investor, by reason of its business and financial
experience, together with the business and financial experience of MSAM, which
is its investment adviser,
(i) has such knowledge sophistication and experience in
financial and business matters and in making investment decisions of this
type that it is capable of evaluating the merits and risks of and of
making an informed investment decision with respect to an investment in
the Notes and Common Stock,
(ii) is capable of protecting its own interest or has engaged
representatives or advisors to assist it in protecting its interests and
(iii) is capable of bearing the economic risk of such
investment.
(b) (i) The Investor understands that an investment in the Company
involves substantial risks.
(ii) The Investor has been given the opportunity to make an
investigation of the proposed activities of the Company.
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(iii) The Investor has been afforded the opportunity to obtain
any additional information requested by it.
(iv) The Investor has had an opportunity to ask questions of
and receive answers from representatives of the Company concerning the Company
and its proposed activities and the terms and conditions of an investment in the
Notes and Common Stock.
(c) The Investor was not formed for the specific purpose of
acquiring an interest in the Company.
(d) The Investor acknowledges that:
(i) the Notes and Common Stock to be issued to such Investor
have not been registered under the Securities Act or state securities laws
by reason of a specific exemption or exemptions from registration under
the Securities Act and applicable state securities laws and such Notes and
Common Stock will bear a legend to such effect,
(ii) the Company's reliance on such exemptions is predicated
in part on the accuracy and completeness of the representations and
warranties of such Investor contained herein,
(iii) the Notes and Common Stock to be issued to such Investor
may not be resold or otherwise distributed unless registered under the
Securities Act and applicable state securities laws, or unless an
exemption from registration is available,
(iv) there is no public market for the Notes and Common Stock;
and
(v) other than as set forth in this Agreement and the Related
Documents, the Company has no obligation or intention to register such
Notes and Common Stock under the Securities Act or any state securities
laws or to take any action that would make available any exemption from
the registration requirements of such laws.
SECTION 7 CONDITIONS TO THE OBLIGATIONS OF EACH INVESTOR.
7.1 Conditions to All Closings. The obligation of each Investor to
purchase the securities to be purchased by it at any Closing are subject to the
satisfaction of each of the following conditions on or before the Closing Date
for such Closing:
(a) Accuracy of Representations and Warranties. Each representation
and warranty contained in Section 5 shall be true and correct in all material
respects on and as of such Closing Date with the same effect as though such
representation and warranty had been
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made on and as of such date (after giving full effect to any supplement or
amendment to Exhibit D delivered pursuant to Section 7.3(a)(x)) except that at
the Stock Closing the representations and warranties set forth in Sections 5.32
and 5.33 shall be deemed to have been made immediately prior to the closing of
the Initial Public Offering.
(b) Performance. The Credit Parties shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by the Credit Parties prior to or at such
Closing.
(c) No Termination Event. No Termination Event or Potential
Termination Event shall have occurred and be continuing or result from the
transactions contemplated to be consummated on such Closing Date.
(d) No Proceeding or Litigation. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
(e) No Material Adverse Change. No event shall have occurred or
conditions shall exist that could reasonably be expected to have a Material
Adverse Effect.
(f) Compliance with Laws; Consents and Approvals. The Company shall
have complied with all applicable requirements of federal and state securities
or "blue sky" laws with respect to the issuance and sale of the securities to be
sold at the Closings and each of the Credit Parties shall have received all
consents, permits and other authorizations, and made all such filings and
declarations as may be required under any applicable law or regulation or
pursuant to any other agreement, order or decree to which any of them is a party
or subject in connection with the transactions to be consummated on or prior to
such Closing Date.
(g) Purchase Permitted. Each Investor's purchase of the securities
to be purchased by it at such Closing shall be permitted under all applicable
laws and regulations governing the activities of such Investor.
(h) Expenses. The Investors shall have received all amounts payable
pursuant to Section 17.13 on or prior to such Closing Date.
7.2 Additional Conditions to First Note Closing. In addition to the
conditions specified in Section 7.1, the obligations of each Investor to
purchase Notes at the First Note Closing are subject to the satisfaction of the
following conditions precedent on or before the First Note Closing Date:
(a) Documents. The Credit Parties shall have delivered to each of
the Investors the following, each of which shall be in form and substance
reasonably satisfactory to MSAM:
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(i) The following agreements, duly executed by each of the parties
thereto:
(A) this Agreement;
(B) the Notes being purchased by such Investor at such
Closing, registered in such names and in such denominations as MSAM, on
behalf of such Investor, shall have requested;
(C) the Registration Rights Agreement;
(D) the Shareholder Pledge Agreement;
(E) the Company Pledge Agreement;
(F) the Operating Partnership Pledge Agreement;
(G) the Operating Partnership Collateral Assignment;
(H) the Company Account Pledge Agreement;
(I) the Operating Partnership Account Pledge
Agreement; and
(J) the Management Company Stock Option Agreement.
(ii) A certificate duly executed on behalf of the Company by
its Secretary or an Assistant Secretary, certifying as to the incumbency
and signatures of each officer of the Company executing this Agreement and
each of the Related Documents to which the Company is a party and to which
is attached copies, certified to be true, correct, complete and in full
force and effect of (A) the Company's Articles of Incorporation, (B) the
Company's by-laws and (C) resolutions of the Company's Board of Directors
authorizing the execution, delivery and performance by the Company of this
Agreement and the Related Documents to which the Company is a party, the
issuance and sale of the Notes and the authorization, issuance and sale of
the Common Stock;
(iii) A certificate, duly executed on behalf of the Operating
Partnership, by the Secretary or an Assistant Secretary of the Company, in
its capacity as the sole general partner of the Operating Partnership,
certifying as to the incumbency and signatures of the officers of the
Company executing this Agreement and each of the Related Documents to
which the Operating Partnership is a party and to which is attached
copies, certified to be true, correct, complete and in full force and
effect of (A) the Operating Partnership's certificate of limited
partnership, (B) the partnership agreement of the Operating Partnership
and (C) resolutions of the Board of Directors of the Company authorizing
the execution, delivery and performance by the Operating Partnership of
this Agreement and the Related Documents to which it is a party;
(iv) A certificate, duly executed on behalf of the Company by
its Secretary or an Assistant Secretary, certifying as to the Management
Company's charter and by-laws;
(v) A certificate duly executed by the Chief Executive Officer
of the Company certifying as to each of the matters set forth in Sections
7.1(a), (b) and (c);
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(vi) Good standing certificates for each of the Company, the
Operating Partnership and the Management Company from the Secretary of
State of their respective jurisdictions of formation and each other
jurisdiction in which they are required to be qualified to do business;
(vii) the Budget;
(viii) An opinion of Battle Fowler, LLP, counsel for each of
the Credit Parties, dated the First Note Closing Date, addressed to the
Investors, substantially in form set forth in Exhibit E-1;
(ix) All certificates or other instruments representing any
interests or other securities pledged as Collateral at the First Note
Closing, together with executed and undated stock powers or assignments in
blank, and evidence that all filings and other actions necessary to
perfect the Collateral Agent's security interest in the Collateral
delivered at the First Note Closing, have been made or taken and that the
Collateral Agent's Lien on the Collateral has priority over any other
Liens, other than Permitted Liens;
(x) Copies, certified to be true, correct and complete by the
Credit Parties, of consents and approvals of any Governmental Authority or
third party required in connection with the transactions to be consummated
on the First Note Closing Date (including, without limitation, any
consents of any partners and lenders required in order to pledge the
interests to be pledged under the Security Documents); and
(xi) Copies of the Initial Contribution Agreements, duly
executed by each of the parties thereto.
(b) Other Matters. All corporate and other proceedings in connection
with the transactions contemplated by this Agreement and the Related Documents
and all other documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to MSAM and MSAM shall have
received all such counterpart originals or certified or other copies of such
additional documents, instruments or opinions as it may request.
7.3 Conditions to Subsequent Note Closings. In addition to the conditions
set forth in Section 7.1, the obligations of each Investor to purchase Notes at
a Subsequent Note Closing are subject to the satisfaction of the following
conditions precedent on or before such Subsequent Note Closing Date.
(a) Documents. The Credit Parties shall have delivered to each of
the Investors the following, each of which shall be in form and substance
satisfactory to MSAM:
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(i) The Notes (duly executed by the Company) being purchased
by such Investor at such Closing, registered in such names and in such
denominations as MSAM, on behalf of such Investor shall have requested;
(ii) A certificate duly executed on behalf of the Company by
its Secretary or an Assistant Secretary, certifying as to the incumbency
and signatures of each officer of the Company executing this Agreement and
each of the Related Documents to which the Company is a party and to which
is attached copies, certified to be true, correct, complete and in full
force and effect of (A) the Company's Articles of Incorporation, (B) the
Company's by-laws and (C) resolutions of the Company's Board of Directors
authorizing the execution, delivery and performance by the Company of this
Agreement and the Related Documents to which the Company is a party, the
issuance and sale of the Notes and the authorization, issuance and sale of
the Common Stock;
(iii) A certificate, duly executed on behalf of the Operating
Partnership, by the Secretary or an Assistant Secretary of the Company, in
its capacity as the sole general partner of the Operating partnership,
certifying that there had been no change in the incumbency of the officers
or the organizational documents or authorizing resolutions of such entity
delivered at the First Note Closing (and that such documents and
resolutions remain in full force and effect) or, if there has been a
change, certifying as to the change and, if applicable, attaching a true,
correct and complete copy of any amendment or superseding document;
(iv) A certificate of the Secretary or an Assistant Secretary
of the Company certifying that there has been no change in the
organizational documents of the Management Company;
(v) A certificate duly executed by the Chief Executive Officer
of the Company certifying as of such Subsequent Note Closing Date as to
each of the matters set forth in Sections 7.1(a), (b) and (c);
(vi) Good Standing Certificates for each of the Company, the
Operating Partnership and the Management Company from the Secretary of
State of their respective jurisdictions of formation and each other
jurisdiction in which they are required to be qualified to conduct
business;
(vii) An opinion of Battle Fowler, LLP, counsel for each of
the Credit Parties, dated such Subsequent Note Closing Date, addressed to
the Investors, substantially in the form set forth in Exhibit E-2;
(viii) Copies, certified to be true, correct and complete by
the Credit Parties, of all consents and approvals of any Governmental
Authority or third party
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required in connection with the transactions to be consummated on such
Subsequent Note Closing Date; and
(ix) The notice required pursuant to Section 4.2 or 4.3;
(x) Amendments to Exhibit D to reflect material modifications
to the representations and warranties in Section 5 since the prior
Closing; provided however that such modifications shall be consistent with
the Budget.
(b) Initial Public Offering. MSAM shall continue to be reasonably
satisfied that each of the Credit Parties are using their reasonable best
efforts to accomplish the Initial Public Offering at the soonest possible time.
(c) Second Note Closing Date. The Second Note Closing shall have
occurred on or prior to June 15, 1997.
(d) Redemption of Notes. The Notes shall not have been redeemed
pursuant to Section 13 of this Agreement.
(e) Other Matters. All corporate and other proceedings in connection
with the transactions contemplated by this Agreement and the Related Documents
and all other documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to MSAM and MSAM shall have
received all such counterpart originals or certified or other copies of such
additional documents, instruments or opinions as it may reasonably request.
7.4 Additional Conditions to the Second Note Closing. In addition to the
conditions set forth in Section 7.1 and 7.3, the obligations of each Investor to
purchase Notes at the Second Note Closing are subject to the satisfaction of the
following conditions precedent on or before the Second Note Closing Date:
(a) DRA Contribution Agreement. A copy of the Contribution
Agreement, duly executed by each of the parties thereto, pursuant to which
Dreyfus Realty Advisors or its Affiliates has agreed to contribute partnership
interests to the Operating Partnership as contemplated in the Budget.
(b) Financial Information. The Company shall have delivered to MSAM
a Pro Forma Statement of Operations in the form to be included in the Company's
Registration Statement on Form S-11 in connection with its Initial Public
Offering, together with a certificate duly executed by the Chief Executive
Officer of the Company certifying that the Pro Forma Statement of Operations
presents fairly in all material respects, on a pro forma basis, the financial
condition and results of operations of the Company purported to be shown
thereby, at the dates and for the periods indicated.
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(c) Retail Properties. Each of the Credit Parties shall, to the
extent permitted by the organizational documents pursuant to which such
interests were issued, have caused to be contributed to the Operating
Partnership and pledged as collateral to the Collateral Agent the direct or
indirect interests in the Retail Properties that are held directly or indirectly
by the REIT Sponsors.
7.5 Conditions to the Stock Closing. In addition to the conditions set
forth in Section 7.1, the obligation of each Investor to purchase the shares of
Common Stock to be purchased by such Investor pursuant to Section 3.1 are
subject to the satisfaction of each of the following conditions on or before the
Stock Closing Date:
(a) Documents. The Credit Parties shall have delivered to each of
the Investors the following, each of which shall be in form and substance
satisfactory to MSAM:
(i) Certificates representing the number of shares of Common
Stock to be purchased by such Investor at such Closing pursuant to Section
3.1, and the number of shares of Common Stock issuable on conversion of
such Investor's Notes , registered in the names and in such denominations
as MSAM, on behalf of such Investor, shall instruct;
(ii) A copy of the Certificate of Incorporation, together with
all amendments thereto, of the Company certified by the Secretary of State
of the State of Maryland;
(iii) A certificate duly executed on behalf of the Company by
its Secretary or an Assistant Secretary certifying as to the incumbency
and signatures of the each officer of the Company authorized to execute
and deliver the documents and instruments required to be delivered by the
Company in connection with this Agreement and the Related Documents and to
which is attached copies, certified to be true, correct and complete and
in full force and effect of (A) the by-laws of the Company and (B) the
resolutions of the Board of Directors of the Company delivered in
connection with the First Note Closing, together with any amendments or
additional resolutions relating to the matters authorized thereby
subsequently adopted by the Board, as well as all resolutions of the Board
and the Shareholder adopted in connection with the Initial Public
Offering, including, without limitation, those resolutions authorizing an
amendment to the Certificate of Incorporation to increase the authorized
capital stock of the Company;
(iv) A certificate, duly executed on behalf of the Operating
Partnership, by the Secretary or an Assistant Secretary of the Company, in
its capacity as the sole general partner of the Operating Partnership,
certifying that there had been no change in the incumbency of the officers
or the organizational documents or authorizing resolutions of such entity
delivered at the First Note Closing (and that such documents and
resolutions remain in full force and effect) or, if there has been a
change, certifying as
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to the change and, if applicable, attaching a true, correct and complete
copy of any amended or superseding document;
(v) A certificate of the Secretary or Assistant or Assistant
Secretary of the Company certifying that there has been no change in the
organizational documents of the Management company;
(vi) A certificate duly executed by the Chief Executive
Officer of each of the Company certifying as of the Stock Closing Date as
to each of the matters set forth in Sections 7.1(a), (b) and (c);
(vii) Good Standing Certificates for each of the Company, the
Operating Partnership and the Management Company from the Secretary of
State of their respective jurisdictions of formation and each other
jurisdiction in which they are required to be qualified to conduct
business;
(viii) A copy of the Company's registration statement on Form
S-11, as declared effective by the Securities and Exchange Commission (the
"Commission"), a copy of the Company's final prospectus used in connection
with the Initial Public Offering, a fully executed copy of the
underwriting agreement entered into by the Company with the underwriters
for the Initial Public Offering, and a copy of all closing documents
delivered under such underwriting agreement at the closing of the Initial
Public Offering;
(ix) A certificate of the Chief Financial Officer of the
Company certifying as to the calculation of the number of shares of Common
Stock into which the Notes were converted;
(x) An opinion of Battle Fowler, LLP, counsel for each of the
Credit Parties, dated the Stock Closing Date, addressed to each of the
Investors, substantially in the form set forth in Exhibit E-3;
(xi) Copies, certified to be true, correct and complete by the
Credit Parties, of all consents and approvals of Governmental Authorities
and third parties required in connection with the transactions to be
consummated on the Stock Closing Date;
(xii) The notice required pursuant to Section 4.4;
(xiii) A certificate of the Chief Executive Officer of the
Company certifying that the representations and warranties of the Credit
Parties set forth in the Underwriting Agreement are true and correct in
all material respects; and
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(xiv) A copy of the opinion of Battle Fowler, LLP, delivered
to the Company and the underwriters pursuant to the terms of the
Underwriting Agreement, together with a letter from Battle Fowler, LLP, to
the Investors expressly providing that the Investors may rely on such
opinion.
(b) Initial Public Offering. The closing of the Initial Public
Offering shall have occurred.
(c) Redemption of Notes. The Notes shall not have been redeemed
pursuant to Section 13 of this Agreement.
(d) Other Matters. All corporate and other proceedings in connection
with the transactions contemplated by this Agreement and the Related Documents
and all other documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to MSAM and MSAM shall have
received all such counterpart originals or certified or other copies of such
additional documents, instruments or opinions as it may reasonably request.
SECTION 8 CONDITION TO THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company under Section 4.1, 4.2, 4.3 and 4.4
of this Agreement as to each Investor are subject to the condition that the
representations and warranties of the Investor contained in Section 6 shall be
true and correct in all material respects on and as of the applicable Closing
Date with the same effect as though such representations and warranties had been
made on and as of that date.
SECTION 9 AFFIRMATIVE COVENANTS.
9.1 Payment of Principal and Interest. The Company covenants and agrees
that it will duly and promptly pay or cause to be paid the principal of and
interest on each of the Notes at the place or places, at the respective times
and in the manner provided in this Agreement and the Notes. Unless otherwise
provided in this Agreement, all payments shall be made by electronic wire
transfer of immediately available United States funds.
9.2 Maintenance of Existence and Rights; Conduct of Business. The Company
and the Operating Partnership shall, and shall cause each of their Controlled
Subsidiaries to preserve and maintain their existence and all rights, privileges
and franchises necessary or desirable in the normal conduct of their businesses,
and conduct, and cause each of their Controlled Subsidiaries to conduct, their
businesses in an orderly and efficient manner consistent with good business
practices and in accordance with all applicable laws and regulations. In
addition, each Credit Party will use its reasonable best efforts to cause each
Subsidiary that is not a Controlled Subsidiary to comply with the foregoing.
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9.3 Financial Statements, Reports and Documents. (a) Commencing after the
Initial Public Offering, the Credit Parties shall deliver to MSAM, with
sufficient copies for each of the Investors, the following:
(i) Quarterly Statements. As soon as available and in
any event within forty-five (45) days after the end of each fiscal
quarter, (A) copies of the consolidated and consolidating balance sheet of
the Company and its consolidated Subsidiaries, including, without
limitation, the Operating Partnership and Management Company as of the end
of each such period, and the related consolidated and consolidating
statements of operations, shareholders' equity and cash flows of the
Company and its consolidated Subsidiaries for each such period and for the
portion of the fiscal year ending with such period, in each case setting
forth in comparative form the figures for the corresponding period of the
preceding fiscal year and (B) a schedule of the contingent liabilities of
the Company, all in reasonable detail, and certified on behalf of the
Company and its consolidated Subsidiaries by its Chief Financial Officer
to fairly represent the financial position and results of operations of
the Company and its consolidated Subsidiaries as of such date and for the
period then ended, and to have been prepared in accordance with GAAP
applied on a consistent basis, subject to normal year-end audit
adjustments and the absence of full footnote disclosures; and
(ii) Annual Statements. As soon as available and in any
event within ninety (90) days after the close of each fiscal year, copies
of the consolidated and consolidating balance sheet of the Company and its
consolidated Subsidiaries, including, without limitation, the Operating
Partnership and the Management Company, as of the close of such fiscal
year and the related consolidated and consolidating statements of
operations, shareholders' equity and cash flows of the Company and its
consolidated Subsidiaries for such fiscal year, in each case setting forth
in comparative form the figures for the preceding fiscal year, all in
reasonable detail and accompanied by an opinion thereon (which shall not
be qualified by reason of any limitation imposed by the Company) of
independent accountants of recognized national standing selected by the
Company to the effect that such financial statements have been prepared in
accordance with GAAP and fairly represent the financial position and
results of operations of the Company and its consolidated Subsidiaries as
of such date and for the period then ended, and that the examination of
such accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards.
(b) The Credit Parties shall deliver to MSAM, with sufficient copies
for each of the Investors, the following:
(i) Registration Statement and Correspondence. All
drafts of the Company's registration statement relating to the Initial
Public Offering which are distributed to parties other than the Company,
its Affiliates and its counsel, together with all correspondence sent by
the Company or its counsel to, or received by Company or its counsel from,
the Commission or any securities exchange;
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(ii) SEC Filings. Promptly upon the filing thereof,
copies of each registration statement and prospectus, any such amendments
or supplements and all documents incorporated by reference therein and any
other document filed by the Company with any securities exchange or the
Commission or any successor agency; and
(iii) Other Information. Such other information
concerning the business, properties or financial condition of the Credit
Parties as MSAM shall reasonably request.
9.4 Notices. Immediately upon becoming aware of the existence of any
condition or event which constitutes a Termination Event or Potential
Termination Event, the Credit Parties shall furnish to MSAM written notice
specifying the nature and period of existence thereof and the action which the
Credit Parties are taking or propose to take with respect thereto.
9.5 Other Notices. The Credit Parties shall promptly notify MSAM of (i)
any change which could reasonably be expected to have a Material Adverse Effect;
(ii) the commencement of, or any material determination in, any litigation with
any third party or any proceeding before any Governmental Authority affecting
any Credit Party or Subsidiary which could reasonably be expected to have a
Material Adverse Effect; and (iii) any material adverse claim against or
affecting any Credit Party or Subsidiary or any of their respective properties.
9.6 Books and Records; Access. Each of the Credit Parties, shall, and
shall cause each of its Controlled Subsidiaries to, give representatives and
agents of MSAM, on behalf of the Investors, reasonable access upon reasonable
notice and during business hours to, and permit such representative or agent to
examine, copy or make excerpts from, any and all books, records and documents in
the possession of such Credit Party of Controlled Subsidiary and relating to its
business affairs and to inspect any of the properties of any such Credit Party
or Controlled Subsidiary and to discuss the business and operations of such
Credit Party or Controlled Subsidiary with its officers and employees. Each
Credit Party shall, and shall cause each of their Controlled Subsidiaries to,
maintain complete and accurate books and records of its business transactions in
accordance with good accounting practices. In addition, each Credit Party will
use its reasonable best efforts to cause each Subsidiary that is not a
Controlled Subsidiary to comply with the foregoing.
9.7 Compliance with Material Agreements. (a) Each Credit Party shall, and
shall cause each of its Controlled Subsidiaries to, comply in all material
respects with all material agreements indentures, mortgages or documents binding
on it or affecting its properties or business. In addition, each Credit Party
will use its reasonable best efforts to cause each Subsidiary that is not a
Controlled Subsidiary to comply with the foregoing.
(b) Commencing April 1, 1997, the Company upon request of MSAM
(which request will not be made more frequently than once during any calendar
month) will provide, on behalf of all the Credit Parties, to MSAM within three
(3) Business Days a true, correct and complete certificate (a "Section 9.7(b)
Certificate") in the form of Exhibit R, with appropriate
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insertions, or in such other form as MSAM may reasonably request in order to
ascertain regularly, the use by the Credit Parties of proceeds of the Notes.
9.8 Compliance with Law. Each Credit Party shall and shall cause each of
their Controlled Subsidiaries to, comply with all applicable constitutions,
laws, rules, regulations, judgments, orders, decisions, rulings and decrees of
any Governmental Authority applicable to it or to any of its properties,
business operations or transactions, a violation of which would have a Material
Adverse Effect. In addition, each Credit Party will use its reasonable best
efforts to cause each Subsidiary that is not a Controlled Subsidiary to comply
with the foregoing.
9.9 Payment of Taxes and Other Indebtedness. Each of the Credit Parties
shall, and shall cause each of the Controlled Subsidiaries to, pay and
discharge: (i) all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits, or upon any property belonging to it,
before delinquent, (ii) all lawful claims (including claims for labor, materials
and supplies) and (iii) all of its Indebtedness as and when due; provided,
however, that no Credit Party or Subsidiary shall be required to pay any such
tax, assessment, charge, claim or levy, if and so long as the amount,
applicability or validity thereof is at the time being contested in good faith
by appropriate proceedings and appropriate accruals and reserves therefor have
been established in accordance with GAAP. In addition, each Credit Party will
use its reasonable best efforts to cause each Subsidiary that is not a
Controlled Subsidiary to comply with the foregoing.
9.10 Insurance. Each of the Credit Parties shall, and shall cause each of
their Controlled Subsidiaries to, apply for and continue in force, or cause to
be applied for and continued in force, adequate insurance covering risks of such
types and in such amounts and with such deductibles as are customary for other
companies engaged in similar lines of business and with good and responsible
insurance companies. In addition, each Credit Party will use its reasonable best
efforts to cause each Subsidiary that is not a Controlled Subsidiary to comply
with the foregoing.
9.11 Board of Directors. Effective on and for each year after the Initial
Public Offering, until the Investors shall determine otherwise or the aggregate
amount of the Common Stock held by the Investors is less than 60% of the Common
Stock held by the Investors immediately following the Initial Public Offering,
the Company will afford one person selected by MSAM full board observation
rights, including full and timely notice of all meetings of the Board of
Directors and each of its committees, copies of all written and other materials
disseminated to members of the Board or its committees, and the right to attend
in person or by telephone all meetings of the Board or its committees. Effective
on and for each year after the completion of the Initial Public Offering, the
Company will nominate such persons as is necessary to ensure the majority of the
directors of the Company are independent directors unaffiliated with the
Company.
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9.12 Additional Capital. Each of the Credit Parties agrees to use its
reasonable best efforts to complete the Initial Public Offering in a minimum
amount of $200 million as soon as practicable, but in any event prior to
December 31, 1997.
9.13 Use of Proceeds. The Company shall use the proceeds received by it
from the sale of Notes solely as provided in the Budget.
9.14 Further Assurances. The Credit Parties shall, and shall cause each of
their Controlled Subsidiaries to, make, execute or endorse, and acknowledge and
deliver or file or cause the same to be done, all such notices, certificates and
additional agreements, undertakings, conveyances, transfers, assignments or
other assurances, and take any and all such other action, as the Investors may,
from time to time, deem reasonably necessary or proper in connection with this
Agreement or any of the Related Documents, or the obligations of the Credit
Parties or their Subsidiaries hereunder or thereunder.
9.15 Additional Collateral. Upon the request of the Collateral Agent and
at the expense of the Company, (i) within five (5) days after such request, to
furnish the Collateral Agent a description of the real and personal properties
of the Credit Parties and the Subsidiaries, including partnership interests,
stocks, securities, contract rights and other property that the Credit Parties
obtain, directly or indirectly, after the First Note Closing Date and
specifically including the option of the Company to repurchase Tower 45 from
Itochu Corporation, when and if the Company has such option, in detail
reasonably satisfactory to the Collateral Agent, (ii) within ten (10) business
days after such request, duly execute and deliver to the Collateral Agent
mortgages, pledges, assignments and other security agreements, as specified by
and in form and substance reasonably satisfactory to the Collateral Agent,
securing payment of all the Obligations under this Agreement and the Related
Documents and constituting Liens on all such properties held by the Credit
Parties, (iii) within thirty (30) days after such request, take whatever
reasonable action (including, without limitation, the recording of mortgages,
the filing of Uniform Commercial Code financing statements, the giving of
notices and the endorsement of notices on title documents) as may be necessary
or advisable in the reasonable opinion of the Investors to vest in the
Collateral Agent (or in any representative of the Collateral Agent designated by
it) valid and subsisting Liens on the assets purported to be subject to the
security agreements delivered pursuant to this Section 9.15, enforceable against
all third parties in accordance with their terms, and (iv) within forty-five
(45) days after such request, deliver to the Collateral Agent a signed copy of a
favorable opinion of counsel for the Company, addressed to the Collateral Agent
and the Investors and acceptable to the Investors, as to the matters contained
in clause (iii) above, as to such security agreements being legal, valid and
binding obligations of the Credit Parties enforceable in accordance with their
terms and as to such other matters as the Investors may reasonably request. Not
by way of limitation of any other provisions hereof (including without
limitation Section 7.4(c)), each of the Credit Parties shall use reasonable
efforts to cause all direct or indirect interests in the Retail Properties that
are held directly or indirectly by the REIT Sponsors which are not subject to
restrictions on transfer under the organizational documents pursuant to which
such interests were issued to be
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contributed to the Operating Partnership and pledged as collateral to the
Collateral Agent no later than the Second Note Closing Date.
9.16 REIT Qualification. The Company shall use its reasonable best efforts
to ensure that at such time as it files its tax return for its fiscal year
ending December 31, 1997 that it will have satisfied all of the requirements
necessary to be taxed as a real estate investment trust within the meaning of
Sections 856-860 of the Code, and shall elect to be taxed as such and make all
necessary filings required in connection therewith.
9.17 Partnership Qualification. The Credit Parties shall use their
reasonable best efforts to ensure that the Operating Partnership and each
non-corporate Subsidiary thereof is taxed as a partnership for U.S. Federal
income tax purposes.
9.18 Domestically-Controlled REIT. The Company covenants and agrees that
(i) the percentage in value of its stock that is held (or is reasonably expected
to be held) directly or indirectly by foreign persons will not equal or exceed
25% and (ii) it will provide the Investors such information and/or verification
as the Investors shall reasonably request in order to verify whether the Company
constitutes a "domestically-controlled REIT" as defined under Section
897(h)(4)(B) of the Code.
9.19 Pension-Held REIT. The Company covenants and agrees that (i) no
"qualified trust" holds or will hold, directly or indirectly, more than 10% of
the interests in the Company, and (ii) it will provide MSAM such information
and/or verification as MSAM shall reasonably request in order to verify whether
the Company constitutes a "pension-held REIT" as defined under Section
856(h)(3)(C) of the Code.
9.20 Management Company. If the Management Company shall fail to fully
comply with its charter, each Credit Party shall use its reasonable best efforts
to enforce its rights under the Management Company's charter.
9.21 Additional Capital. Each of the Credit Parties agrees that in the
event that it or any Controlled Subsidiary requires additional capital to
acquire any properties or interests in properties (an "Acquisition Event"), it
shall first seek such additional capital from the Investors, which shall have
the right (but shall not be obligated) to provide such additional capital in the
form of convertible notes on the same terms as set forth herein, except that
such notes shall be convertible into the number of shares of Common Stock
(computed on the basis of an assumed price per share equal to the Mid-Point
Purchase Price) equal in value to the product of (i) 1.5 (1.25 with respect to
an Acquisition Event relating to CXX Mineola Limited Partnership) times (ii) the
principal amount of notes issued to finance any such acquisitions. In the event
a Credit Party or one of its Controlled Subsidiaries requires additional capital
in respect of a proposed Acquisition Event, it shall provide written notice of
the proposed Acquisition Event to MSAM (which notice shall set forth reasonable
detail regarding the acquisition terms and background information of the
underlying property) and MSAM shall have five Business Days from receipt of such
notice to commit in writing (a "Commitment Notice") to fund 100% of the expenses
and
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costs relating to the proposed Acquisition Event on the terms set forth in
this Section 9.21. If MSAM delivers a Commitment Notice to a Credit Party as set
forth above, the Investors shall be required to close the purchase in respect of
the Acquisition Event within fifteen Business Days after delivery of the
Commitment Notice. If MSAM does not deliver a Commitment Notice within the time
period set forth above, the Credit Parties and/or their Controlled Subsidiaries
will be permitted to obtain alternative financing for the purchase relating to
the Acquisition Event free and clear of the restrictions set forth in this
Section 9.21.
9.22 Good Faith. In conducting negotiations with third parties which
directly or indirectly affect the conversion rate of the Notes, the Credit
Parties shall, and shall cause the Controlled Subsidiaries to, conduct all such
negotiations in good faith.
SECTION 10 NEGATIVE COVENANTS.
10.1 Limitation on Indebtedness. No Credit Party shall, and no Credit
Party shall permit any Controlled Subsidiary to, directly or indirectly, incur,
create, contract, assume, have outstanding, Guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness, except for (i)
the Notes, (ii) any Indebtedness of such Person existing on the date
hereof, (iii) any Indebtedness expressly contemplated to be incurred under the
Budget and (iv) Indebtedness incurred by any Controlled Subsidiary in the
operation of the real properties owned by such Controlled Subsidiary in the
ordinary course of business. If as a result of the incurrence by any Subsidiary
other than a Controlled Subsidiary of any additional Indebtedness or the
refinancing of any existing Indebtedness, any amounts are distributed or
available for distribution to the Shareholder, any Credit Party or any
Controlled Subsidiary, the Credit Parties shall, or cause the appropriate
Persons to, have such amounts reserved or placed into an escrow (in either case,
under arrangements reasonably satisfactory to MSAM) and pledged as additional
Collateral (unless such amounts are used exclusively to finance transactions or
expenses contemplated in the Budget).
10.2 Negative Pledge. No Credit Party shall, and no Credit Party shall
permit any Controlled Subsidiary to, directly or indirectly, create, incur or
permit or suffer to exist any Lien upon any of its properties or assets, now
owned or hereafter acquired, except for (i) Liens in favor of the Collateral
Agent under the Security Documents, (ii) Liens securing Indebtedness permitted
under clauses (ii) and (iii) of Section 10.1, (iii) Permitted Liens and (iv)
Liens disclosed in the title reports listed on Exhibit D on the date hereof. In
addition, each Credit Party will use its reasonable best efforts to cause each
Subsidiary that is not a Controlled Subsidiary to comply with the foregoing.
10.3 Prohibition on Dividends. The Credit Parties shall not make or
declare any Dividend, either directly or indirectly, whether in cash, property
or obligations; provided that (i) so long as (A) no Potential Termination Event
has occurred and is continuing, (B) no notice has been delivered pursuant to
Section 13.2(c) or (C) the Company has not failed to redeem the Notes as
required under Section 13, and (ii) the Company has cash on deposit or is
entitled to receive cash distributions previously declared by the Operating
Partnership (which has cash on
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deposit in an amount sufficient to pay such distributions) in an amount
sufficient to pay the cash portion of any interest on the Notes due on the next
Interest Payment Date following the date such Dividend is declared, the Credit
Parties may declare and pay Dividends to the extent of funds legally available
therefor, provided the proceeds of such Dividend are used exclusively to finance
transactions or expenses contemplated in the Budget or otherwise required for
the Company to maintain its tax status as a real estate investment trust under
the Code.
10.4 Material Agreements. No Credit Party shall, or permit any Controlled
Subsidiary to, consent to or permit any alteration, amendment, modification,
release, waiver or termination of any provision of any agreement to which it is
a party, including, without limitation, any agreement governing or relating to
any Collateral, if such action could adversely affect the interests of the
Investors or could reasonably be expected to have a Material Adverse Effect. In
addition, each Credit Party will use its reasonable best efforts to cause each
Subsidiary that is not a Controlled Subsidiary to comply with the foregoing.
10.5 Certain Transactions. Except as contemplated in the Budget, no Credit
Party shall, or permit any Controlled Subsidiary to, enter into any transaction
with an Affiliate upon terms less favorable to such Person than those which it
could obtain in arm's-length dealings with Persons other than Affiliates. In
addition, each Credit Party will use its reasonable best efforts to cause each
Subsidiary that is not a Controlled Subsidiary to comply with the foregoing.
10.6 Issuance of Interests. No Credit Party shall, or permit any
Controlled Subsidiary to, issue, sell or otherwise dispose of its equity
interests or other securities, or rights, warrants or options to purchase or
acquire any such interests or other securities, except as expressly contemplated
hereunder and under the Budget. In addition, each Credit Party will use its
reasonable best efforts to cause each Subsidiary that is not a Controlled
Subsidiary to comply with the foregoing. If as a result of the issuance, sale or
disposition of an equity interest or other securities, or rights, warrants or
options to purchase or acquire any such interests or other securities, by a
Subsidiary other than a Controlled Subsidiary, any amounts are distributed to
the Shareholder, any Credit Party or any Controlled Subsidiary, the Credit
Parties shall, or shall cause the appropriate Persons to, have such amounts
reserved or placed into escrow (in either case, under arrangements reasonably
satisfactory to MSAM) and pledged as additional collateral (unless such amounts
are used exclusively to finance transactions as expenses contemplated in the
Budget).
10.7 Mergers and Sales of Assets. No Credit Party shall, or permit any
Controlled Subsidiary to, dissolve or liquidate, or become a party to any merger
or consolidation or sell, transfer, lease or otherwise dispose of any of its
property, assets or business, except (i) as contemplated under the Budget, (ii)
the leasing by any Controlled Subsidiary of any real property owned by it in the
ordinary course of business (iii) the sale of personal property for cash for an
amount not less than the fair value thereof, in the ordinary course of business,
provided the aggregate amount of all such sales shall not exceed $250,000 and
(iv) the disposition by the Operating Partnership immediately prior to the
closing of the Initial Public Offering of any direct or indirect interests owned
by it in the Retail Properties. In addition, each Credit Party will use
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its reasonable best efforts to cause each Subsidiary that is not a Controlled
Subsidiary to comply with the foregoing. If as a result of any dissolution,
liquidation, merger, consolidation, sale, transfer, lease or other disposition
of assets by a Subsidiary other than a Controlled Subsidiary, any amounts are
distributed to the Shareholder, any Credit Party or any Controlled Subsidiary
the Credit Parties shall, or shall cause the appropriate Persons to, have such
amounts reserved or placed into escrow (in either case, under arrangements
reasonably satisfactory to MSAM) and pledged as additional collateral (unless
such amounts are used exclusively to finance transactions as expenses
contemplated the Budget).
10.8 No Amendments. No Credit Party shall, or permit any Controlled
Subsidiary to, amend its organizational documents, except (i) as expressly
contemplated under the Budget and (ii) any amendment to the Company's
Certificate of Incorporation increasing its authorized capital stock approved by
MSAM. In addition, each Credit Party will use its reasonable best efforts to
cause each Subsidiary that is not a Controlled Subsidiary to comply with the
foregoing.
10.9 ERISA. No Credit Party shall, or permit any Controlled Subsidiary to,
establish, participate in or otherwise contribute to any employee benefit plan
subject to ERISA. In addition, each Credit Party will use its reasonable best
efforts to cause each Subsidiary that is not a Controlled Subsidiary to comply
with the foregoing.
10.10 Contribution Agreements. No Credit Party shall, or permit any
Controlled Subsidiary to, enter into any Contribution Agreement unless such
agreement has been previously approved by MSAM which approval shall not be
unreasonably withheld or delayed.
10.11 Reference to Investors or MSAM. No Credit Party shall, or permit any
Controlled Subsidiary to, make reference to any Investor or MSAM in any public
document without in each case the prior written consent of MSAM, which consent
shall not be unreasonably withheld or delayed.
SECTION 11 TERMINATION OF COVENANTS.
Each of the covenants set forth in Sections 9 and 10 of this
Agreement shall terminate on the date the Notes and all of the Obligations are
repaid in full or on the date of the closing of the Initial Public Offering,
except that, if the Initial Public Offering is consummated, the covenants set
forth in Sections 9.3(a) and (b), 9.6 and 9.11 shall continue and full force in
effect for so long as any Investor shall hold greater than 10% of any
Registrable Securities received by it in connection with the Initial Public
Offering or, if earlier, such time as is specified in such covenant.
SECTION 12 TERMINATION EVENTS.
The occurrence of any of the following shall constitute a Termination
Event:
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(a) the Company defaults in the payment of the principal of any of
the Notes, when the same shall become due and payable, whether at maturity, upon
any optional or mandatory redemption or otherwise;
(b) the Company defaults in the payment of any interest on any of
the Notes or any other amount due hereunder, when the same becomes due and
payable, and such default is not cured within five (5) Business Days;
(c) the Company fails to use the proceeds from the sale of the Notes
as provided in the Budget;
(d) any Credit Party fails duly to observe or perform any of its
covenants or agreements contained in this Agreement or any of the Related
Documents to which it is a party (other than as set forth in (a), (b) and (c)
above), and, if such failure is capable of cure, such failure continues uncured
for a period of 10 days, provided, however, that, if such failure is not capable
of cure within 10 days, such 10 day period shall be extended to 30 days,
provided the breaching Credit Party is making a good faith and diligent attempt
to cure; or
(e) Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") has advised MSAM that the Initial Public Offering cannot in its view be
completed or fails to advise MSAM within two days (upon MSAM making a request)
that the Initial Public Offering can in its view be completed, provided that the
foregoing shall not constitute a Termination Event for a period of 180 days
after the date such notice is delivered by MSAM to the Company; provided
further, that, if after advising MSAM as aforesaid Merrill Lynch reverses its
position, no Termination Event shall be deemed to have occurred, except that, if
Merrill Lynch reverses its position again, it shall constitute a Termination
Event on the expiration of the number of days remaining in the 180-day period at
the time Merrill Lynch first reversed its position (and no further tolling of
such period shall be permitted); or
(f) any Credit Party or any Subsidiary shall:
(i) commence a voluntary case under any applicable Bankruptcy
Law;
(ii) consent to the entry of an order for relief against it in
any involuntary case under any applicable Bankruptcy Law;
(iii) consents to the appointment of a Custodian of it or for
any substantial part of its property;
(iv) makes a general assignment for the benefit of its
creditors; or
(v) generally not pay its debts as they become due or admit in
writing its inability to pay its debts;
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provided, however, that if any of the foregoing occur with respect to a
Subsidiary other than a Controlled Subsidiary, it shall not constitute a
Termination Event unless it would have a Material Adverse Effect;
(g) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against any Credit Party, or any Subsidiary
in an involuntary case;
(ii) appoints a Custodian of any Credit Party or any
Subsidiary or for any substantial part of his or its property; or
(iii) orders the winding up or liquidation of any Credit Party
or Subsidiary;
provided, however, that if any of the foregoing occur with respect to a
Subsidiary other than a Controlled Subsidiary, it shall not constitute a
Termination Event unless it would have a Material Adverse Effect;
(h) Any involuntary case, proceeding or other action is commenced
against any Credit Party or Subsidiary under any Bankruptcy Law and such case,
proceeding or other action remains undismissed for a period of 60 days;
provided, however, that if any of the foregoing occur with respect to a
Subsidiary other than a Controlled Subsidiary, it shall not constitute a
Termination Event unless it would have a Material Adverse Effect;
(i) Any Credit Party or Subsidiary shall fail to pay any
Indebtedness (other than the Notes) when due or shall default in the performance
of any other obligations relating to such indebtedness if the effect of such
defaults is to accelerate the maturity of such Indebtedness or to permit the
holders thereof to cause such Indebtedness to become due prior to its stated due
date, and such failure to default shall continue unremediated for a period of 60
days; provided, however, that if any of the foregoing occur with respect to a
Subsidiary other than a Controlled Subsidiary, it shall not constitute a
Termination Event unless it would have a Material Adverse Effect;
(j) any judgment or decree for the payment of money in excess of
$250,000 (to the extent not covered by insurance or a bond) shall be rendered
against any Credit Party or any Subsidiary and shall not be paid or discharged,
waived or the execution thereof stayed on appeal within 30 days following the
entry of such judgment or decree or (ii) any judgment or decree;
(k) If the Shareholder resigns as the Chief Executive Officer of the
Company;
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(l) If the Company unintentionally breaches a representation or
warranty contained in this Agreement that has a Material Adverse Effect, and
such breaches continue for a period of 30 days without being cured if capable of
being cured; or
(m) If the Company intentionally breaches a representation or
warranty contained in this Agreement.
SECTION 13 REDEMPTION OF THE NOTES.
13.1 Optional Redemption. The Notes shall be redeemable, in whole but not
in part, at any time prior to the occurrence of any event giving rise to a
mandatory redemption at the option of the Company at a redemption price equal to
100% of the outstanding principal amount of the Notes plus all accrued and
unpaid interest thereon to the date of redemption plus a premium equal to 5% of
the weighted average outstanding principal amount of the Notes computed over the
period from the First Note Closing Date to but not including the date of
redemption (the "Optional Redemption Price"). The Company shall give each holder
of the Notes written notice of any redemption pursuant to this Section 13.1 at
least ten (10) Business Days prior to the date of redemption. The notice shall
identify the Notes to be redeemed and shall state the redemption date, the
Optional Redemption Price (and include a reasonably detailed calculation
thereof) and, in accordance with Section 2.4, the manner and place of payment.
Any notice of redemption given by the Company pursuant to this Section 13.1
shall be irrevocable and shall obligate the Company to pay the Optional
Redemption Price on the date specified in such notice.
13.2 Mandatory Redemption. Upon the occurrence of any of the following
events the Company shall immediately redeem the Notes at a price equal to the
Optional Redemption Price:
(a) Any Termination Event;
(b) The Maturity Date; and
(c) 180 days after the date of delivery by MSAM, on behalf of the
Investors, of a written notice requiring the Company to redeem the Notes,
provided that no such notice may be delivered to the Company prior to September
1, 1997.
13.3 Maturity; Surrender. In the case of any redemption of Notes pursuant
to this Section 13, the principal amount of the Notes shall, without any further
action, notice or demand by any party hereto or any other Person, mature and
become due and payable on the redemption date therefor, together with interest
on such principal amount accrued to such date, plus the applicable premium. From
and after such date, unless the Company shall fail to pay such principal amount
when so due and payable together with all accrued and unpaid interest and any
applicable premium, interest on such principal amount shall cease to accrue. Any
Note
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redeemed in full shall be surrendered to the Company and cancelled and shall not
be reissued, and no Note shall be issued in lieu of any redeemed Note.
13.4 Remedies for Failure to Redeem. If the Company fails to redeem the
Notes as and when required pursuant to Sections 13.1 and 13.2, the redemption
price payable on the Notes automatically shall be increased from the Optional
Redemption Price to an amount equal to the sum of (i) 200% of the sum of (A) the
principal amount of the Notes that were not redeemed as required plus (B) all
accrued and unpaid interest thereon to the date such Notes were supposed to be
redeemed (to the extent such interest has not been added to principal), plus
(ii) all accrued and unpaid interest of the Notes, computed at the Default Rate,
from the date the Notes were supposed to be redeemed to the date the redemption
price payable on the Notes pursuant to this Section 13.4 is paid in full. In
addition, the Investors and the Collateral Agent, on behalf of the Investors,
shall be entitled to exercise all rights and remedies available to them, or take
any other action to which they are entitled, under this Agreement, any of the
Related Documents, at law or otherwise, provided however, that in any action or
proceeding brought to enforce the Notes, the Credit Parties shall not be liable
for any punitive damages or for any consequential damages in excess of the
redemption price payable pursuant to this Section 13.4, any costs of
enforcement, including reasonable attorneys fees and disbursements, and any
amounts payable pursuant to Section 17.
13.5 Major Capital Events. In the event that at any time during the two
year period following any redemption of the Notes, optional or mandatory (other
than a mandatory redemption pursuant to Section 13.2(c)), the Company or any
other Affiliate of the Shareholder shall consummate a Major Capital Event, each
Investor shall be entitled to receive an additional amount of cash or other
consideration, less the principal amount of the Notes previously redeemed,
sufficient to provide such Investor with the same economic results to which it
would have been entitled had such Investor fully participated in such event
(assuming the Notes had been converted as contemplated under Section 14.1 of
this Agreement).
SECTION 14 CONVERSION.
14.1 Conversion. Upon the closing of the Initial Public Offering each Note
shall, without any action on the part of any holder thereof, automatically be
converted into fully paid and nonassessable shares of Common Stock at the
conversion rate set forth in Exhibit K hereto.
14.2 Surrender of Notes; Delivery of Shares. At the Stock Closing, the
Company shall issue and deliver, against surrender of the Notes, to each
Investor, (a) a certificate or certificates for the number of full shares of
Common Stock or other securities issuable upon the conversion of such Investor's
Notes as provided in Section 14.1, in accordance with the instructions provided
by MSAM pursuant to Section 4.4, (b) the amount of cash required to be paid for
any fractional interest in respect of a share of Common Stock or other security
arising upon the conversion as provided in Section 14.3 and (c) cash (or, if
interest on the Notes is to be paid
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in Common Stock, then Common Stock) in the amount of all accrued and unpaid
interest on the Notes surrendered up to and including the date of the closing of
the Initial Public Offering.
14.3 Effect of Conversion. Each person in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
conversion of the Notes shall be deemed to have become the holder or holders of
record of the shares of Common Stock represented by those certificates at the
time of the closing of the Initial Public Offering. All shares of Common Stock
delivered upon conversion of the Notes will upon delivery be duly and validly
issued and fully paid and nonassessable, free of all Liens and charges and not
subject to any preemptive rights. Upon conversion, the Notes shall no longer be
deemed to be outstanding and all rights of a holder with respect to the Notes
shall immediately terminate except the right to receive the Common Stock or
other securities, cash or other assets as herein provided.
14.4 Fractional Shares. No fractional shares or securities representing
fractional shares of Common Stock shall be issued upon conversion of Notes. Any
fractional interest in a share of Common Stock resulting from conversion of a
Note shall be paid in cash (computed to the nearest cent) based on the principal
amount of the Notes represented by the fractional share.
14.5 Taxes on Conversion. The Company will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the issue of
delivery of shares of Common Stock on conversion of the Notes pursuant hereto.
14.6 Anti-Dilution. In the event that at any time prior to the Initial
Public Offering the Company issues any shares of Common Stock or securities
exchangeable or convertible into Common Stock or any options, warrants or rights
to acquire any shares of Common Stock or securities exchangeable or convertible
into Common Stock to any Person other than a Person contributing assets to the
Company or the Operating Partnership in connection with the Initial Public
Offering (the "Dilutive Securities"), the conversion rate formula in Exhibit K
shall be adjusted to increase the number of shares of Common Stock into which
the Notes are convertible so that, after such adjustment, the Investors will
have, in the aggregate, on conversion of the Notes, the same percentage
ownership interest in the Company as they would have had the Dilutive Securities
not been issued.
SECTION 15 GUARANTEE.
15.1 Guarantee of Obligations. The Operating Partnership hereby
unconditionally and irrevocably guarantees (as primary obligor and not merely as
surety) to each holder of the Notes the full payment and performance by the
Company, when due (whether at stated maturity, on redemption or otherwise), of
the principal of, premium and interest on the Notes and all other obligations of
the Company under this Agreement, the Notes and the other Related Documents,
whether now existing or hereafter arising, voluntary or involuntary, direct and
indirect, absolute or contingent, liquidated or unliquidated, and whether or not
from time to time decreased or extinguished and later increased, created or
incurred (collectively, the
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"Obligations"). The Operating Partnership hereby agrees that it will forthwith
pay and perform when due the Obligations immediately upon demand by any holder
of the Notes.
15.2 Costs and Expenses. The Operating Partnership further
irrevocably and unconditionally agrees to pay any and all reasonable costs and
expenses (including, without limitation, attorneys' fees and disbursements)
incurred by any holder of the Notes (or any agent acting on behalf of such
holders), in enforcing its rights or remedies under the Notes, this Agreement or
under any of the other Related Documents.
15.3 Guarantee Absolute. This Guarantee is an unconditional and
absolute guaranty of payment (and not merely of collection) and shall apply to
all of the Obligations. The Obligations shall be conclusively presumed to have
been created in reliance on this Guarantee. This Guarantee shall be enforceable
against the Operating Partnership its successors and assigns. The Operating
Partnership guarantees that the Obligations will be paid strictly in accordance
with the terms of the Notes, this Agreement and the other Related Documents,
regardless of any law, regulation or order, now or hereafter in effect in any
jurisdiction, affecting any of the terms or the rights of any holder of the
Notes with respect thereto and notwithstanding any claim, defense or right of
set-off the Credit Parties or any other Person may have against any holder of
the Notes.
15.4 Waivers. The Operating Partnership hereby waives (i) the right
to have any holder of the Notes pursue any other remedy or enforce any other
rights, (ii) the right to receive notice of acceptance of this Guarantee or
notice of the incurrence, existence or non-payment of any of the Obligations and
(iii) presentment, demand, notice of dishonor, protest or any other notice or
demand to which the Operating Partnership might otherwise be entitled. The
Operating Partnership shall not be exonerated or discharged from liability
hereunder by any time or grace period given to the Company or by any other
indulgence or concession granted to the Company, including, without limitation,
any such period, indulgence or concession whatsoever affecting or preventing a
recovery of the Obligations which, but for this provision, might operate to
exonerate or discharge the Operating Partnership from its obligations hereunder.
If the Company or the Operating Partnership merges or consolidates with or into
another entity, loses its separate legal identity or ceases to exist, the
Operating Partnership shall nonetheless continue to be liable for the payment
and performance of the Obligations.
15.5 Guarantee Not Affected by Changes. This Guarantee shall be a
continuing guarantee, and the obligations and liability of the Operating
Partnership hereunder shall in no way be affected, impaired, released, reduced
or discharged by reason of the occurrence of any of the following (regardless of
whether notice has been given to, or consent has been given by, the Operating
Partnership):
(1) the amendment, modification, supplement, extension or
restatement (whether material or otherwise) of any of the Obligations, the
Notes, this Agreement or any of the other Related Documents;
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(2) the assertion of any of the rights or remedies of the holders of
the Notes, or the Collateral Agent under the Notes, this Agreement or any
of the other Related Documents;
(3) the failure, omission or delay on the part of any holder of the
Notes or the Collateral Agent to enforce, assert or exercise any right,
power or remedy conferred on or available to it under the Notes, this
Agreement or any of the other Related Documents;
(4) any bankruptcy, insolvency, reorganization, arrangement,
assignment for the benefit of creditors, receivership or trusteeship
affecting the Company;
(5) any lack of validity or enforceability of any of the
Obligations, this Agreement, the Notes, any of the other Related Documents
or any other agreement or instrument relating thereto;
(6) any release or amendment or waiver of or consent to or departure
from any other guarantee or security for all or any of the Obligations; or
(7) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Company or the Operating
Partnership.
This Guarantee shall continue to be effective or be reinstated, as
the case may be, if at any time, any payment of any amounts payable by the
Company is rescinded or must otherwise be returned by the holder of any Note
upon the insolvency, bankruptcy or reorganization of the Company, the Operating
Partnership or otherwise, all as though such payment had not been made. If an
event permitting the redemption of the Notes shall at any time have occurred and
be continuing and such redemption shall at such time be prevented by reason of
the pendency against the Company or the Operating Partnership of a case or
proceeding under any bankruptcy or insolvency law, the Operating Partnership
agrees that, for purposes of this Guarantee and its obligations hereunder, the
Operating Partnership shall forthwith pay the redemption price payable in
respect of the Notes, and the other Obligations hereunder, without any further
notice or demand (including interest which, but for the filing of a petition in
bankruptcy, would accrue on the Obligations).
15.6 Payments. Each payment to be made by the Operating Partnership
under this Guarantee or in connection herewith to any Person shall be made
without set-off or deduction of any kind whatsoever and also shall be made free
and clear of, and without deduction or withholding for or on account of, any
tax, reserve, levy or duty of, or imposed by, any governmental or taxing
authority in any jurisdiction.
15.7 Subrogation. The Operating Partnership hereby waives any and
all rights of subrogation, reimbursement, contribution, exoneration and
indemnity (contractual, statutory or otherwise) arising from the existence or
performance of this Guarantee and, further, waives
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any right to enforce any remedy which any holder of the Notes or the Collateral
Agent now has or may hereafter have against the Company or any other Person, and
waives any benefit of, and any right to participate in, any security now or
hereafter held by the holder of the Notes, or the Collateral Agent, in each
case, until such time as the Obligations have been finally and indefeasibly paid
in full in cash to the holders of the Notes.
SECTION 16 TRANSFERS.
16.1 Limitations on Transfer. Except for transfers to designees which are
investment advisory clients of MSAM and without in any way limiting the
representations set forth above, each Investor agrees (i) not to transfer all or
any portion of the Notes that may be acquired by it until the earlier to occur
of a Termination Event or the Maturity Date, and will transfer such Notes
thereafter, only if such securities shall have first been registered under the
Securities Act or such transfer is made pursuant to an available exemption from
such registration and (ii) not to transfer all or a portion of the Common Stock
acquired pursuant to the terms of this Agreement until after the Lock-up Period,
and will transfer such Common Stock thereafter, only if such Common Stock has
first been registered under the Securities Act or such transfer is made pursuant
to an available exemption from such registration.
16.2 Legends. It is understood that the certificates evidencing the Notes
and the Common Stock acquired by each Investor under the terms of this Agreement
shall bear the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the securities
laws of any state, and neither the securities nor any interest therein may
be sold, transferred, pledged or otherwise disposed of in the absence of
such registration or an exemption therefrom."
The foregoing legend shall be removed from the certificates representing
any Notes or Common Stock, at the request of the holder thereof, at such time as
they become eligible for resale pursuant to Rule 144(k) under the Securities Act
or have been registered under the Securities Act.
16.3 Rule 144A Information. The Company shall, at all times during which
it is neither subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act nor exempt from reporting pursuant to Rule 12g3-2(b) under the
Exchange Act, upon the written request of any Investor, provide in writing to
such Investor and to any prospective transferee of any Notes or Common Stock
held by such Investor, the information concerning the Company described in Rule
144A(d)(4) under the Securities Act.
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SECTION 17 MISCELLANEOUS.
17.1 Indemnification. Each of the Credit Parties agrees to indemnify each
Investor, MSAM and their respective shareholders, partners, directors, officers,
employees, Affiliates and agents (collectively, "Indemnified Persons") against,
and agree to hold each such Indemnified Person harmless from, any and all
losses, claims, damages and liabilities and related expenses, including
reasonable counsel fees and expenses, incurred by such Indemnified Person
arising out of, in any way in connection with, or as a result of (i) the
consummation of the transactions contemplated by this Agreement or the Notes,
(ii) the use of any of the proceeds of the Notes by the Credit Parties or the
consummation of the transactions contemplated by this Agreement, (iii) the
performance by the parties hereto of their respective obligations hereunder or
(iv) any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Investor or any such person is a party thereto;
provided, however, that such indemnity shall not apply to any such losses,
claims, damages, liabilities or related expenses finally determined by a court
of competent jurisdiction to have arisen from the gross negligence or wilful
misconduct of such Indemnified Person. If any litigation or proceeding is
brought against any Indemnified Person in respect of which indemnity may be
sought against the Credit Parties pursuant to this Section 17.1, such
Indemnified Person shall promptly notify the Credit Parties in writing of the
commencement of such litigation or proceeding, but the omission so to notify the
Credit Parties shall not relieve the Credit Parties from any other obligation or
liability which it may have to any Indemnified Person under this Section 17.1
unless the Credit Parties are materially prejudiced thereby. In case any such
litigation or proceeding shall be brought against any Indemnified Person and
such Indemnified Person shall notify the Credit Parties of the commencement of
such litigation or proceedings, the Credit Parties shall be entitled to
participate in such proceedings, and, after written notice to such Indemnified
Person, will have the right to assume control of any litigation for which
indemnification is sought and no settlement of any claim may be agreed to
without the prior written consent of the Credit Parties. However, any
Indemnified Person shall have the right to hire its own counsel for any reason;
provided, however, that the fees and expenses of such counsel shall be at the
Indemnified Person's own expense unless (a) the Credit Parties have agreed to
pay such fees and expenses or (b) the Credit Parties shall have failed properly
to assume the defense in such action or proceeding and employ counsel reasonably
satisfactory to such Indemnified Person in any such action or proceeding or (c)
either (x) the named parties to such action or proceeding include such
Indemnified Person and one or more of the Credit Parties or such Indemnified
Person shall have been advised in writing by counsel that there may be one or
more legal defenses available to such Indemnified Person which are different
from or in addition to those available to such Credit Parties or (y) such
Indemnified Person concludes that taking into account the position of such
Indemnified Person (or any Affiliate) as a lender to the Company such
Indemnified Person reasonably believes that it is advisable for such Indemnified
Person to employ separate counsel on its behalf, recognizing that in such case
the Credit Parties and their counsel shall remain primarily responsible for the
overall strategy, control and direction of such action or proceeding. In any
case referred to in (b) or (c) above, if such Indemnified Person notifies the
Credit Parties in writing that it elects to employ separate counsel at the
expense of the Credit Parties, the Credit Parties shall not have the right to
assume the defense of such action or proceeding on
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behalf of such Indemnified Person, it being understood, however, that the Credit
Parties shall not in connection with any one such action or proceeding, or
separate but substantially similar proceedings or related actions or proceedings
arising out of the same general allegations or circumstances be liable for the
fees and expenses of more than one separate firm of attorneys, together with
appropriate local counsel (but not more than one separate firm of attorneys per
state), at a time for all Indemnified Persons. The foregoing indemnity shall
remain operative and in full force and effect regardless of the expiration of
the term of this Agreement, the consummation of the transactions contemplated by
this Agreement, the repayment of any of the Notes, the invalidity or
unenforceability of any term or provision of this Agreement or the Notes or any
investigation made by or on behalf of any Indemnified Person or the Credit
Parties and the content or accuracy of any representation or warranty made under
this Agreement. All amounts due under this Section 17.1 shall be payable as
incurred upon written demand therefor.
17.2 Survival of the Representations and Warranties. The representations
and warranties of the Credit Parties made herein shall survive the consummation
of the transactions contemplated hereby but shall terminate eighteen (18) months
after the last closing to occur under the terms of this Agreement.
17.3 Confidentiality. (a) Each Investor agrees that it will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information, including the Company's plan to conduct an Initial Public
Offering, which the Investor may obtain from the Credit Parties pursuant to
financial statements, reports and other materials submitted by the Credit
Parties in connection with this Agreement, or pursuant to visitation or
inspection rights granted to the Investors, unless such information is known, or
until such information becomes known, to the public; provided, however, that an
Investor may disclose such information (i) to its directors, officers,
attorneys, accountants, consultants, and other professionals to the extent
necessary to obtain their services in connection with its investment in the
Company, (ii) to any prospective purchaser of any Notes from the Investor as
long as such prospective purchaser agrees in writing to be bound by the
provisions of this Section, (iii) to any Affiliate of the Investor or (iv) as
required by applicable law or regulation, court or administrative order, or any
listing or trading agreement concerning the Company.
(b) Each of the Credit Parties agrees that it will, and will cause
each of its Controlled Subsidiaries to, keep confidential and not disclose or
divulge the terms of this Agreement and the Related Documents to any other
Person; provided, however, that each of the Credit Parties may disclose such
terms (i) to the officers and directors of the Company, or its attorneys,
accountants, consultants, and other professionals to the extent necessary to
obtain their services in connection with this Agreement or the Initial Public
Offering or (ii) as required by applicable law or regulation, court or
administrative order, or any listing or trading agreement concerning the
Company, including in connection with the Initial Public Offering.
17.4 Brokers. Each of the Credit Parties and each Investor (i) represents
and warrants to the other party hereto that it has retained no finder or broker
in connection with the transactions contemplated by this Agreement, and (ii)
will indemnify and save the other party
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harmless from and against any and all claims, liabilities or obligations with
respect to brokerage or finders' fees or commissions, or consulting fees in
connection with the transactions contemplated by this Agreement asserted by any
person on the basis of any statement or representation alleged to have been made
by such indemnifying party.
17.5 Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter.
17.6 Amendments and Waivers. Except as otherwise expressly set forth in
this Agreement, any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Credit Parties and each Investor. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
17.7 Inaccuracy of Representations. Each Investor will cause MSAM to use
its reasonable efforts to inform the Credit Parties of any inaccuracy in the
representations and warranties set forth in Section 5, provided however the
failure of MSAM to so inform the Credit Parties shall not limit any right of the
Investors or the Collateral Agent under this Agreement or any of the Related
Documents. For purposes of this Section 17.7, the knowledge of MSAM shall be
limited to the actual knowledge of Russell Platt and Theodore Bigman.
17.8 Time. Time shall be of the essence in this Agreement.
17.9 Section Headings. The section headings are for the convenience of the
parties and in no way alter, modify, amend, limit, or restrict the contractual
obligations of the parties.
17.10 Notices. All notices or other communications given or made hereunder
shall be in writing and shall be deemed effectively given on the date of
delivery or refusal, if delivered personally or delivered by certified mail
return receipt requested, to the parties at the addresses set forth on the
signature pages of this Agreement, or at such other place as the parties may
designate by written notice from time to time.
17.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which taken together
shall constitute one Agreement.
17.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
17.13 Consent to Jurisdiction. Each of the Credit Parties and Investors
irrevocably submits to the exclusive jurisdiction of (i) the Supreme Court of
the State of New York located
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in New York County, City of New York and (ii) the United States District Court
for the Southern District of New York, for the purposes of any suit, action or
other proceeding relating to this Agreement, the Notes and the other Related
Documents or any of the transactions contemplated hereby or thereby. Each of the
Credit Parties and Investors agrees to commence any action, suit or proceeding
relating hereto either in the United States District Court for the Southern
District of New York or, if such suit, action or proceeding may not be brought
in such court for jurisdictional reasons, in the Supreme Court of the State of
New York located in New York County, City of New York. Each of the Credit
Parties further agrees that service of process, summons, notice or document by
hand delivery or U.S. registered certified mail return receipt requested in care
of Battle Fowler LLP, Park Avenue Tower, 75 East 55th Street, New York, New York
10022. Attention: Bradley A. Kaufman, Esq., shall be effective service of
process for any action, suit or proceeding brought against such Credit Party in
any such court. Each of the Credit Parties and Investors irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding relating to this Agreement, the Notes and the other Related
Documents and any of the transactions contemplated hereby or thereby in (i) the
Supreme Court of the State of New York located in New York County, City of New
York or (ii) the United States District Court for the Southern District of New
York and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
17.14 Expenses; Documentary Taxes. The Credit Parties agree to pay (a) all
reasonable out-of-pocket expenses of the Investors, including the reasonable
fees and disbursements of counsel for the Investors up to a maximum of the sum
of (i) 100% of the first $150,000 and (ii) 50% of the next $50,000, in
connection with the negotiation and preparation of this Agreement, (b) all
reasonable out-of-pocket expenses of the Investors, for the Investors in
connection with all additional and subsequent documentation contemplated hereby,
any waiver or consent hereunder or thereunder or any amendment hereof or thereof
and (c) if a default occurs, all reasonable out-of-pocket expenses incurred by
the Investors, including fees and disbursements of counsel, in connection with
such default and collection and other enforcement proceedings resulting
therefrom, including, without limitation, costs and expenses incurred in a
bankruptcy case; provided, however, that the Credit Parties shall not be
responsible for fees and disbursements of counsel in excess of $175,000. The
Credit Parties shall indemnify the Investors against any transfer taxes,
documentary taxes, assessments or charges made by any Governmental Authority by
reason of the execution and delivery of this Agreement or the Notes. The
obligations of the Credit Parties under this Section 17.14 shall survive
transfer by any Investor of the Notes.
17.15 Definitions.
(a) As used in this Agreement, the following terms shall have the
meaning specified below:
"Acquisition Event" is defined in Section 9.21.
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"Affiliate" of any Person means (i) any person that, directly or
indirectly, is in Control of, is Controlled by, or is under common Control with
such person or (ii) any person who is a director or officer (A) of such person,
(B) of any subsidiary of such person or (C) of any person described in clause
(i) above.
"Aggregate Share Amount" is defined in Section 3.1.
"Agreement" is defined in the preamble.
"Bankruptcy Law" means Title 11, of the United States Code, or any similar
federal or state law for the relief of debtors.
"Budget" is an operating plan and budget a copy of which is attached as
Exhibit E hereto.
"Business Day" means each day other than a Saturday, a Sunday or any other
day on which banking institutions in the State of New York (or such other
location as the Company shall notify the Investors is its principal place of
business) are authorized or obligated by law or executive order to be closed.
"Capitalized Leases" of a Person means (a) any lease of property, real or
personal, if the then present value of the minimum rental commitment thereunder
should, in accordance with GAAP, be capitalized on a balance sheet of the
lessee, and (b) any other such lease the obligations under which are capitalized
on the balance sheet of the Company.
"Certificate of Incorporation" is defined in Section 1.2.
"Closing" means the First Note Closing, any Subsequent Note Closing and/or
the Stock Closing, as the context requires.
"Closing Date" means the First Note Closing Date, any Subsequent Note
Closing Date and/or the Stock Closing Date, as the context requires.
"Code" is defined in Section 5.21.
"Collateral" means any property or assets in which the Collateral Agent
has been granted a security interest for the benefit of the Investors.
"Collateral Agent" means MSAM, in its capacity as Collateral Agent on
behalf of the Investors.
"Commission" is defined in Section 7.5(a).
"Common Stock" is defined in Section 1.1.
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"Company" is defined in the preamble.
"Company Account Pledge Agreement" means the Account Pledge Agreement,
substantially in the form of Exhibit M, to be executed by the Company in favor
of the Collateral Agent.
"Company Collateral Assignment" means the Collateral Assignment,
substantially in the form of Exhibit J, to be executed by the Company in favor
of the Collateral Agent.
"Company Pledge Agreement" means the Pledge Agreement, substantially in
the form of Exhibit H, to be executed by the Company in favor of the Collateral
Agent.
"Contribution Agreements" means the Initial Contribution Agreements and
any other contribution or similar agreement entered into after the date hereof.
"Control" means the power, direct or indirect, to direct or cause the
direction of the management and policies of a Person whether by contract or
otherwise; and the terms "Controlling" and "Controlled" have meanings
correlative to the foregoing.
"Controlled Subsidiaries" means Subsidiaries which are exclusively
Controlled by the Company, the Operating Partnership, or the Shareholder.
"Credit Parties" is defined in the preamble.
"Custodian" means any receiver, trustee, assignee, liquidator, custodian
or similar official under any Bankruptcy Law.
"Dilutive Securities" is defined in Section 14.6.
"Dividends" means, with respect to any Person, (i) any dividends,
payments, return of capital or distributions (cash or otherwise) made or
declared on or in respect of any class of equity interests or securities of such
Person, except for distributions made solely in equity interests or securities
of the same class of such Person, and (ii) any and all funds, cash or other
payments made in respect of, or set aside or apart for a sinking or other
analogous fund for, the redemption, repurchase or acquisition of equity
interests or securities of such Person.
"Default Rate" is defined in Section 1.1
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" is defined in Section 5.29.
"First Note Closing" is defined in Section 4.1.
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"First Note Closing Date" is defined in Section 4.1
"GAAP" means U.S. generally accepted accounting principles.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive
legislative, judicial regulatory or administrative functions of or pertaining to
government.
"Guarantee" means any obligation, contingent or otherwise, of any person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other person and any obligation, direct or indirect, contingent or otherwise of
such person (i) to purchase or pay (or advance or supply funds for the purpose
of payment of) such Indebtedness or other obligation of such other person
(whether arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Materials" is defined in Section 5.24.
"Indebtedness" means as to any Person, at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business (provided such accounts are promptly paid and discharged when
due), (iv) all obligations of such Person under Capitalized Leases, (v) all
contingent or non-contingent obligations of such Person to reimburse any bank or
other Person in respect of amounts paid or payable (currently or in the future,
on a contingent or non-contingent basis) under a letter of credit or similar
instrument, (vi) all Indebtedness of others secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person, (vii)
all obligations of such Person under interest rate swaps, caps or collars or
under any other financial hedging arrangement net of any amounts receivable by
such Person under such arrangements and (viii) all Indebtedness of others
Guaranteed by such Person; provided however, that Indebtedness shall not include
the fees and expenses of the Initial Public Offering and related formation
expenses specified in the Company's Registration Statement on Form S-11.
"Indemnified Person" is defined in Section 17.1.
"Initial Contribution Agreements" means each contribution agreement, in
form and substance satisfactory to MSAM, listed on Exhibit O.
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"Initial Public Offering" means the initial public offering of Common
Stock by the Company proposed to be lead managed by Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
"Investor" is defined in the preamble.
"Interest Payment Date" is defined in Section 1.1.
"Lease" is defined in Section 5.16(a).
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind whatsoever (including any conditional sale or other title
retention agreement, any lease in the nature thereof and the filing of any
financing statement under the Uniform Commercial Code in any jurisdiction in
connection with the creation of a security interest).
"Lock-up Period" is defined in Section 3.6.
"Major Capital Event" means any public offering by any Person acquiring
all or a substantial part of the Scheduled Assets or a sale of all or a majority
of the Scheduled Assets in one or more transactions or a combination of the
foregoing.
"Management Company" means Tower Equities Management, Inc., a Delaware
corporation, or any successor.
"Management Company Stock Option Agreement" means the Stock Option
Agreement, in substantially the form of Exhibit Q, to be entered into among the
Shareholder and the Collateral Agent.
"Material Adverse Effect" means any (i) adverse effect whatsoever upon the
validity or enforceability of this Agreement or any of the Related Documents or
any of the transactions contemplated hereby or thereby, (ii) material adverse
effect upon the properties, business, prospects or condition (financial or
otherwise) of any Credit Party or (iii) material adverse effect upon the ability
of the Credit Parties to fulfill any of their obligations under this Agreement
or any of the Related Documents.
"Maturity Date" means June 30, 1997, unless the conditions to the Second
Note Closing set forth in Section 7.4 are satisfied on or prior to June 30,
1997, in which case the "Maturity Date" shall be March 31, 1998; provided that,
if the conditions to the Second Note Closing set forth in Section 7.4 are not
satisfied on or prior to June 30, 1997, the Company may request that the
maturity of the Notes be extended to December 27, 1997 by delivering a notice to
MSAM on behalf of the Investors, which notice, if received by MSAM on or prior
to June 30, 1997, shall result (i) in an automatic extension of the Maturity
Date to December 27, 1997 and (ii) a $600,000 payment to the Investors in
accordance with Section 2.5 (which payment shall be made to each of the holders
of the Notes pro rata according to the principal amount held by each such
holders).
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"Maturity Date Extension Notes" is defined in Section 2.5.
"Merrill Lynch" is defined in Section 12(e).
"Mid-Point Purchase Price" means the mid-point of the per share price
range set forth in the Preliminary Prospectus declared effective by the
Commission.
"MSAM" means Morgan Stanley Asset Management Inc.
"Note" is defined in Section 1.1.
"Obligations" is defined in Section 15.1.
"Operating Partnership" is defined in the preamble.
"Operating Partnership Account Pledge Agreement" means the Account Pledge
Agreement, in substantially the form of Exhibit N, to be executed by the
Operating Partnership in favor of the Collateral Agent.
"Operating Partnership Pledge Agreement" means the Account Pledge
Agreement, in substantially the form of Exhibit I, to be executed by the
Operating Partnership in favor of the Collateral Agent.
"Optional Redemption Price" is defined in Section 13.1.
"Permitted Liens" means (i) liens for taxes or assessments or other
government charges or levies not yet due and payable, (ii) liens imposed by law,
such as mechanic's, materialmen's, warehousemen's and carrier's liens, and other
similar liens, securing obligations incurred in the ordinary course of business
which are not past due, and (iii) pledges or deposits made to secure payment of
workmen's compensation, unemployment insurance, social security or similar
programs, (iv) encumbrances consisting of zoning restrictions, easements or
other restrictions on the use of real property, provided, such items do not
materially impair the use of such property for the purposes intended and (v)
restrictions on transfers imposed by contract or the Securities Act.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Per Share Purchase Price" is defined in Section 3.2.
"Potential Termination Event" means any event which with the giving of
notice or the passage of time would constitute a Termination Event.
-50-
<PAGE> 56
"Preliminary Prospectus" means the preliminary prospectus of the Company
circulated to investors in connection with the Initial Public Offering, or any
subsequent preliminary prospectus which is included in a subsequent amendment to
the Company's Registration Statement on Form S-11 which is declared effective by
The Commission. It is the intention of the parties that this definition shall
mean that preliminary prospectus in which the REIT Sponsor equity is last
determined.
"REIT Sponsors" means any Person listed on Exhibit L.
"Registrable Securities" is defined in the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement,
in substantially the form attached as Exhibit C, to be entered into among the
Company and the Investors.
"Retail Properties" means the real properties owned directly or indirectly
by TERCO Realty, LLC, Smit-Lake LLC and Smit-Warner, LLC.
"Related Documents" means the Notes, the Registration Rights Agreement,
the Contribution Agreements, the Management Company Stock Option Agreement and
the Security Documents.
"Scheduled Assets" means all of the real estate interests and real estate
assets to be contributed to the Operating Partnership by the REIT Sponsors in
connection with the Initial Public Offering, a list of which is attached to the
Budget.
"Second Note Closing" is defined in Section 4.2.
"Second Note Closing Date" is defined in Section 4.2.
"Security Documents" means the Shareholder Pledge Agreement, the Company
Pledge Agreement, the Operating Partnership Pledge Agreement, the Company
Collateral Assignment, the Company Account Pledge Agreement, the Operating
Partnership Account Pledge Agreement and any other documents which the Investors
require to be executed on or after the Closing Dates in order to evidence,
perfect, record or maintain the Collateral Agent's security interest in any
Collateral.
"Securities Act" is defined in Section 5.6.
"Shareholder" means Lawrence H. Feldman, an individual residing at 351
Mill River Road, Upper Brookville, New York.
"Shareholder Pledge Agreement" means the Pledge Agreement, in
substantially the form of Exhibit G, to be executed by the Shareholder in favor
of the Collateral Agent.
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<PAGE> 57
"Significant Agreements" is defined in Section 5.15(e).
"Solvent" means, with respect to any Person on a particular date, that on
such date (i) the fair value of the property of such Person is greater than the
total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) the present fair salable value of the assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (iii) such Person is able to realize upon its assets and pay its debts
and other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (iv) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (v) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital after giving due consideration to the prevailing
practice in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"Stock Closing" is defined in Section 4.4.
"Stock Closing Date" is defined in Section 4.4.
"Subsequent Note Closing" has the meaning specified in Section 4.3.
"Subsequent Note Closing Date" has the meaning specified in Section 4.3
"Subsidiary" is defined in Section 5.8.
"Termination Event" means any of the events described in Section 12.
"Underwriting Agreement" means the underwriting agreement entered into by
the Company with its underwriters, including Merrill Lynch, in connection with
the Company's Initial Public Offering.
(b) In this Agreement the singular includes the plural and the plural the
singular; words importing any gender include the other genders; references to
statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a visible form; references to agreements and other contractual
instruments shall be deemed to include all amendments thereto or changes therein
entered into in accordance with their respective terms but only to the extent to
which such amendments or changes are not prohibited by the terms of this
Agreement; references to persons include their permitted successors and assigns;
"including" means 'including, without limitation'; "or" is not exclusive; "day"
means a calendar day unless otherwise specified; and an accounting term not
otherwise
-52-
<PAGE> 58
defined has the meaning assigned to it, and all determinations involving any
such term required to be made herein shall be made, in accordance with GAAP.
(c) For purposes of Section 5 of this Agreement, references to the
knowledge of the Credit Parties or any Subsidiary shall be limited to the
knowledge of each of Lawrence Feldman, Ruben Friedberg, Robert Cox, Joseph
Kasman, Clifford Stein and Scott Jensen.
[The remainder of this page has been intentionally left blank]
-53-
<PAGE> 59
IN WITNESS WHEREOF, this Purchase Agreement has been executed this
31st day of March, 1997.
ISSUER:
TOWER REALTY TRUST, INC.
By: /s/ Lawrence H. Feldman
------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
GUARANTOR:
TOWER REALTY OPERATING PARTNERSHIP,
L.P.
By: Tower Realty Trust, Inc., its general
partner
By: /s/ Lawrence H. Feldman
------------------------------------------
Title: Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
First Note
Closing Total
Commitment Commitment Investors:
$4,000,000 $6,000,000 MS REAL ESTATE SPECIAL SITUATIONS INC.,
on behalf of itself and as agent for certain
undisclosed principals
By: /s/ Theodore R. Bigman
------------------------------------------
Name: Theodore R. Bigman
Title: Vice President
Address: c/o Morgan Stanley Asset
Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Payment Instructions:
------------------------
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<PAGE> 60
EXHIBIT A
[Restrictive Legend]
FORM OF NOTE
TOWER REALTY TRUST, INC.
NOTE
No. [____] [_________ __, 1997
$[________]
FOR VALUE RECEIVED, the undersigned, Tower Realty Trust, Inc.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Maryland, hereby promises to pay to [__________________],
or registered assigns (the "Holder"), the principal sum of
[________________________] DOLLARS on the Maturity Date (as defined in the
Purchase Agreement referred to below). The Company also promises to pay interest
(computed on the basis of a 365 day year and the actual number of days elapsed)
(a) from the date hereof until the earlier of (i) the Maturity Date, (ii) the
date this Note and all amounts payable in connection herewith have been paid to
the Holder and (iii) the occurrence of a Termination Event (as defined in the
Purchase Agreement) on the unpaid balance hereof at the rate of 15% per annum,
payable quarterly, on the last day of March, June, September and December,
commencing June 30, 1997, and on the Maturity Date (each such date an "Interest
Payment Date") and (b) from the earlier of (i) the Maturity Date or (ii) the
occurrence of a Termination Event until the date this Note and all amounts
payable in connection herewith have been paid to the Holder, at the rate of 20%
per annum payable on demand. Until the earlier of the Maturity Date or the
occurrence of a Termination Event, the Company may at its option, elect to add
up to 50% of the amount of interest payable on any Interest Payment Date to the
then outstanding principal amount of the Notes; provided that if the conditions
to the Second Note Closing (as defined in the Purchase Agreement) do not occur
on or prior to June 30, 1997 but, in accordance with the definition of the term
"Maturity Date," the maturity of the Notes has been extended to December 31,
1997, the Company shall not have the option during the period such conditions
remain unsatisfied of electing to add any portion of the interest payable on the
Notes to the principal thereof. Any such interest added to principal shall
thereafter bear interest as provided above.
Payments of principal of, premium, if any, and interest on this Note
are to be made in lawful money of the United States of America. Payments shall
be made to the Holder at such place and by such means as provided in the
Purchase Agreement.
This Note is one of a series of senior secured convertible notes
issued pursuant to a Purchase Agreement, dated as of March [__], 1997 (as from
time to time amended, the "Purchase Agreement"), among the Company, as issuer,
the Operating Partnership, as guarantor, and the respective Investors named
therein and is entitled to the benefits thereof. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to such terms in the Purchase
Agreement. As provided in the Purchase Agreement, this Note (i) is subject to
A-1
<PAGE> 61
redemption prior to maturity and (ii) is automatically convertible into shares
of the Company's Common Stock on an initial public offering as is described more
fully in the Purchase Agreement. Payment of the principal, of, premium, if any,
and interest on this Note is guaranteed by the Operating Partnership as provided
in the Purchase Agreement.
This Note is a registered Note and, as provided in the Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note (for a like principal amount) or Notes (in authorized
denominations) will be issued to, and registered in the name of, the transferee.
Prior to due presentment for registration of transfer, the Company may treat the
person in whose name this Note is registered as the owner hereof for the purpose
of receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
If this Note is collected by or through an attorney at law or
otherwise, then the Company shall be obligated to pay, in addition to the
principal balance hereof and any premium and accrued interest hereon, reasonable
attorney's fees and all out-of-pocket costs of the Holder in connection with the
collection or enforcement of this Note.
The Company hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
This Note shall be governed by the laws of the State of New York.
TOWER REALTY TRUST, INC.
By:
------------------------------------------
Name:
Title:
A-2
<PAGE> 62
EXHIBIT K
CONVERSION RATE OF THE NOTES
The Notes are convertible into the number of shares of Common Stock equal to the
amounts determined in accordance with items 1 and 2 below.
1. The number of shares of Common Stock equal to the following:
IA
------------- 1
6,000,000 X 0.225 x ACP x ------------
MP
where:
IA = the aggregate original principal amount of all
outstanding Notes (other than the original
principal of any note issued pursuant to Section
2.5 or 9.21 or accrued but unpaid interest
allocated therewith), plus all accrued and unpaid
interest thereon to the Stock Closing Date.
ACP = The difference between (1) the value of the
aggregate number of shares of Common Stock and
units of limited partnership interest ("OP Units")
issued or to be issued by the Company and the
Operating Partnership as of the Stock Closing Date
and (2) value of the sum of (i) the aggregate
number of shares of Common Stock issued or to be
issued by the Company as of the Stock Closing Date
in the Initial Public Offering and (ii) the
aggregate number of OP Units issued or to be
issued by the Operating Partnership to continuing
investors (other than REIT Sponsors) as of the
Stock Closing Date; provided that for this purpose
each share of Common Stock and OP Unit shall be
valued at MP.
MP = Mid-Point Purchase Price.
Notwithstanding the foregoing, the number of shares calculated in item 1 shall
not be less than such number of shares of Common Stock equal to (A) the
principal amount of all outstanding Notes plus all accrued and unpaid interest
divided by (B) the Mid-Point Purchase Price.
2. Such number of shares of Common Stock obtained by dividing (A) the product
of (I) the Aggregate Share Amount times (II) the per share amount of the
pro forma underwriting discounts or commissions (as set forth in the
Preliminary Prospectus) that would have been paid by the Company to the
underwriters in connection with the Initial Public Offering assuming such
shares were priced at the Mid-Point Purchase Price (the "Per
K-1
<PAGE> 63
Share MP Underwriting Discount") by (B) the difference between (1) the
Mid-Point Purchase Price minus (2) the Per Share MP Underwriting Discount.
K-2
<PAGE> 64
TOWER REALTY TRUST, INC.
================================================================================
PURCHASE AGREEMENT SUPPLEMENT
Dated as of May 15, 1997
================================================================================
$1,050,000
Senior Secured Convertible Notes
<PAGE> 65
PURCHASE AGREEMENT SUPPLEMENT (this "Supplement") dated as of May 15, 1997, to
Purchase Agreement dated as of March 31, 1997 (the "Agreement"), among TOWER
REALTY TRUST, INC., a Maryland corporation with its principal place of business
located at 120 West 45th Street, New York, New York 10036 (the "Company"), as
issuer, TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
with its principal place of business located at 120 West 45th Street, New York,
New York 10036 (the "Operating Partnership"), as guarantor (the Operating
Partnership and the Company are sometimes hereinafter collectively referred to
as the "Credit Parties"), and each of the investors signatory hereto
(collectively, the "Investors"). The capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Agreement.
WHEREAS, the Company, the Operating Partnership and the Investors
have entered into the Agreement; and
WHEREAS, the Credit Parties and the Investors desire to supplement
and modify the Agreement as contemplated herein;
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, the parties hereto agree as follows:
SECTION 1 SUPPLEMENT.
1.1 Special Note Closing. Notwithstanding anything to the contrary set
forth in Section 4.3 of the Agreement, a Subsequent Note Closing (the "Special
Note Closing") shall take place on May 15, 1997 (the "Special Note Closing
Date") at the offices of Battle Fowler, LLP, Park Avenue Tower, 75 East 55th
Street, New York, New York 10022 at 10:00 A.M. (or such other time and place as
are mutually agreeable to the Company and the Investors) whereby the Company
will sell Notes in an aggregate principal amount of $1,050,000 with the pro rata
portion (determined according to each Investor's relative total commitment) of
such principal amount to be purchased by each Investor at such Special Note
Closing. At such Special Note Closing, the Company shall deliver to each
Investor the Notes being purchased by such Investor, issued in the name of the
Investor or its nominee in such authorized denominations as MSAM on behalf of
such Investor shall request, against payment to the Company of the purchase
price therefor, by wire transfer, check or other method acceptable to the
Company. If on such Special Note Closing any of the conditions specified in
Sections 7.1 or 7.3 of the Agreement or Section 1.3 of this Supplement shall
have not been fulfilled, each Investor shall, at its election, be relieved of
all of the obligations under this Agreement to purchase the Notes to be
purchased at such Special Note Closing without thereby waiving any other rights
it may have by reason of such failure or nonfulfillment. The Special Note
Closing shall not be deemed to be the Second Note Closing as contemplated under
the Agreement. No waiver of the conditions required to fulfilled in connection
with the Second Note Closing is made hereby, and no waiver shall be implied.
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<PAGE> 66
1.2.Representations and Warranties. The Credit Parties, jointly and
severally, represent and warrant to each Investor as follows:
(a) Representations and Warranties in the Agreement. Except as set
forth in the amendment to Exhibit D to the Agreement, each of the
representations and warranties set forth in the Agreement and Related Documents
is true and correct in all material respects on and as of the date hereof with
the same effect as though such representation and warranty had been made on and
as of such date.
1.3 Conditions to Subsequent Note Closing. In addition to the conditions
specified in Section 7 of the Agreement, the following conditions must be
satisfied for the Special Note Closing:
(a) Documents. The Credit Parties shall have delivered to each
Investor the following, each of which shall be in form and substance reasonably
satisfactory to MSAM:
(i) In lieu of the opinion of Battle Fowler LLP required under
Section 7.3(a)(vii) under the Agreement, an opinion of Battle Fowler LLP,
counsel for each of the Credit Parties, dated the Special Note Closing Date,
addressed to the Investors, substantially in the form set forth in Annex A.
(b) Other Matters. All corporate and other proceedings in connection
with the transactions contemplated by this Supplement and all other documents
and instruments incident to such transactions shall be reasonably satisfactory
in substance and form to MSAM and MSAM shall have received all such counterpart
originals or certified or other copies of such additional documents, instruments
or opinions as it may request.
1.4 Negative Covenants. There is hereby added to Section 10 of the
Agreement a new subsection 10.12 as follows:
"10.12 Use of Proceeds. The Company shall use the proceeds received
by it from the sale of the Notes issued on the Special Note Closing
Date in the aggregate amount of $1,050,000 for the purchase of the
Tower 45 and Maitland Interests."
1.5 Termination Event. There is hereby added to Section 12 of the
Agreement a new subsection (n) as follows:
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<PAGE> 67
"(n) the purchase by or transfer to the Company of the Tower 45 and
Maitland Interests shall for any reason be invalidated or set aside
by a court of competent jurisdiction, or the Company or its
Subsidiaries at any time before the Initial Public Offering does not
own the Tower 45 and Maitland Interests."
1.6 Additional Covenant. If any amounts in excess of $1,500,000 must for
any reason be delivered to the Trustee of the Estate of Edward Feldman for the
Tower 45 and Maitland Interests, Lawrence H. Feldman agrees that he will
contribute to the Company such excess amounts as are required to paid to the
Trustee of the Estate of Edward Feldman.
1.7 Section 3.1. The reference to $20,000,000 in Section 3.1 of the
Purchase Agreement shall be deleted and replaced with a reference to
$15,000,000.
1.8 Exhibit K. The formula in Item 1 of Exhibit K of the Purchase
Agreement is hereby amended and restated as follows:
IA 1
--------- x 0.29 x ACP x ----
6,000,000 MP
SECTION 2 MISCELLANEOUS.
2.1 Counterparts. Except as herein provided, this Supplement shall be
governed by the terms, conditions, covenants and agreements of the Agreement.
This Supplement may be executed in any number of counterparts, each of which
shall be the same supplementary instrument but all of which taken together shall
constitute one Agreement.
2.2 Governing Law. This Supplement shall be governed by and construed in
accordance with the laws of the State of New York.
2.3 Expenses; Documentary Taxes. The Credit Parties agree to pay (a) all
reasonable out-of-pocket expenses of the Investors, including the reasonable
fees and disbursements of counsel for the Investors incurred in connection with
execution and delivery of this Supplement, (b) all reasonable out-of-pocket
expenses of the Investors, in connection with all additional and subsequent
documentation contemplated hereby, any waiver or consent hereunder or thereunder
or any amendment hereof or thereof and (c) if a default occurs, all reasonable
out-of-pocket expenses incurred by the Investors, including reasonable fees and
disbursements of counsel, in connection with such default and collection and
other enforcement proceedings resulting therefrom, including, without
limitation, costs and expenses incurred in a bankruptcy case. The Credit Parties
shall indemnify the Investors against any transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution and
-3-
<PAGE> 68
delivery of this Supplement or the Notes. The obligations of the Credit Parties
under this Section 2.3 shall survive transfer by any Investor of the Notes.
2.4 Terms of the Agreement. Except as otherwise expressly modified hereby,
all the terms and conditions of the Agreement shall remain in full force and
effect and from and after the date hereof all references in the Agreement to
"this Agreement" or "the Agreement" shall mean the Agreement as supplemented
hereby.
2.5 Definitions.
(a) As used in this Supplement, the following terms shall have the
meaning specified below:
"Tower 45 and Maitland Interests" shall have the meaning ascribed to it in
the order issued on May 13, 1997, a copy of which is attached hereto as Annex B,
by the United States Bankruptcy Court for the Eastern District of New York with
respect to the matter of Edward Feldman and Rosalie Feldman, Joint Debtors, Case
No.897-80388-478.
[The remainder of this page has been intentionally left blank]
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<PAGE> 69
IN WITNESS WHEREOF, this Supplement has been executed as of the 15th
day of May, 1997.
ISSUER:
TOWER REALTY TRUST, INC.
By: /s/ Lawrence H. Feldman
------------------------------------------------
Name: Lawrence H. Feldman
Title:Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
GUARANTOR:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust Inc., its general partner
By: /s/ Lawrence H. Feldman
------------------------------------------------
Name: Lawrence H. Feldman
Title:Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
Special Note
Closing
Commitment
$1,050,000 Investors:
MS REAL ESTATE SPECIAL SITUATIONS INC.,
on behalf of itself and as agent for certain
undisclosed principals
By: /s/ Theodore R. Bigman
------------------------------------------------
Name: Theodore R. Bigman
Title: Vice President
Address: c/o Morgan Stanley Asset
Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Payment Instructions:___________________________
-5-
<PAGE> 70
FOR PURPOSES OF SECTION 1.6 OF THIS AGREEMENT:
By: /s/ Lawrence H. Feldman
- ------------------------------------------------
Name: Lawrence H. Feldman, in his individual capacity
Address: 120 West 45th Street
24th Floor
New York, New York 10036
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<PAGE> 71
TOWER REALTY TRUST, INC
================================================================================
PURCHASE AGREEMENT SUPPLEMENT NO.2
Dated as of May 29, 1997
================================================================================
$1,642,145
Senior Secured Convertible Mineola Notes
<PAGE> 72
TABLE OF CONTENTS
Page
SECTION 1 AUTHORIZATION OF SECURITIES ..................................... 1
1.1 Authorization of Mineola Notes .............................. 1
SECTION 2 ISSUANCE OF MINEOLA NOTES ....................................... 2
2.1 Purchase and Sale of Mineola Notes .......................... 2
SECTION 3 THE CLOSING ..................................................... 2
3.1 The Mineola Note Closing .................................... 2
SECTION 4 REPRESENTATIONS OF THE COMPANY .................................. 3
4.1 Representations and Warranties in the Agreement ............. 3
4.2 Issuance of Securities ...................................... 3
4.3 Representations and Warranties in the Mineola Financing
Documents ................................................. 3
SECTION 5 REPRESENTATIONS OF THE INVESTORS ................................ 4
5.1 Authorization ............................................... 4
5.2 Purchase Entirely for Own Account ........................... 4
5.3 Accredited Investor ......................................... 4
5.4 Other Representations and Warranties ........................ 4
SECTION 6 CONDITIONS TO THE OBLIGATIONS OF EACH INVESTOR .................. 5
6.1 Conditions to Mineola Note Closing .......................... 5
SECTION 7 CONDITION TO THE OBLIGATIONS OF THE COMPANY ..................... 9
SECTION 8 COVENANTS ....................................................... 9
8.1 Payment of Principal and Interest ........................... 9
8.2 Use of Proceeds ............................................. 9
8.3 Covenants in Agreement ...................................... 9
SECTION 9 TERMINATION OF COVENANTS ....................................... 9
SECTION 10 TERMINATION EVENTS ............................................. 9
SECTION 11 REDEMPTION OF THE MINEOLA NOTES ............................... 10
11.1 Redemption .................................................. 10
SECTION 12 CONVERSION .................................................... 10
12.1 Conversion Rate ............................................. 10
12.2 Surrender of Mineola Notes; Delivery of Shares .............. 10
12.3 Effect of Conversion ........................................ 10
<PAGE> 73
Page
----
12.4 Fractional Shares ........................................... 11
12.5 Taxes on Conversion ......................................... 11
12.6 Anti-Dilution ............................................... 11
SECTION 13 GUARANTEE ................................................... 11
13.1 Benefits of Guarantee and Security .......................... 11
SECTION 14 MISCELLANEOUS ............................................... 11
14.1 Counterparts ................................................ 11
14.2 Governing Law ............................................... 12
14.3 Consent to Jurisdiction ..................................... 12
14.4 Expenses; Documentary Taxes ................................. 12
14.5 Terms of the Agreement ...................................... 12
14.6 Related Documents ........................................... 13
14.7 Definitions ................................................. 13
ii
<PAGE> 74
INDEX OF EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Opinion of Counsel to be delivered at the Mineola
Note Closing
iii
<PAGE> 75
PURCHASE AGREEMENT SUPPLEMENT NO.2 (this "Supplement") dated as of May 29, 1997,
to Purchase Agreement dated as of March 31, 1997 (as supplemented by Purchase
Agreement Supplement dated May 15, 1997 and as the same may be supplemented,
amended, restated, modified or extended from time to time, the "Agreement"),
among TOWER REALTY TRUST, INC., a Maryland corporation with its principal place
of business located at 120 West 45th Street, New York, New York 10036 (the
"Company"), as issuer, TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership with its principal place of business located at 120 West
45th Street, New York, New York 10036 (the "Operating Partnership"), as
guarantor (the Operating Partnership and the Company are sometimes hereinafter
collectively referred to as the "Credit Parties"), and each of the investors
signatory hereto (collectively, the "Investors"). The capitalized terms used
herein and not otherwise defined shall have the meaning set forth in the
Agreement.
WHEREAS, the Company, the Operating Partnership and the Investors
have entered into the Agreement;
WHEREAS, pursuant to terms of the Agreement, any additional capital
that the Credit Parties or its Controlled Subsidiaries may require to acquire
any properties or interests in properties may be provided by the Investors in
the form of convertible notes on the terms set forth therein;
WHEREAS, Tower Mineola Limited Partnership, a Delaware limited
partnership ("Mineola Partnership"), is a Controlled Subsidiary of the Company
and needs additional capital in connection with the acquisition and financing of
a certain property situated at 120 Mineola Boulevard, Mineola, New York, New
York; and
WHEREAS, pursuant to section 9.21 of the Agreement, the Credit
Parties have notified the Investors of the need for such additional capital and
the Investors wish to provide such additional capital in form of convertible
notes subject to terms and conditions set forth in this Supplement;
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, the parties hereto agree as follows:
SECTION 1 AUTHORIZATION OF SECURITIES.
1.1 Authorization of Mineola Notes. The Company has duly authorized the
sale and issuance of its senior secured convertible note in the aggregate
principal amount of $1,642,145, in substantially the form attached hereto as
Exhibit A (each note delivered pursuant to this Supplement and each note
delivered in substitution or exchange for any such note, being hereinafter
referred to as the "Mineola Notes"). The Mineola Notes shall (i) be dated the
date of issuance, (ii) bear interest (computed on the basis of a 365-day year
and the actual number of days elapsed) from the date of issuance until the
earlier of (A) maturity, (B) the date such Mineola Notes are repaid in full or
(C) the occurrence of a Termination Event, at the rate of 15% per annum payable
quarterly, in arrears, on the last day of each March, June, September
-1-
<PAGE> 76
and December, commencing June 30, 1997, and at maturity (each such date being
hereinafter referred to as an "Interest Payment Date"), (iii) bear interest
(computed as provided in clause (ii) above) from the earlier of (A) maturity or
(B) the occurrence of a Termination Event, until the date such Mineola Notes are
repaid in full at the rate of 20% per annum payable on demand (the "Default
Rate") and (iv) mature on the Maturity Date. The Mineola Notes issued pursuant
to this Supplement shall be deemed to be "Notes" for all purposes of the
Agreement and shall be guaranteed by the Operating Partnership as provided in
Section 13 of this Supplement and shall be secured by all Collateral now or
hereinafter provided as security for any Notes now or hereinafter issued under
the Agreement or any Supplement or amendment thereto. The Mineola Notes shall be
convertible into the Common Stock, as provided in Section 12 of this Supplement
and shall be redeemable as provided in Section 11 of this Supplement and Section
13 of the Agreement.
The Company shall contribute the proceeds received by it from the sale of
Mineola Notes to the capital of the Operating Partnership, which shall in turn
contribute such proceeds to the capital of Mineola Partnership. The Company
shall cause Mineola Partnership to use such proceeds for the completion and
closure of the transactions contemplated in the Mineola Financing Documents, and
this Supplement, including, without limitation, the payment of expenses
(including transfer taxes and the fees and expenses of counsel to (i) the
Company, the Operating Partnership and Mineola Partnership, (ii) Merrill Lynch
and (iii) MSAM and the Investors) of such completion and closure.
SECTION 2 ISSUANCE OF MINEOLA NOTES.
2.1 Purchase and Sale of Mineola Notes. Subject to the terms and
conditions of this Supplement, the Company will issue and sell to each Investor,
and each Investor will purchase, Mineola Notes in an aggregate principal amount
not to exceed the amount set forth opposite its name under the heading "Mineola
Note Closing Commitment" on the signature pages hereto. The obligations of each
Investor are several and not joint, and no Investor shall be liable for the acts
and omissions of any other Investor. The Investors shall not be deemed to be
Affiliated shareholders or Affiliated purchasers.
SECTION 3 THE CLOSING.
3.1 The Mineola Note Closing. The closing of the purchase and sale of the
Mineola Notes under this Supplement shall take place at the offices of Battle
Fowler, LLP, Park Avenue Tower, 75 East 55th Street, New York, New York 10022,
(the "Mineola Note Closing"), at 10:00 A.M. on the date hereof, or at such other
time, date and place as are mutually agreeable to the Company and the Investors.
The date of the Mineola Note Closing is hereinafter referred to as the "Mineola
Note Closing Date." At the Mineola Note Closing, the Company shall deliver to
each Investor Mineola Notes in an aggregate principal amount set forth opposite
its name under the heading "Mineola Note Closing Commitment" on the signature
pages hereto, issued in the name of the Investor or its nominee and in such
authorized denominations as MSAM on behalf of the Investor shall request,
against payment to the Company of the purchase
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price therefor, by wire transfer, check, or other method acceptable to the
Company. If on the Mineola Note Closing Date any of the conditions specified in
Sections 6.1 shall not have been fulfilled, each Investor shall, at its
election, be relieved of all of its obligations under this Supplement without
thereby waiving any other rights it may have by reason of such failure or such
nonfulfillment.
SECTION 4 REPRESENTATIONS OF THE COMPANY.
The Credit Parties, jointly and severally, represent and warrant to each
Investor as follows:
4.1 Representations and Warranties in the Agreement. Except as set forth
in the amendment to Exhibit D to the Agreement delivered pursuant to Section 6.1
of this Supplement each of the representations and warranties set forth in the
Agreement and Related Documents is true and correct in all material respects on
and as of the Mineola Note Closing Date with the same effect as though such
representation and warranty had been made on and as of such date.
4.2 Issuance of Securities. The issuance and delivery of the Mineola Notes
and the shares of the Common Stock issuable upon conversion of the Mineola
Notes, have been duly authorized by all necessary corporate action on the part
of the Company. The Mineola Notes, when issued, will have been duly and validly
authorized and issued and will constitute legal, valid and binding obligations
of the Company entitled to all the rights and benefits provided under the
Agreement as supplemented by this Supplement and shall be enforceable against
the Company in accordance with their terms except as such enforceability may be
limited under (i) applicable bankruptcy, insolvency, reorganization or other
similar laws affecting the rights of creditors generally, and (ii) general
principles of equity. Payment of the Mineola Notes is not, and will not, be
subordinate to any other Indebtedness or obligations of the Credit Parties and
will rank pari passu with the Notes. The Mineola Notes shall be entitled to all
the rights and benefits provided in the Agreement as supplemented hereby,
including without limitation the benefit of the guarantee set forth in Section
15 of the Agreement and the security of all Collateral. The shares of Common
Stock issuable to the Investors upon conversion of the Mineola Notes, when
issued as contemplated hereunder, will be duly and validly authorized and
issued, and fully paid and non-assessable.
4.3 Representations and Warranties in the Mineola Financing Documents. The
representations and warranties set forth in the Mineola Financing Documents and
other related documents thereto are true, complete and accurate and may be
relied upon by the Investors as if such representations and warranties were
fully set forth herein.
SECTION 5 REPRESENTATIONS OF THE INVESTORS.
Each Investor severally, and not jointly, hereby represents and warrants
as follows:
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5.1 Authorization. The Investor has full power and authority to enter into
this Supplement and this Supplement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms except as such
enforceability may be limited under (i) applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the rights of creditors
generally, and (ii) general principles of equity.
5.2 Purchase Entirely for Own Account. The Mineola Notes and the Common
Stock to be acquired by such Investor will be acquired for investment for
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same.
5.3 Accredited Investor. The Investor is an "accredited investor"
within the meaning of Rule 501 of Regulation D, under the Securities Act, as
presently in effect.
5.4 Other Representations and Warranties.
(a) The Investor, by reason of its business and financial
experience, together with the business and financial experience of MSAM, which
is its investment adviser,
(i) has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions of this
type that it is capable of evaluating the merits and risks of and of
making an informed investment decision with respect to an investment in
the Mineola Notes,
(ii) is capable of protecting its own interest or has engaged
representatives or advisors to assist it in protecting its interests and
(iii) is capable of bearing the economic risk of such
investment.
(b) (i) The Investor understands that an investment in the Company
involves substantial risks.
(ii) The Investor has been given the opportunity to make an
investigation of the proposed activities of the Company.
(iii) The Investor has been afforded the opportunity to obtain
any additional information requested by it.
(iv) The Investor has had an opportunity to ask questions of
and receive answers from representatives of the Company concerning the Company
and its proposed activities and the terms and conditions of an investment in the
Mineola Notes.
(c) The Investor was not formed for the specific purpose of
acquiring an interest in the Company.
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(d) The Investor acknowledges that:
(i) the Mineola Notes and Common Stock to be issued to such
Investor have not been registered under the Securities Act or state
securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws
and such Mineola Notes and Common Stock will bear a legend to such effect,
(ii) the Company's reliance on such exemptions is predicated
in part on the accuracy and completeness of the representations and
warranties of such Investor contained herein,
(iii) the Mineola Notes and Common Stock to be issued to such
Investor may not be resold or otherwise distributed unless registered
under the Securities Act and applicable state securities laws, or unless
an exemption from registration is available,
(iv) there is no public market for the Mineola Notes and
Common Stock; and
(v) other than as set forth in this Supplement and the Related
Documents, the Company has no obligation or intention to register such
Mineola Notes and Common Stock under the Securities Act or any state
securities laws or to take any action that would make available any
exemption from the registration requirements of such laws.
SECTION 6 CONDITIONS TO THE OBLIGATIONS OF EACH INVESTOR.
6.1 Conditions to Mineola Note Closing. The obligation of each Investor to
purchase the securities to be purchased by it at the Mineola Note Closing are
subject to the satisfaction of each of the following conditions on or before the
Mineola Note Closing Date:
(a) Accuracy of Representations and Warranties. Except as set forth
in the amendment to Exhibit D to the Agreement delivered pursuant to this
Section 6, each representation and warranty contained in Section 5 of the
Agreement and in this Supplement shall be true and correct in all material
respects on and as of such Mineola Note Closing Date with the same effect as
though such representation and warranty had been made on and as of such Mineola
Note Closing Date.
(b) Performance. The Credit Parties shall have performed and
complied with all covenants, agreements and conditions contained in the
Agreement and this Supplement and the Agreement required to be performed or
complied with by the Credit Parties hereunder and thereunder.
(c) No Termination Event. No Termination Event or Potential
Termination Event shall have occurred and be continuing or result from the
transactions contemplated to be consummated on such Mineola Note Closing Date.
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(d) No Proceeding or Litigation. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
(e) No Material Adverse Change. No event shall have occurred or
conditions shall exist that could reasonably be expected to have a Material
Adverse Effect.
(f) Compliance with Laws; Consents and Approvals. The Company shall
have complied with all applicable requirements of federal and state securities
or "blue sky" laws with respect to the issuance and sale of the securities to be
sold at the Mineola Note Closing and each of the Credit Parties shall have
received all consents, permits and other authorizations, and made all such
filings and declarations as may be required under any applicable law or
regulation or pursuant to any other agreement, order or decree to which any of
them is a party or subject in connection with the transactions to be consummated
on or prior to such Mineola Note Closing Date.
(g) Purchase Permitted. Each Investor's purchase of the securities
to be purchased by it at the Mineola Note Closing shall be permitted under all
applicable laws and regulations governing the activities of such Investor.
(h) Expenses. The Investors shall have received all amounts payable
pursuant to Section 14.4 of this Supplement on or prior to such Mineola Note
Closing Date.
(i) Documents. The Credit Parties shall have delivered to each of
the Investors the following, each of which shall be in form and substance
reasonably satisfactory to MSAM:
(i) The following agreements, duly executed by each of the
parties thereto:
(A) this Supplement;
(B) the Mineola Notes being purchased by each Investor
at such Closing, registered in such names and in such denominations as
such Investor, shall have requested;
(C) the Supplement to Operating Partnership Pledge
Agreement;
(D) the Supplement to Company Pledge Agreement;
(E) the Mineola Pledge Agreement;
(F) Amendments to Exhibit D to the Agreement to reflect
any modifications to the representations and warranties in Section 5 of
the Agreement since the prior Closing; provided, however, that such
modifications shall be consistent with the Budget.
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(ii) A certificate duly executed on behalf of the Company by
its Secretary or an Assistant Secretary, certifying as to the incumbency
and signatures of each officer of the Company executing this Supplement
and all other documents to be delivered at the Mineola Note Closing to
which the Company is a party and to which is attached copies, certified to
be true, correct, complete and in full force and effect of (A) the
Company's Articles of Incorporation, (B) the Company's by-laws and (C)
resolutions of the Company's Board of Directors authorizing the execution,
delivery and performance by the Company of this Supplement and all other
documents to be delivered at the Mineola Note Closing to which the Company
is a party, the issuance and sale of the Mineola Notes and the
authorization and issuance of the Common Stock upon conversion of the
Mineola Notes as contemplated in this Supplement;
(iii) A certificate, duly executed on behalf of the Operating
Partnership, by the Secretary or an Assistant Secretary of the Company, in
its capacity as the sole general partner of the Operating Partnership,
certifying as to the incumbency and signatures of the officers of the
Company executing this Supplement and all other documents to be delivered
at the Mineola Note Closing to which the Operating Partnership is a party
and to which is attached copies, certified to be true, correct, complete
and in full force and effect of (A) the Operating Partnership's
certificate of limited partnership, (B) the partnership agreement of the
Operating Partnership and (C) resolutions of the Board of Directors of the
Company authorizing the execution, delivery and performance by the
Operating Partnership of this Supplement and all other documents to be
delivered at the Mineola Note Closing to which it is a party;
(iv) A certificate duly executed by the Chief Executive
Officer of the Company certifying as to each of the matters set forth in
Sections 6.1(a), (b) and (c) of this Supplement;
(v) Good standing certificates for each of the Company, the
Operating Partnership and the Management Company from the Secretary of
State of their respective jurisdictions of formation and each other
jurisdiction in which they are required to be qualified to do business;
(vi) An opinion of Battle Fowler, LLP, counsel for each of the
Credit Parties, dated the Mineola Note Closing Date, addressed to the
Investors, substantially in form set forth in Exhibit B;
(vii) All certificates or other instruments representing any
interests or other securities pledged as Collateral at the Mineola Note
Closing, together with executed and undated stock powers or assignments in
blank, and evidence that all filings and other actions necessary to
perfect the Collateral Agent's security interest in the Collateral
delivered at the Mineola Note Closing, have been made or taken and that
the Collateral Agent's Lien on the Collateral has priority over any other
Liens, other than Permitted Liens; and
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(viii) Copies, certified to be true, correct and complete by
the Credit Parties, of consents and approvals of any Governmental
Authority or third party required in connection with the transactions to
be consummated on the Mineola Note Closing Date (including, without
limitation, any consents of any partners and lenders required in order to
pledge the interests to be pledged under the Security Documents).
(j) Initial Public Offering. MSAM shall continue to be reasonably
satisfied that each of the Credit Parties is using its reasonable best efforts
to accomplish the Initial Public Offering at the soonest possible time.
(k) Financial Information. The Company shall have delivered to the
Investors a Pro Forma Statement of Operations in the form to be included in the
Company's Registration Statement on Form S-11 in connection with its Initial
Public Offering, together with a certificate duly executed by the Chief
Executive Officer of the Company certifying that the Pro Forma Statement of
Operations presents fairly in all material respects, on a pro forma basis, the
financial condition and results of operations of the Company purported to be
shown thereby, at the dates and for the periods indicated.
(l) Mineola Financing. The transactions contemplated under the
Mineola Financing Documents shall have closed and the MSAM shall have received
copies, each of which shall be reasonably satisfactory in substance and form to
MSAM, certified by the Secretary or an Assistant Secretary to the Company as
true, correct and complete, of the Mineola Financing Documents and all other
agreements, opinions and documents entered into in contemplation therewith.
(m) Title Insurance. Mineola Partnership shall have received an
owner's extended coverage policy of title insurance with respect to certain
property situated at 120 Mineola Boulevard, Mineola, New York, New York, issued
by a title insurance company approved by MSAM. Such title insurance policy shall
have Mineola Partnership as an insured person and shall be in form and substance
acceptable to MSAM.
(n) Other Matters. All corporate and other proceedings in connection
with the transactions contemplated by this Supplement and all other documents
and instruments incident to such transactions shall be reasonably satisfactory
in substance and form to MSAM and MSAM shall have received all such counterpart
originals or certified or other copies of such additional documents, instruments
or opinions as it may request.
SECTION 7 CONDITION TO THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company under Section 3.1 of this Supplement
as to each Investor are subject to the condition that the representations and
warranties of the Investor contained in Section 5 of this Supplement shall be
true and correct in all material respects on and as of the Mineola Note Closing
Date with the same effect as though such representations and warranties had been
made on and as of that date.
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SECTION 8 COVENANTS.
8.1 Payment of Principal and Interest. The Company covenants and agrees
that it will duly and promptly pay or cause to be paid the principal of and
interest on each of the Mineola Notes at the place or places, at the respective
times and in the manner provided in the Agreement, this Supplement and the
Mineola Notes. Unless otherwise provided in this Supplement, all payments shall
be made by electronic wire transfer of immediately available United States
funds.
8.2 Use of Proceeds For Mineola Notes. There is hereby added to Section 10
of the Agreement a new subsection 10.13 as follows:
"10.13 Use of Proceeds From Mineola Notes. The Company shall use the
proceeds received by it from the sale of the Mineola Notes issued on
the Mineola Note Closing Date in the aggregate amount of $1,642,145
for the completion and closure of the transactions contemplated in
the Mineola Financing Documents, including, without limitation, the
payment of expenses (including transfer taxes and the fees and
expenses of counsel to (i) the Company, the Operating Partnership
and Mineola Partnership, (ii) Merrill Lynch and (iii) MSAM and the
Investors) of such completion and closure. Any amounts remaining in
excess of that needed for the completion and closure of the
transactions contemplated in the Mineola Financing Documents shall
be used in accordance with the Budget."
8.3 Covenants in Agreement. The Mineola Notes are entitled to the benefits
of each of the covenants set forth in Section 9 and Section 10 of the Agreement
with the same force and effect as if set forth herein in full.
SECTION 9 TERMINATION OF COVENANTS.
Each of the covenants set forth in Sections 8.1 and 8.2 of this
Supplement shall terminate on the date the Mineola Notes and all of the
Obligations are repaid in full or on the date of the closing of the Initial
Public Offering.
SECTION 10 TERMINATION EVENTS.
There is hereby added to Section 12 of the Agreement a new
subsection (o) as follows:
"(o) event of default (as defined in the Mineola Financing
Documents) shall occur."
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SECTION 11 REDEMPTION OF THE MINEOLA NOTES.
11.1 Redemption. The Mineola Notes are redeemable on the same terms and
conditions set forth in Section 13 of the Agreement, including, without
limitation, the provision relating to Major Capital Events; provided however
that the Optional Redemption Price for the Mineola Notes shall be equal to the
following:
((0.25 x OPA) -- INT) + CPA
OPA = the principal amount of the Mineola Notes issued and
outstanding immediately prior to the date of
redemption, but not less than the original principal
amount
INT = all interest paid on the Mineola Notes as of the
date of redemption
CPA = OPA plus all accrued but unpaid interest as of the date
of redemption;
provided further that if the Optional Redemption Price payable under this
Section 11.1 would be less than the Optional Redemption Price computed as set
forth in Section 13.1 of the Agreement, then the Optional Redemption Price for
the Mineola Notes will be established in accordance with Section 13.1 of the
Agreement.
SECTION 12 CONVERSION.
12.1 Conversion Rate. Upon the closing of the Initial Public Offering each
Mineola Note shall, without any action on the part of any holder thereof,
automatically be converted into fully paid and nonassessable shares of Common
Stock at the following conversion rate:
(((0.25 x OPA) - INT* + CPA)/MP
* If this calculation results in an amount less than
zero, then such calculation shall be equal to zero such
that the conversion rate shall be equal to the quotient
of CPA divided by MP
OPA = the principal amount of the Mineola Notes issued and
outstanding immediately prior to the Initial Public
Offering, but not less than the original principal
amount
INT = all interest paid on the Mineola Notes as of the date
of the Initial Public Offering
CPA = OPA plus all accrued but unpaid interest as of the
date of the Initial Public Offering
MP = the Mid-Point Purchase Price
12.2 Surrender of Mineola Notes, Delivery of Shares. At the Stock Closing,
the Company shall issue and deliver, against surrender of the Mineola Notes, to
each Investor, (a)
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a certificate or certificates for the number of full shares of Common Stock or
other securities issuable upon the conversion of such Investor's Mineola Notes
as provided in Section 12.1 of this Supplement, in accordance with the
instructions provided by MSAM pursuant to Section 4.4 of the Agreement, (b) the
amount of cash required to be paid for any fractional interest in respect of a
share of Common Stock or other security arising upon the conversion as provided
in Section 12.3 of this Supplement and (c) cash (or, if interest on the Mineola
Notes is to be paid in Common Stock, then Common Stock) in the amount of all
accrued and unpaid interest on the Mineola Notes surrendered up to and including
the date of the closing of the Initial Public Offering.
12.3 Effect of Conversion. Each person in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
conversion of the Mineola Notes shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented by those
certificates at the time of the closing of the Initial Public Offering. All
shares of Common Stock delivered upon conversion of the Mineola Notes will upon
delivery be duly and validly issued and fully paid and nonassessable, free of
all Liens and charges and not subject to any preemptive rights. Upon conversion,
the Mineola Notes shall no longer be deemed to be outstanding and all rights of
a holder with respect to the Mineola Notes shall immediately terminate except
the right to receive the Common Stock or other securities, cash or other assets
as herein provided.
12.4 Fractional Shares. No fractional shares or securities representing
fractional shares of Common Stock shall be issued upon conversion of Mineola
Notes. Any fractional interest in a share of Common Stock resulting from
conversion of a Mineola Note shall be paid in cash (computed to the nearest
cent) based on the principal amount of the Mineola Notes represented by the
fractional share.
12.5 Taxes on Conversion. The Company will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the issue of
delivery of shares of Common Stock on conversion of the Mineola Notes pursuant
hereto.
12.6 Anti-Dilution. In the event that at any time prior to the Initial
Public Offering the Company issues any shares of Common Stock or securities
exchangeable or convertible into Common Stock or any options, warrants or rights
to acquire any shares of Common Stock or securities exchangeable or convertible
into Common Stock to any Person other than a Person contributing assets to the
Company or the Operating Partnership in connection with the Initial Public
Offering (the "Dilutive Securities"), the conversion rate formula in Section
12.1 of this Supplement shall be adjusted to increase the number of shares of
Common Stock into which the Mineola Notes are convertible so that, after such
adjustment, the Investors will have, in the aggregate, on conversion of the
Mineola Notes, the same percentage ownership interest in the Company as they
would have had the Dilutive Securities not been issued.
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SECTION 13 GUARANTEE AND SECURITY.
13.1 Benefits of Guarantee and Security. The payment of the
principal of and interest on the Mineola Notes, and any other amount payable in
connection therewith shall be deemed "Obligations" for all purposes of the
Agreement and the Related Documents and shall be absolutely, unconditionally and
irrevocably guaranteed by the Operating Partnership and shall be entitled to the
rights and benefits of all Collateral now or hereinafter provided as security
for the Notes now or hereinafter issued pursuant to the Agreement.
SECTION 14 MISCELLANEOUS.
14.1 Counterparts. Except as herein provided, this Supplement shall be
governed by the terms, conditions, covenants and agreements of the Agreement.
This Supplement may be executed in any number of counterparts, each of which
shall be the same supplementary instrument but all of which taken together shall
constitute one Agreement.
14.2 Governing Law. This Supplement shall be governed by and construed in
accordance with the laws of the State of New York.
14.3 Consent to Jurisdiction. Each of the Credit Parties and Investors
irrevocably submits to the exclusive jurisdiction of (i) the Supreme Court of
the State of New York located in New York County, City of New York and (ii) the
United States District Court for the Southern District of New York, for the
purposes of any suit, action or other proceeding relating to this Supplement,
the Mineola Notes and the other Related Documents or any of the transactions
contemplated hereby or thereby. Each of the Credit Parties and Investors agrees
to commence any action, suit or proceeding relating hereto either in the United
States District Court for the Southern District of New York or, if such suit,
action or proceeding may not be brought in such court for jurisdictional
reasons, in the Supreme Court of the State of New York located in New York
County, City of New York. Each of the Credit Parties further agrees that service
of process, summons, notice or document by hand delivery or U.S. registered
certified mail return receipt requested in care of Battle Fowler LLP, Park
Avenue Tower, 75 East 55th Street, New York, New York 10022. Attention: Bradley
A. Kaufman, Esq., shall be effective service of process for any action, suit or
proceeding brought against such Credit Party in any such court. Each of the
Credit Parties and Investors irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding relating to
this Supplement, the Mineola Notes and the other Related Documents and any of
the transactions contemplated hereby or thereby in (i) the Supreme Court of the
State of New York located in New York County, City of New York or (ii) the
United States District Court for the Southern District of New York and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
14.4 Expenses; Documentary Taxes. The Credit Parties agree to pay (a) all
reasonable out-of-pocket expenses of the Investors, including the reasonable
fees and disbursements of counsel for the Investors incurred through the date
hereof, and such other fees and disbursements
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incurred in connection with execution and delivery of this Supplement, (b) all
reasonable out-of-pocket expenses of the Investors, in connection with all
additional and subsequent documentation contemplated hereby, any waiver or
consent hereunder or thereunder or any amendment hereof or thereof and (c) if a
default occurs, all reasonable out-of-pocket expenses incurred by the Investors,
including reasonable fees and disbursements of counsel, in connection with such
default and collection and other enforcement proceedings resulting therefrom,
including, without limitation, costs and expenses incurred in a bankruptcy case.
The Credit Parties shall indemnify the Investors against any transfer taxes,
documentary taxes, assessments or charges made by any Governmental Authority by
reason of the execution and delivery of this Supplement or the Mineola Notes.
The obligations of the Credit Parties under this Section 14.4 shall survive
transfer by any Investor of the Mineola Notes.
14.5 Terms of the Agreement. Except as otherwise expressly modified
hereby, all the terms and conditions of the Agreement shall remain in full force
and effect and from and after the date hereof all references in the Agreement to
"this Agreement" or "the Agreement" shall mean the Agreement as supplemented
hereby.
14.6 Related Documents. The Mineola Pledge Agreement dated as the date
hereof, among Mineola UPREIT, LLC, Tower QRS No.1 Corp., Tower QRS No.2 Corp.
and Morgan Stanley Asset Management Inc., as collateral Agent for the Investors,
shall be deemed to be a "Related Document" for all purposes of the Agreement and
Related Documents.
14.7 Definitions.
(a) As used in this Supplement, the following terms shall have the
meaning specified below:
"Mineola Note" is defined in Section 1.1.
"Mineola Note Closing" is defined in Section 3.1.
"Mineola Note Closing Date" is defined in Section 3.1
"Mineola Financing Documents" means the Consolidated, Amended and Restated
Fee and Leasehold Indenture of Mortgage, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits
in the amount of $11,000,000 given by Tower Mineola Limited Partnership, as
mortgagor, in favor of Midland Loan Services, L.P., secured by certain property
located at 120 Mineola Boulevard, Mineola, New York and any other documents and
instruments incident to such transaction.
[The remainder of this page has been intentionally left blank]
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IN WITNESS WHEREOF, this Supplement has been executed on the first
day and year first above written.
ISSUER:
TOWER REALTY TRUST, INC.
By: /s/ Lawrence H. Feldman
-------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
GUARANTOR:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By: /s/ Lawrence H. Feldman
-------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
Mineola Note
Closing
Commitment Investors:
$1,642,145 MS REAL ESTATE SPECIAL SITUATIONS INC.,
on behalf of itself and as agent for certain
undisclosed principals
By: /s/ Ted R. Bigman
Name: Ted R. Bigman
Title: Principal
Address: c/o Morgan Stanley Asset
Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Payment Instructions:________________________
<PAGE> 89
EXHIBIT A
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state, and neither the securities nor any interest therein may be
sold, transferred, pledged or otherwise disposed of in the absence of such
registration or an exemption therefrom.
FORM OF MINEOLA NOTE
TOWER REALTY TRUST, INC.
Mineola Note
No.[__] May , 1997
$[__________]
FOR VALUE RECEIVED, the undersigned, Tower Realty Trust, Inc.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Maryland, hereby promises to pay to [__________], or
registered assigns (the "Holder"), the principal sum of [__________] DOLLARS on
the Maturity Date (as defined in the Agreement referred to below). The Company
also promises to pay interest (computed on the basis of a 365 day year and the
actual number of days elapsed) (a) from the date hereof until the earlier of (i)
the Maturity Date, (ii) the date this Mineola Note and all amounts payable in
connection herewith have been paid to the Holder and (iii) the occurrence of a
Termination Event (as defined in the Agreement) on the unpaid balance hereof at
the rate of 15% per annum, payable quarterly, on the last day of March, June,
September and December, commencing June 30, 1997, and on the Maturity Date (each
such date an "Interest Payment Date") and (b) from the earlier of (i) the
Maturity Date or (ii) the occurrence of a Termination Event until the date this
Mineola Note and all amounts payable in connection herewith have been paid to
the Holder, at the rate of 20% per annum payable on demand.
Payments of principal of, premium, if any, and interest on this
Mineola Note are to be made in lawful money of the United States of America.
Payments shall be made to the Holder at such place and by such means as provided
in the Agreement.
This Mineola Note is one of a series of senior secured convertible
notes issued pursuant to Purchase Agreement, dated as of March 31, 1997 (as from
time to time amended and supplemented, the "Agreement"), among the Company, as
issuer, the Operating Partnership, as guarantor, and the respective Investors
named therein and is entitled to the benefits thereof. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to such terms in the
Agreement. As provided in the Agreement, this Mineola Note (i) is subject to
redemption prior to maturity and (ii) is automatically convertible into shares
of the Company's Common Stock on an initial public offering as is described more
fully in the Agreement. Payment of the principal, of, premium, if any, and
interest on this Mineola Note is guaranteed by the Operating Partnership as
provided in the Agreement.
A-1
<PAGE> 90
This Mineola Note is a registered Mineola Note and, as provided in
the Agreement, upon surrender of this Mineola Note for registration of transfer,
duly endorsed, or accompanied by a written instrument of transfer duly executed,
by the registered holder hereof or such holder's attorney duly authorized in
writing, a new Mineola Note (for a like principal amount) or Mineola Notes (in
authorized denominations) will be issued to, and registered in the name of, the
transferee. Prior to due presentment for registration of transfer, the Company
may treat the person in whose name this Mineola Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.
If this Mineola Note is collected by or through an attorney at law
or otherwise, then the Company shall be obligated to pay, in addition to the
principal balance hereof and any premium and accrued interest hereon, reasonable
attorney's fees and all out-of-pocket costs of the Holder in connection with the
collection or enforcement of this Mineola Note.
The Company hereby waives presentment, demand, protest or notice of
any kind in connection with this Mineola Note.
This Mineola Note shall be governed by the laws of the State of New
York.
TOWER REALTY TRUST, INC.
By: ______________________________
Name:
Title:
A-2
<PAGE> 91
TOWER REALTY TRUST, INC.
================================================================================
PURCHASE AGREEMENT SUPPLEMENT NO. 3
Dated as of May 29, 1997
================================================================================
$411,016
Senior Secured Convertible Notes
<PAGE> 92
PURCHASE AGREEMENT SUPPLEMENT NO. 3 (this "Supplement") dated as of May 29,
1997, to Purchase Agreement dated as of March 31, 1997 (as supplemented by
Purchase Agreement Supplement dated May 15, 1997 and Purchase Agreement
Supplement No. 2 dated the date hereof ("Supplement No. 2") and as the same may
be further supplemented, amended, restated , modified or extended from time to
time, the "Agreement"), among TOWER REALTY TRUST, INC., a Maryland corporation
with its principal place of business located at 120 West 45th Street, New York,
New York 10036 (the "Company"), as issuer, TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership with its principal place of business
located at 120 West 45th Street, New York, New York 10036 (the "Operating
Partnership"), as guarantor (the Operating Partnership and the Company are
sometimes hereinafter collectively referred to as the "Credit Parties"), and
each of the investors signatory hereto (collectively, the "Investors"). The
capitalized terms used herein and not otherwise defined shall have the meaning
set forth in the Agreement.
WHEREAS, the Company, the Operating Partnership and the Investors
have entered into the Agreement; and
WHEREAS, the Credit Parties and the Investors desire to supplement
and modify the Agreement as contemplated herein.
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, the parties hereto agree as follows:
SECTION 1 SUPPLEMENT.
1.1 Subsequent Special Note Closing. Notwithstanding anything to the
contrary set forth in Section 4.3 of the Agreement, a Subsequent Note Closing
(the "Special Note Closing") shall take place on May 29, 1997 (the "Special Note
Closing Date") at the offices of Battle Fowler, LLP, Park Avenue Tower, 75 East
55th Street, New York, New York 10022 at 10:00 A.M. (or such other time and
place as are mutually agreeable to the Company and the Investors) whereby the
Company will sell Notes in an aggregate principal amount of $411,016 with the
pro rata portion (determined according to each Investor's relative total
commitment) of such principal amount to be purchased by each Investor at such
Subsequent Special Note Closing. At such Subsequent Special Note Closing, the
Company shall deliver to each Investor the Notes being purchased by such
Investor, issued in the name of the Investor or its nominee in such authorized
denominations as MSAM on behalf of such Investor shall request, against payment
to the Company of the purchase price therefor, by wire transfer, check or other
method acceptable to the Company. If on such Special Note Closing any of the
conditions specified in Section 1.2 of this Supplement shall have not been
fulfilled, each Investor shall, at its election, be relieved of all of the
obligations under this Agreement to purchase the Notes to be purchased at such
Special Note Closing without thereby waiving any other rights it may have by
reason of such failure or nonfulfillment. The Special Note Closing shall not be
deemed to be the Second Note Closing as contemplated under the Agreement. No
waiver of the conditions required to fulfilled in connection with the Second
Note Closing is made hereby, and no waiver shall be implied. The parties hereto
expressly agree and acknowledge that if the condition specified in Section
<PAGE> 93
7.4(c) of the Agreement is not met prior to June 30, 1997, the Notes shall
become due and payable on June 30, 1997, subject to extension as contemplated in
the Agreement, in full, including all accrued and unpaid interest thereon.
1.2 Conditions to Subsequent Note Closing. In addition to the conditions
specified in Section 6.1 of the Supplement No. 2, the following conditions must
be satisfied for the Subsequent Special Note Closing on or before the Special
Closing Date:
(a) Documents. The Credit parties shall have delivered to each
Investor the Notes in an aggregate principal amount of $411,016 in accordance
with the terms hereof, registered in such names and in such denominations as
such Investor, shall have requested.
(b) Other Matters. All corporate and other proceedings in connection
with the transactions contemplated by this Supplement and in Supplement No. 2
and all other documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to MSAM and MSAM shall have
received all such counterpart originals or certified or other copies of such
additional documents, instruments or opinions as it may request.
1.3 Use of Proceeds. The Company shall use the proceeds received by it
from the sale of the Notes issued on the Special Note Closing Date in an
aggregate amount of $411,016 solely as set forth in the new Section 10.13 of the
Agreement, added to the Agreement by Section 8.2 of Supplement No. 2.
SECTION 2 MISCELLANEOUS.
2.1 Counterparts. Except as herein provided, this Supplement shall be
governed by the terms, conditions, covenants and agreements of the Agreement.
This Supplement may be executed in any number of counterparts, each of which
shall be the same supplementary instrument but all of which taken together shall
constitute one Agreement.
2.2 Governing Law. This Supplement shall be governed by and construed in
accordance with the laws of the State of New York.
2.3 Expenses; Documentary Taxes. The Credit Parties agree to pay (a) all
reasonable out-of-pocket expenses of the Investors, including the reasonable
fees and disbursements of counsel for the Investors incurred in connection with
execution and delivery of this Supplement, (b) all reasonable out-of-pocket
expenses of the Investors, in connection with all additional and subsequent
documentation contemplated hereby, any waiver or consent hereunder or thereunder
or any amendment hereof or thereof and (c) if a default occurs, all reasonable
out-of-pocket expenses incurred by the Investors, including reasonable fees and
disbursements of counsel, in connection with such default and collection and
other enforcement proceedings resulting therefrom, including, without
limitation, costs and expenses incurred in a bankruptcy case. The Credit Parties
shall indemnify the Investors against any transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution and delivery of this Supplement or the Notes. The obligations of the
Credit Parties under this Section 2.3 shall survive transfer by any Investor of
the Notes.
<PAGE> 94
2.4 Terms of the Agreement. Except as otherwise expressly modified hereby,
all the terms and conditions of the Agreement shall remain in full force and
effect and from and after the date hereof all references in the Agreement to
"this Agreement" or "the Agreement" shall mean the Agreement as supplemented
hereby.
[The remainder of this page has been intentionally left blank]
<PAGE> 95
IN WITNESS WHEREOF, this Supplement has been executed as of the day
and year first above written.
ISSUER:
TOWER REALTY TRUST, INC.
By: /s/ Lawrence H. Feldman
-------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
GUARANTOR:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By: /s/ Lawrence H. Feldman
-------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
Subsequent
Special Note
Closing
Commitment Investors:
$411,016 MS REAL ESTATE SPECIAL SITUATIONS INC.,
on behalf of itself and as agent for certain
undisclosed principals
By: /s/ Ted Bigman
-------------------------------------------
Name: Ted Bigman
Title: Principal
Address: c/o Morgan Stanley Asset
Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Payment Instructions: _________________________
<PAGE> 96
TOWER REALTY TRUST, INC.
================================================================================
PURCHASE AGREEMENT SUPPLEMENT No. 4
Dated as of July 9, 1997
================================================================================
$265,829
Senior Secured Convertible Notes
<PAGE> 97
PURCHASE AGREEMENT SUPPLEMENT NO. 4 (this "Supplement"), dated as of July 9,
1997, to Purchase Agreement dated as of March 31, 1997 (as supplemented by
Purchase Agreement Supplement, dated May 15, 1997, Purchase Agreement Supplement
No. 2, dated May 30, 1997 ("Supplement No. 2"), Purchase Agreement Supplement
No. 3, dated May 30, 1997 ("Supplement No. 3") and as the same may be further
supplemented, amended, restated, modified or extended from time to time, the
"Agreement"), among TOWER REALTY TRUST, INC., a Maryland corporation with its
principal place of business located at 120 West 45th Street, New York, New York
10036 (the "Company"), TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership with its principal place of business located at 120 West
45th Street, New York, New York 10036 (the "Operating Partnership"; the
Operating Partnership and the Company are sometimes hereinafter collectively
referred to as the "Credit Parties"), and each of the investors signatory hereto
(collectively, the "Investors"). The capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Agreement.
W I T N E S S E T H:
WHEREAS, the Credit Parties and the Investors desire to supplement
and modify the Agreement as contemplated herein; and
WHEREAS, MSAM has assigned its rights and obligations as Collateral
Agent under the Purchase Agreement and the Related Documents to MS Real Estate
Special Situations Inc. ("MSRESS");
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, the parties hereto agree as follows:
SECTION 1 SUPPLEMENT.
1.1 Special Note Closing. Notwithstanding anything to the contrary set
forth in Section 4.3 of the Agreement, a Subsequent Note Closing (the "Special
Note Closing") shall take place on July 9, 1997 (the "Special Note Closing
Date") at the offices of Battle Fowler, LLP, Park Avenue Tower, 75 East 55th
Street, New York, New York 10022 at 10:00 A.M. (or such other time and place as
are mutually agreeable to the Company and the Investors) whereby the Company
will sell Notes in an aggregate principal amount of $265,829 with the pro rata
portion (determined according to each Investor's relative total commitment) of
such principal amount to be purchased by each Investor at such Special Note
Closing. At such Special Note Closing, the Company shall deliver to each
Investor the Notes being purchased by such Investor, issued in the name of the
Investor or its nominee in such authorized denominations as MSRESS on behalf of
such Investor shall request, against payment to the Company of the purchase
price therefor, by wire transfer, check or other method acceptable to the
Company. If on such Special Note Closing any of the conditions specified in
Sections 7.1 or 7.3 of the Agreement or Section
-2-
<PAGE> 98
1.3 of this Supplement shall have not been fulfilled, each Investor shall, at
its election, be relieved of all of the obligations under the Agreement to
purchase the Notes to be purchased at such Special Note Closing without thereby
waiving any other rights it may have by reason of such failure or
nonfulfillment. No waiver of the covenants relating to contributions by the
Credit Parties of their respective interests in the Retail Properties to the
Operating Partnership, as more fully described under Section 9.15 of the
Agreement, is made hereby, and no waiver shall be implied. Each of the Credit
Parties shall continue to use its reasonable efforts to cause all direct or
indirect interests in the Retail Properties that are held directly or indirectly
by the REIT Sponsors which are not subject to restrictions on transfer under the
organizational documents pursuant to which such interest were issued to be
contributed to the Operating Partnership and pledged as collateral to the
Collateral Agent.
1.2. Payment In-Kind. In lieu of the cash payment of the accrued interest
payable to the Investors on the Interest Payment Date of June 30, 1997, the
Company shall add such accrued interest to principal as of June 30, 1997, and
deliver to the Investors Notes in the amount of such accrued interest, which
Notes shall be dated as of, and accrue interest from, June 30, 1997. Such Notes
shall be in the same form as the previously issued Notes.
1.3.Representations and Warranties. The Credit Parties, jointly and
severally, represent and warrant to each Investor as follows:
(a) Representations and Warranties in the Agreement. Each of the
representations and warranties set forth in the Agreement and Related Documents
is true and correct in all material respects on and as of the date hereof with
the same effect as though such representation and warranty had been made on and
as of such date.
1.4 Conditions to Subsequent Note Closing. In addition to the conditions
specified in Section 7 of the Agreement, the following conditions must be
satisfied for the Special Note Closing:
(a) Documents. The Credit Parties shall have delivered to each
Investor the following agreements, duly executed by each of the parties, which
agreements shall be in form and substance reasonably satisfactory to MSRESS:
(i) this Supplement;
(ii) the Notes being purchased at the Special Note Closing
pursuant to terms of this Supplement; and
(iii) the Notes to be issued pursuant to Section 1.2 of this
Supplement.
(b) Other Matters. All corporate and other proceedings in
connection with the transactions contemplated by this Supplement and all other
documents and instruments incident
-3-
<PAGE> 99
to such transactions shall be reasonably satisfactory in substance and form to
MSRESS and MSRESS shall have received all such counterpart originals or
certified or other copies of such additional documents, instruments or opinions
as it may request.
SECTION 2 MISCELLANEOUS.
2.1 Counterparts. Except as herein provided, this Supplement shall be
governed by the terms, conditions, covenants and agreements of the Agreement.
This Supplement may be executed in any number of counterparts, each of which
shall be the same supplementary instrument but all of which taken together shall
constitute one Agreement.
2.2 Governing Law. This Supplement shall be governed by and construed in
accordance with the laws of the State of New York.
2.3 Expenses; Documentary Taxes. The Credit Parties agree to pay (a) all
reasonable out-of-pocket expenses of the Investors, including the reasonable
fees and disbursements of counsel for the Investors incurred in connection with
execution and delivery of this Supplement, (b) all reasonable out-of-pocket
expenses of the Investors, in connection with all additional and subsequent
documentation contemplated hereby, any waiver or consent hereunder or thereunder
or any amendment hereof or thereof and (c) if a default occurs, all reasonable
out-of-pocket expenses incurred by the Investors, including reasonable fees and
disbursements of counsel, in connection with such default and collection and
other enforcement proceedings resulting therefrom, including, without
limitation, costs and expenses incurred in a bankruptcy case. The Credit Parties
shall indemnify the Investors against any transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution and delivery of this Supplement or the Notes. The obligations of the
Credit Parties under this Section 2.3 shall survive transfer by any Investor of
the Notes.
2.4 Terms of the Agreement. Except as otherwise expressly modified hereby,
all the terms and conditions of the Agreement shall remain in full force and
effect and from and after the date hereof all references in the Agreement to
"this Agreement" or "the Agreement" shall mean the Agreement as supplemented
hereby.
2.5 Collateral Agent. All references to MSAM, in its capacity as the
Collateral Agent, in the Agreement and the Related Documents shall henceforth be
deemed to refer to MSRESS, and its successors and assigns.
[The remainder of this page has been intentionally left blank]
-4-
<PAGE> 100
IN WITNESS WHEREOF, this Supplement has been executed as of the day
and year first above written.
ISSUER:
TOWER REALTY TRUST, INC.
By: /s/ Lawrence H. Feldman
-------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
GUARANTOR:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By: /s/ Lawrence H. Feldman
-------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
Special Note
Closing
Commitment Investors:
$265,829 MS REAL ESTATE SPECIAL SITUATIONS INC.,
on behalf of itself and as agent for certain
undisclosed principals
By: /s/ Ted Bigman
-------------------------------------------
Name: Ted Bigman
Title: Principal
Address: c/o Morgan Stanley Asset
Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
Payment Instructions: _________________________
<PAGE> 101
TOWER REALTY TRUST, INC.
================================================================================
PURCHASE AGREEMENT SUPPLEMENT NO. 5
Dated as of July 31, 1997
================================================================================
<PAGE> 102
PURCHASE AGREEMENT SUPPLEMENT NO. 5 (this "Supplement"), dated as of July 31,
1997, to Purchase Agreement dated as of March 31, 1997 (as supplemented by
Purchase Agreement Supplement, dated May 15, 1997, Purchase Agreement Supplement
No. 2, dated May 30, 1997 ("Supplement No. 2"), Purchase Agreement Supplement
No. 3, dated May 30, 1997 ("Supplement No. 3"), Purchase Agreement Supplement
No. 4, dated July 30, 1997 ("Supplement No. 4"), and as the same may be further
supplemented, amended, restated, modified or extended from time to time, the
"Agreement"), among TOWER REALTY TRUST, INC., a Maryland corporation with its
principal place of business located at 120 West 45th Street, New York, New York
10036 (the "Company"), TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership with its principal place of business located at 120 West
45th Street, New York, New York 10036 (the "Operating Partnership"; the
Operating Partnership and the Company are sometimes hereinafter collectively
referred to as the "Credit Parties"), and each of the investors signatory hereto
(collectively, the "Investors"). The capitalized terms used herein and not
otherwise defined shall have the meaning set forth in the Agreement.
W I T N E S S E T H:
WHEREAS, the Credit Parties and the Investors desire to
supplement and modify the Agreement as contemplated herein;
WHEREAS, MSAM has assigned its rights and obligations as Collateral
Agent under the Agreement and the Related Documents to MS Real Estate Special
Situations Inc. ("MSRESS"); and
WHEREAS, the Company has advised the Investors that it wishes to
amend and supplement the Agreement to, among other things, (i) increase the
aggregate principal amount of the Notes from $6,000,000 to $11,000,000, (ii) to
modify the Maturity Date and (iii) to modify and supplement certain other
provisions, all as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, the parties hereto agree as follows:
SECTION 1 AMENDMENT.
The Agreement is hereby amended as follows:
1.1 Section 1.1. Section 1.1 of the Agreement is hereby deleted in its
entirety and the following is hereby substituted in lieu thereof:
"1.1 Authorization of Notes. The Company has duly authorized the
sale and issuance of its senior secured convertible notes of the
Company in the aggregate principal amount of $11,000,000, in
substantially the form attached hereto as
2
<PAGE> 103
Exhibit A (each note delivered pursuant to this Agreement and each
note delivered in substitution or exchange for any such note, being
hereinafter referred to, as the "Notes"). The Notes shall (i) be
dated the date of issuance, (ii) bear interest (computed on the
basis of a 365-day year and the actual number of days elapsed) from
the date of issuance until the earlier of (A) maturity, (B) the date
such Notes are repaid in full or (C) the occurrence of a Termination
Event at the rate of 15% per annum payable quarterly, in arrears, on
the last day of each March, June, September and December, commencing
September 30, 1997, and at maturity (each such date being
hereinafter referred to as an "Interest Payment Date"), (iii) bear
interest (computed as provided in clause (ii) above) from the
earlier of (A) maturity or (B) the occurrence of a Termination Event
until the date such Notes are repaid in full at the rate of 20% per
annum payable on demand (the "Default Rate") and (iv) mature on the
Maturity Date. Until the earlier of maturity or the occurrence of a
Termination Event, the Company shall add 100% of the amount of
interest payable on any Interest Payment Date to the then
outstanding principal amount of the Notes. Any such interest added
to principal shall thereafter bear interest as provided above. The
Notes issued by the Company and purchased by the Investors shall be
subject to the terms and conditions set forth in this Agreement. The
Notes shall be guaranteed by the Operating Partnership as provided
in Section 15 of the Agreement and shall be entitled to the rights
and benefits of all Collateral now or hereinafter provided as
security for the Notes now or hereinafter issued pursuant to this
Agreement. The Notes shall be convertible into shares of the
Company's common stock, par value $.01 per share (the "Common
Stock") ,as provided in Section 14 of this Agreement and shall be
redeemable as provided in Section 13 of this Agreement."
3
<PAGE> 104
1.2 Exhibit A. Exhibit A attached hereto shall replace Exhibit A attached
to the Agreement.
1.3 Section 2.5. Section 2.5 of the Agreement is hereby deleted in its
entirety and the following is hereby substituted in lieu thereof:
"2.5 Additional Payment. No later than July 31, 1997, the Company
shall deliver a $300,000 payment to the Investors by issuing to such
Investors recourse promissory notes (the "Maturity Date Extension
Notes") in a principal amount equal to their respective pro rata
share (determined according to the principal amount of the Notes
held by such Investor) of such $300,000 payment. If the conditions
set forth in Section 7.4(c) are not satisfied prior to August 15,
1997, the Company may request that the maturity of the Notes be
extended to December 27, 1997 by (i) delivering a notice to MSRESS,
on behalf of the Investors, and (ii) an additional $300,000 payment
to the Investors by issuing to such Investors the Maturity Date
Extension Notes in a principal amount equal to their respective pro
rata share (determined according to the principal amount of the
Notes held by such Investor) of such $300,000 payment. The Maturity
Date Extension Notes shall be in substantially the form of this Note
except that they shall reflect the following terms: (i) such
Maturity Date Extension Notes shall bear interest (computed on the
same basis as the Notes) at the rate of 15% per annum (20% per annum
following the occurrence of a Termination Event) payable on each
Interest Payment Date; (ii) such Maturity Date Extension Notes shall
mature on the same day as the Notes, (iii) such Maturity Date
Extension Notes shall be guaranteed by the Operating Partnership and
shall be secured by the Collateral, and (iv) if the Initial Public
Offering occurs, the outstanding principal amount of such Maturity
Date Extension Notes shall be repayable by issuing to the holders
thereof such number of shares of Common Stock determined by dividing
(A) the aggregate principal amount of such Maturity Date Extension
Notes plus all accrued but unpaid interest thereon to the date of
repayment (to the extent such interest has not been added to
principal) by (B) the Mid-Point Purchase Price."
1.4 Section 9.21. Section 9.21 of the Agreement is hereby amended by
deleting the reference to "1.5" in seventh line therein and replacing it with
"1.25".
1.5 Section 17.15. The definition of "Maturity Date" is hereby deleted in
its entirety and the following is hereby substituted in lieu thereof:
""Maturity Date" means August 15, 1997, unless the conditions set
forth in Section 7.4(c) are satisfied on or prior to August 15,
1997, in which case the "Maturity Date" shall be March 31, 1998;
provided that, if the conditions set forth in Section 7.4(c) are not
satisfied on or prior to August 15, 1997, the Maturity Date shall
automatically be extended to December 27, 1997 if the conditions set
forth in Section 2.5 of the Agreement are satisfied."
4
<PAGE> 105
SECTION 2 SUPPLEMENT.
The Agreement is hereby supplemented as follows:
2.1 Representations of the Company. The Credit Parties, jointly and
severally, represent and warrant as follows:
(a) Representations and Warranties in the Agreement. Each of the
representations and warranties set forth in the Agreement and Related Documents
is true and correct in all material respects on and as of the date hereof with
the same effect and force as though such representation and warranty has been
made on and as of such date.
(b) Representations relating to Ownership Structure. Attached as
Exhibit S is a true, correct and complete copy of the ownership structure chart
(the "Ownership Structure Chart") setting forth details relating to the
ownership structure of each entity, including, without limitation, types and
percentages of the interests held in such an entity, in which any of the Credit
Parties or Shareholder holds, directly or indirectly, any equity interest.
(c) Bank Accounts. Schedule 1 to this Supplement sets forth (a) the
name and account numbers and account balances of all deposit and other accounts
of any kind or nature with any bank, trust company, securities or other broker,
financial institution or other Person (collectively, the "Banks") in which any
Credit Party or their respective Subsidiaries has any interest (collectively,
the "Accounts"); (b) the name of each person authorized by resolution, proxy,
power of attorney or otherwise to have access thereto, draw thereon or give
instructions or take any other action with respect thereto; and (c) the purpose
of each such Account:
(d) Financial Statements. Attached as Exhibit T hereto is a true,
correct and complete copy of (i) the consolidated and consolidating balance
sheet of the Operating Partnership and its Subsidiaries, as of June 30, 1997,
and the related consolidated and consolidating statements of operation,
partners' equity interest and cash flows of the Operating Partnership and its
Subsidiaries for the period from April 1, 1997 to June 30, 1997 (the "Balance
Sheet"), and (ii) a consolidated and consolidating schedule of all commitments
and contingent liabilities of the Operating Partnership and each of its
Subsidiaries, all in reasonable detail (the "Contingent Liability Schedule",
together with the Balance Sheet, the "Operating Partnership's Financial
Statements") , and certified on behalf of the Operating Partnership and its
Subsidiaries by the Company's Chief Financial Officer to fairly represent the
financial position and results of operations of the Operating Partnership and
its Subsidiaries as of June 30, 1997 and for the period then ended and to have
been prepared in accordance with GAAP applied on a consistent basis, subject to
normal year-end audit adjustments and the absence of full footnote disclosures.
The Company's Chief Financial Officer shall certify on behalf of the
Company that there is no material discrepancy between the Operating
Partnership's Financial Statements delivered pursuant to this Section 2.1(d) of
this Supplement and the consolidated and consolidating financial statements of
the Company and its Subsidiaries that would have been prepared and delivered by
the Company according to this Section 2.1(d) of this Supplement for the same
period. If the Company is unable to deliver such certification on behalf of the
Company
5
<PAGE> 106
and its Subsidiaries, then the Company shall deliver to MSRESS a true, correct
and complete copy of (i) the consolidated and consolidating balance sheet of the
Company and its Subsidiaries, including, without limitation, the Operating
Partnership, as of June 30, 1997, and the related consolidated and consolidating
statements of operation, shareholders' equity and cash flows of the Company and
its Subsidiaries for the period from April 1, 1997 to June 30, 1997, and (ii) a
consolidated and consolidating schedule of all commitments and contingent
liabilities of the Company and each of its Subsidiaries, all in reasonable
detail, and certified on behalf of the Company and its Subsidiaries by the
Company's Chief Financial Officer to fairly represent the financial position and
results of operations of the Company and its Subsidiaries as of June 30, 1997
and for the period then ended and to have been prepared in accordance with GAAP
applied on a consistent basis, subject to normal year-end audit adjustments and
the absence of full footnote disclosures;
(e) Cash Reconciliation. Attached as Exhibit U hereto is a true,
correct and complete copy of a statement setting forth details of all cash
receipts received by the Company and its Subsidiaries, including, without
limitation, the Operating Partnership and all cash expenditures made by the
Company and its Subsidiaries, in each case, for the period beginning from June
30, 1997 through the date hereof, together with a reconciliation of such
receipts and expenditures to the financial statements dated as of June 30, 1997;
and
(f) Budget. Attached as Exhibit V hereto is a true, correct and
complete copy of the Budget dated the date hereof covering the period from the
date hereof through September 30, 1997. Such Budget sets forth all cash receipts
and the sources thereof, expected to be received by the Company and its
Subsidiaries during such period and all cash expenditures and the uses thereof
expected to be made by the Company and its Subsidiaries during such period. In
addition, such Budget details all expenditures or series of expenditures, cash
or otherwise, and the uses thereof expected to be incurred by the Company or any
Subsidiary during such period in excess of $500. The Budget shall include a
true, correct and complete copy of the time and responsibility schedule setting
forth details of each action that the Company proposes to take in order to
complete the Initial Public Offering, the parties responsible for each such
action and the proposed time schedule of each such action.
2.2 Covenants. The Credit Parties, jointly and severally, covenant to the
Investors as follows:
(a) Weekly Cash Reconciliations. No later than 10:00 a.m., New York
time, on Monday of every week (or the next business day if Monday is not a
business day), the Company shall deliver to MSRESS at its offices a statement
showing for the prior week all cash receipts and expenditures (including copies
of checks or other information or reports that MSRESS may reasonably request) of
the Company and its Subsidiaries, including, without limitation, the Operating
Partnership, for such week and reconciling such receipts and expenditures to the
Budget attached as Exhibit V hereto, together with a detailed explanation of any
variances. Such statement shall be substantially in form of Exhibit U, with
appropriate insertion or in such other form as MSRESS may reasonably request in
order to ascertain regularly, the cash position of the Company and its
Subsidiaries, and certified on behalf of the
6
<PAGE> 107
Company and its consolidated Subsidiaries by the Company's Chief Financial
Officer to be true, correct and complete.
(b) Financial Statements. No later than 10:00 a.m., New York time,
on the twenty-fifth day of every month (or the next business day if such day is
not a business day), the Operating Partnership shall deliver to MSRESS at its
offices copies of the consolidated and consolidating balance sheets and related
consolidated and consolidating statements of operations, partners' equity
interest and cash flows of the Operating Partnership and its Subsidiaries, as of
the close of business on the last business day of the immediately preceding
month. Such balance sheets and related consolidated and consolidating statements
of operations, partners' equity interest and cash flows (the "Financial
Statements") shall be certified on behalf of the Operating Partnership and its
Subsidiaries by the Company's Chief Financial Officer to be true, correct and
complete, to fairly represent the financial position and the results of
operations of the Operating Partnership and its Subsidiaries as of such date and
to have been prepared in accordance with GAAP applied on a consistent basis
subject to normal year-end adjustments and the absence of full footnote
disclosure.
The Company's Chief Financial Officer shall certify on behalf of the
Company that there is no material discrepancy between the Financial Statements
of the Operating Partnership and its Subsidiaries delivered pursuant to this
Section 2.2(b) of this Supplement and the consolidated and consolidating
financial statements of the Company and its Subsidiaries that would have been
prepared and delivered by the Company according to this Section 2.2(b) of this
Supplement for the same period. If the Company is unable to deliver such
certification on behalf of the Company and its Subsidiaries, then no later than
10:00 a.m., New York time, on the twenty-fifth day of every month (or the next
business day if such day is not a business day), the Company shall deliver to
MSRESS at its offices copies of the consolidated and consolidating balance
sheets and related consolidated and consolidating statements of operations,
shareholders' equity and cash flows of the Company and its Subsidiaries,
including, without limitation, the Operating Partnership, as of the close of
business on the last business day of the immediately preceding month prepared
and delivered by the Company in accordance with terms of this Section 2.2(b) of
this Supplement.
(c) Modifications to Budget. The Credit Parties shall not make any
modification to the Budget attached as Exhibit V hereto, without the prior
written consent of MSRESS, nor shall the Credit Parties make, or permit any of
their Subsidiaries to make, any expenditure or series of expenditures, cash or
otherwise, in excess of 5% of any individual item included in the Budget or any
variation in excess of $10,000.
(d) Modifications to Ownership Structure. The Credit Parties shall
not make any modification in the ownership structure attached as Exhibit S
hereto, without the prior approval of MSRESS.
(e) Bank Accounts. No Credit Party and none of its Subsidiaries
shall maintain or open any other Account other than those listed on Schedule 1
attached hereto, without the prior written consent of MSRESS.
7
<PAGE> 108
(f) Letter Agreement. The Credit Parties or their respective
Subsidiaries, as the case may be, shall execute a side letter with the relevant
Bank relating to the Accounts listed in Schedule 1 to this Supplement Agreement
(each, a "Letter Agreement"), the form of which is attached hereto as Exhibit X
or such other form as may be acceptable to the counsel to the Investors, and
deliver the same to MSRESS within 10 days from the date hereof. If any of the
Credit Parties or a Subsidiary fails to execute and deliver the Letter
Agreements (i) within 10 days from the date hereof, then on the 10th day from
the date hereof the Company shall deliver a payment of $100,000 to the Investors
by issuing to such Investors Notes in a principal amount equal to their
respective pro rata shares (determined according to the principal amount of the
Notes held by such Investor) of such $100,000 payment; (ii) within 30 days from
the date hereof, then on the 30th day from the date hereof the Company shall
deliver a payment of $400,000 to the Investors by issuing to such Investors
Notes in a principal amount equal to their respective pro rata shares
(determined according to the principal amount of the Notes held by such
Investor) of such $400,000 payment; and (iii) after 30 days from the date
hereof, then beginning on the 31st day from the date hereof, the Company shall
deliver a payment of $10,000 per day on each such day that the Letter Agreements
are not executed and delivered to MSRESS by issuing to such Investors Notes in a
principal amount equal to their respective pro rata shares (determined according
to the principal amount of the Notes held by such Investor) of such payment.
(g) Additional Covenant. Not by way of limitation of any other
provisions hereof, each of the Credit Parties shall use best efforts to cause
all direct or indirect interests in the Retail Properties that are held directly
or indirectly by the REIT Sponsors which are not subject to restrictions on
transfer under the organizational documents pursuant to which such interests
were issued to be contributed to the Operating Partnership and pledged as
collateral to the Collateral Agent no later than August 15, 1997.
(h) Covenant Relating to Contribution Agreements. The Credit Parties
shall not enter into, and shall prohibit each Controlled Subsidiary from
entering into, any transaction or series of transactions, directly or
indirectly, designed to or having the effect of frustrating the purpose of the
Contribution Agreements listed on Schedule 2 to this Supplement.
2.3 Contribution Agreements. No Credit Party shall, or permit any
Controlled Subsidiary to, amend, rescind, cancel or modify any Contribution
Agreement, without the prior approval of MSRESS.
2.4 Exhibit K. Exhibit K to the Agreement is hereby deleted in its
entirety and the Exhibit K annexed hereto is hereby substituted in lieu thereof.
2.5 Termination Event. There is hereby added to section 12 of the
Agreement a new subsection (p) as follows:
"(p) the failure of the New Management Company, the Old
Management Company, Feldman or the Feldman Assignors (each as
defined in the Assignment and Option Agreement referred to below) to
comply with their obligations set forth in the Amended and Restated
Assignment and Option
8
<PAGE> 109
Agreement dated July 31, 1997 (the "Assignment and Option
Agreement"), a copy of which is attached as Exhibit Y hereto, or any
breach by the New Management Company, the Old Management Company,
Feldman or the Feldman Assignors of a representation or warranty set
forth in the Assignment and Option Agreement, provided, however,
that if such failure or breach is unintentional and is capable of
being cured, then such failure or breach shall not constitute a
Termination Event unless such failure or breach remains uncured for
a period of 15 days from the date of occurrence of such failure or
breach."
2.6 Subsidiaries. For purposes of this Supplement, including for purposes
of any financial statement, cash reconciliation statement or the Budget that is
required to be delivered pursuant to the terms of this Supplement, "Subsidiary"
or Subsidiaries" shall include, without limitation, each entity in which any of
the Credit Parties or the Shareholder, directly or indirectly, holds any equity
interest, as set forth in the certified copy of the Ownership Structure Chart
attached as Exhibit S to this Supplement.
SECTION 3 MISCELLANEOUS.
3.1 Counterparts. This Supplement may be executed in any number of
counterparts, each of which shall be the same supplementary instrument but all
of which taken together shall constitute one agreement.
3.2 Governing Law. This Supplement shall be governed by and construed in
accordance with the laws of the State of New York.
3.3 Expenses: Documentary Taxes. The Credit Parties agree to pay (a) all
reasonable out-of-pocket expenses of the Investors, including the reasonable
fees and disbursements of counsel for the Investors incurred in connection with
execution and delivery of this Supplement, and (b) all reasonable out-of-pocket
expenses of the Investors, in connection with all additional and subsequent
documentation contemplated hereby, any waiver or consent hereunder or thereunder
or any amendment hereof or thereof. The Credit Parties shall indemnify the
Investors against any transfer taxes, documentary taxes, assessments or charges
made by any Governmental Authority by reason of the execution and delivery of
this Supplement.
3.4 Terms of the Agreement. Except as otherwise expressly modified hereby,
all the terms and conditions of the Agreement shall remain in full force and
effect and from and after the date hereof all references in the Agreement to
"this Agreement" or "the Agreement" shall mean the Agreement as supplemented by
this Supplement.
3.5 Indemnification. In addition to the Indemnification of the Credit
Parties under Section 17.1 of the Agreement, Lawrence H. Feldman ("Larry
Feldman"), agrees to indemnify, in his individual capacity, each Investor, and
their respective shareholders, partners, directors, officers, employees,
Affiliates and agents (collectively, "Indemnified Persons") against, and agrees
to hold each such Indemnified Person harmless, jointly and severally with each
of the Credit Parties, to the same extent that the Credit Parties have agreed to
indemnify and hold
9
<PAGE> 110
harmless such Indemnified Persons pursuant to the Agreement. The foregoing shall
remain operative and in full force and effect regardless of the expiration of
the term of the Agreement, the consummation of the transactions contemplated by
the Agreement, the repayment of any of the Notes, the invalidity or
unenforceability of any term or provision of the Agreement or the Notes or any
investigation made by or on behalf of any Indemnified Person or Larry Feldman
and the content or accuracy of any representation or warranty made under the
Agreement. All amounts due under this Section 2.5 of this Supplement shall be
payable as incurred upon written demand therefor. This Section 3.5 of this
Supplement is not intended to make Larry Feldman a guarantor of the payment of
principal and interest on the Notes issued pursuant to the Agreement.
3.6 Collateral Agent. All references to MSAM, in its capacity as the
Collateral Agent, in the Agreement and the Related Documents shall henceforth be
deemed to refer to MSRESS, and its successors and assigns.
10
<PAGE> 111
IN WITNESS WHEREOF, this Supplement has been executed as of the day
and year first above written.
TOWER REALTY TRUST, INC.
By: /s/ Lawrence H. Feldman
-------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By: /s/ Lawrence H. Feldman
-------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive Officer and
President
Address: 120 West 45th Street
24th Floor
New York, New York 10036
MS REAL ESTATE SPECIAL SITUATIONS INC., on
behalf of itself and as agent for certain
undisclosed principals
By: /s/ Ted Bigman
-------------------------------------------
Name: Ted Bigman
Title: Principal
Address: c/o Morgan Stanley Asset
Management, Inc.
1221 Avenue of the Americas
New York, New York 10020
FOR PURPOSES OF SECTION 3.5 OF THIS SUPPLEMENT
By: /s/ Lawrence H. Feldman
-----------------------------------------------
Lawrence H. Feldman, in his individual capacity
<PAGE> 112
Schedule 1
Accounts
Set forth below are all the account numbers of all deposit and other accounts of
each of the Company and the Operating Partnership and Subsidiaries held with the
Banks listed below:
(a) Accounts of Tower Realty Trust, Inc.
================================================================================
Bank Account Type of Name of the Account
Number Account and Person Balance as of
Purpose Authorized to July 18, 1997
Operate the
Account
- --------------------------------------------------------------------------------
================================================================================
(b) Accounts of Tower Realty Operating Partnership, L.P.
================================================================================
Bank Account Type of Name of the Account
Number Account and Person Balance as of
Purpose Authorized to July 18, 1997
Operate the
Account
- --------------------------------------------------------------------------------
================================================================================
(c) Accounts of [name of Subsidiary].
================================================================================
Bank Account Type of Name of the Account
Number Account and Person Balance as of
Purpose Authorized to July 18, 1997
Operate the
Account
- --------------------------------------------------------------------------------
================================================================================
12
<PAGE> 113
Schedule 2
Contribution Agreements
13
<PAGE> 114
EXHIBIT A
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT AND SUCH LAWS
OR (1) REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED AND
(2) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS FURNISHED TO THE EFFECT
THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
TOWER REALTY TRUST, INC.
NOTE
No. [date]
$
FOR VALUE RECEIVED, the undersigned, Tower Realty Trust, Inc.
(herein called the "Company"), a corporation organized and existing under the
laws of the State of Maryland, hereby promises to pay to MS Real Estate Special
Situations Inc., or registered assigns (the "Holder"), the principal sum of
_____________ DOLLARS on the Maturity Date (as defined in the Agreement referred
to below). The Company also promises to pay interest (computed on the basis of a
365 day year and the actual number of days elapsed) (a) from the date hereof
until the earlier of (i) the Maturity Date, (ii) the date this Note and all
amounts payable in connection herewith have been paid to the Holder and (iii)
the occurrence of a Termination Event (as defined in the Agreement) on the
unpaid balance hereof at the rate of 15% per annum, payable quarterly, on the
last day of March, June, September and December, commencing September 30, 1997,
and on the Maturity Date (each such date an "Interest Payment Date") and (b)
from the earlier of (i) the Maturity Date or (ii) the occurrence of a
Termination Event until the date this Note and all amounts payable in connection
herewith have been paid to the Holder, at the rate of 20% per annum payable on
demand. Until the earlier of maturity or the occurrence of a Termination Event,
the Company shall add 100% of the amount of interest payable on any Interest
Payment Date to the then outstanding principal amount of the Notes. Any such
interest added to principal shall thereafter bear interest as provided above.
Payments of principal of, premium, if any, and interest on this Note
are to be made in lawful money of the United States of America. Payments shall
be made to the Holder at such place and by such means as provided in the
Agreement.
This Note is one of a series of senior secured convertible notes
issued pursuant to certain Purchase Agreement, dated as of March 31, 1997 (as
from time to time amended, supplemented or otherwise modified, the "Agreement"),
among the Company, as issuer, the Operating Partnership, as guarantor, and the
respective Investors named therein and is entitled to the benefits thereof.
Capitalized terms not otherwise defined herein shall have the meanings
<PAGE> 115
ascribed to such terms in the Agreement. As provided in the Agreement, this Note
(i) is subject to redemption prior to maturity and (ii) is automatically
convertible into shares of the Company's Common Stock on an initial public
offering as is described more fully in the Agreement. Payment of the principal,
of, premium, if any, and interest on this Note is guaranteed by the Operating
Partnership as provided in the Agreement.
This Note is a registered Note and, as provided in the Agreement,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
(for a like principal amount) or Notes (in authorized denominations) will be
issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
If this Note is collected by or through an attorney at law or
otherwise, then the Company shall be obligated to pay, in addition to the
principal balance hereof and any premium and accrued interest hereon, reasonable
attorney's fees and all out-of-pocket costs of the Holder in connection with the
collection or enforcement of this Note.
The Company hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
This Note shall be governed by the laws of the State of New York.
TOWER REALTY TRUST, INC.
By:
-------------------------
Name: Lawrence H. Feldman
Title: President
2
<PAGE> 116
Exhibit K
CONVERSION RATE OF THE NOTES
The Notes are convertible into the number of shares of Common Stock equal to the
amounts determined in accordance with items 1, 2 and 3 below.
1. The number of shares of Common Stock equal to the following:
IA x ACP x 1
--------- --------
IA + EV MP
[HANDWRITTEN NOTES OMITTED]
where:
IA = the aggregate principal amount (including any
interest added to principal) of all outstanding
Notes (other than the original principal of any
note issued pursuant to Section 2.5 or 9.21 or
accrued but unpaid interest allocated
therewith) plus all accrued and unpaid interest
thereon to the Stock Closing Date which has not
been added to principal.
ACP = The difference between (1) the value of the
aggregate number of shares of Common Stock and
units of limited partnership interest ("OP
Units") issued or to be issued by the Company
and the Operating Partnership as of the Stock
Closing Date and (2) value of the sum of (i)
the aggregate number of shares of Common Stock
issued or to be issued by the Company as of the
Stock Closing Date in the Initial Public
Offering and (ii) the aggregate number of OP
Units issued or to be issued by the Operating
Partnership to continuing investors (other than
REIT Sponsors) and Cliff Stein in return for
the contribution of his equity interest in
Properties Atlantic, a ______ corporation, as
of the Stock Closing Date; provided that for
this purpose each share of Common Stock and OP
Unit shall be valued at MP.
EV = The value of Total Owned Properties as set forth
on Schedule K-1 attached hereto, as the same may
be reduced as provided in Schedule K-1.
MP = Mid-Point Purchase Price.
14
<PAGE> 117
Notwithstanding the foregoing, the number of shares calculated in item 1 shall
not be less than such number of shares of Common Stock equal to the following:
((1.15 x OPA) - INT)* + (1.15 x INT)
------------------------------------
MP
* If this calculation results in an amount less
than zero, then such calculation shall be equal to
zero
OPA = the original principal amount (excluding any
interest paid in-kind or added to principal) of
the Notes (other than principal amount of any Note
issued pursuant to Section 2.5 or 9.21) issued and
outstanding immediately prior to the Initial
Public Offering, but not less than the original
principal amount
INT = all interest paid (including interest paid
in-kind or added to principal) and all accrued but
unpaid interest, in each case with respect to the
Notes (other than paid interest or accrued but
unpaid interest on any Note issued pursuant to
section 2.5 or 9.21) as of the date of the Initial
Public Offering
2. Such number of shares of Common Stock obtained by dividing (A) the
product of (I) the Aggregate Share Amount times (II) the per share
amount of the pro forma underwriting discounts or commissions (as set
forth in the Preliminary Prospectus) that would have been paid by the
Company to the underwriters in connection with the Initial Public
Offering assuming such shares were priced at the Mid-Point Purchase
Price (the "Per Share MP Underwriting Discount") by (B) the difference
between (1) the Mid-Point Purchase Price minus (2) the Per Share MP
Underwriting Discount.
3. Such number of shares of Common Stock that is equal to the quotient of (A)
SF less $100,000 for each $1,000,000 that (i) ACP exceeds (ii) the sum of
(a) IA, (b) EV and (c) $10,000,000; divided by (B) MP. ACP, IA, EV and MP
shall have the same meaning as set forth in Item 1 of this Exhibit K. SF
shall equal $500,000 plus $100,000 for each $1,000,000 that ACP exceeds
$10,000,000 provided that SF shall not be greater than $1,000,000.
The quotient to be computed in accordance with above mentioned formula in
this Item 3 of this Exhibit K shall not under any circumstances be less
than zero.
15
<PAGE> 118
Schedule K-1
16
<PAGE> 119
Exhibit S
17
<PAGE> 120
Exhibit T
18
<PAGE> 121
Exhibit U
19
<PAGE> 122
Exhibit V
20
<PAGE> 123
Exhibit W
21
<PAGE> 124
Rider to Schedule K-1
As of the date of the Initial Public Offering or Major Capital Event,
$[21,484,000.61] will be reduced by the value attributed to any equity interest
set forth on Schedule K-1 with respect to any property set forth on such
Schedule K-1, if such equity interest is not 100% owned, directly or indirectly,
by the Company or the Operating Partnership, provided, however, the foregoing
amount not be reduced if 2800 North Central is not 100% owned, directly or
indirectly, by the Company or the Operating Partnership if the general partner
interest in 2800 North Central is owned by the REIT or the Operating
Partnership.
22
<PAGE> 1
Exhibit 10.12
CONTRIBUTION AGREEMENT
(OP Units--CXX Mineola Limted Partnership from prior
owners of Stellar Associates)
BY AND AMONG
TOWER REALTY OPERATING PARTNERSHIP, L.P.
AND
JEFFREY FELDMAN
Dated as of April 24, 1997
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I
CONTRIBUTION OF INTEREST AND EXCHANGE FOR OP UNITS.................. 1
1.1 Contribution Transaction................................................ 1
1.2 Exchange of OP Units.................................................... 2
1.3 Contribution of Certain Rights.......................................... 2
1.4 Treatment as Contribution............................................... 2
1.5 Additional Documents.................................................... 2
ARTICLE II
CLOSING................................. 2
2.1 Conditions Precedent.................................................... 2
2.3 Closing Deliveries...................................................... 3
2.4 Closing Costs........................................................... 4
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE CONTRIBUTOR.......................... 4
3.1 Title to Interest....................................................... 4
3.2 Organization; Authority; No Conflicts................................... 5
3.3 Litigation.............................................................. 6
3.4 No Other Agreements..................................................... 6
3.5 No Brokers.............................................................. 6
3.6 Investment Representations and Warranties............................... 7
3.7 Covenant to Remedy Breaches............................................. 9
3.8 Actions Prior to Closing................................................ 9
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP...................... 9
4.1 Authority............................................................... 9
-i-
<PAGE> 3
PAGE
4.2 No Brokers.............................................................. 10
ARTICLE V
POWER OF ATTORNEY........................... 11
5.1 Grant of Power of Attorney.............................................. 11
5.2 Limitation on Liability................................................. 11
ARTICLE VI
MISCELLANEOUS.............................. 12
6.1 Amendment............................................................... 12
6.2 Entire Agreement; Counterparts; Applicable Law.......................... 12
6.3 Assignability........................................................... 12
6.4 Titles.................................................................. 13
6.5 Third Party Beneficiary................................................. 13
6.6 Severability............................................................ 13
6.7 Equitable Remedies...................................................... 13
6.8 Notices; Exercise of Option............................................. 13
6.9 Waiver of Rights; Consents with Respect to Partnership Interests........ 14
6.10 Releases and Waivers.................................................... 17
6.11 Confidentiality......................................................... 17
6.12 Computation of Time..................................................... 18
6.13 Survival................................................................ 18
6.14 Time of the Essence..................................................... 18
Exhibit
A. Contribution and Assumption Agreement
Schedule
A. Interest
-ii-
<PAGE> 4
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "AGREEMENT") dated as of the 24th day
of April, 1997 is entered into by and among TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and JEFFREY
FELDMAN (the "CONTRIBUTOR").
R E C I T A L S:
A. The Contributor owns an interest as set forth on Schedule A
hereto (the "INTEREST") in CXX Mineola Limited Partnership, a New York limited
partnership (the "PARTNERSHIP").
B. The Contributor owned a 20% limited partnership interest in
Stellar Associates, a New York limited partnership ("Stellar"). As a result of
the bankruptcy of the general partner of Stellar, Stellar was dissolved (the
"Dissolution"). Stellar had been the record owner of a 5% limited partnership of
the Partnership. Pursuant to the Dissolution, the general partner of Stellar
distributed or will distribute on or prior to the Closing (as defined in Section
2.2) to each of the partners of Stellar, including the Contributor, each such
partner's pro rata share, subject to a proportionate share of its liability, of
the Partnership, which is the Interest.
C. The Operating Partnership desires to acquire through a
contribution to capital from the Contributor, and the Contributor desires to
contribute to the Operating Partnership, on the terms and conditions set forth
herein, all of the Contributor's rights, title and interest as a partner of the
Partnership in exchange for units or limited partnership interests ("OP UNITS")
in the Operating Partnership.
D. The Operating Partnership desires to acquire the Interest in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner as well as a limited
partner of the Operating Partnership, and (ii) the proposed loan from Merrill
Lynch, Pierce, Fenner & Smith, Incorporated or an affiliate thereof (the "ML
LOAN") to the Partnership.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and the Contributor agree as follows:
<PAGE> 5
ARTICLE I
CONTRIBUTION OF INTEREST AND EXCHANGE FOR OP UNITS
1.1 Contribution Transaction. At the Closing (as defined in
Section 2.2 herein) and subject to the terms and conditions contained in this
Contribution Agreement, the Contributor shall transfer to the Operating
Partnership, absolutely and unconditionally, all of its Interest (as such term
is defined in Recital A herein). The contribution of the Contributor's Interest
shall be evidenced by a "CONTRIBUTION AND ASSUMPTION AGREEMENT" in substantially
the form of EXHIBIT "A" attached hereto. The parties shall take such additional
actions and execute such additional documentation as may be required by the
agreement of limited partnership dated as of January 18, 1987 of the Partnership
(the "PARTNERSHIP AGREEMENT") and the agreement of limited partnership dated as
of March 24, 1997 of the Operating Partnership (the "OP AGREEMENT") in order to
effect the transactions contemplated hereby.
1.2 Exchange of OP Units. The Operating Partnership shall, in
exchange for the Interest, transfer to the Contributor 600 OP Units (the
"CONSIDERATION"). The transfer of the OP Units to the contributor shall be
evidenced by an amendment (the "AMENDMENT") to the OP Agreement. The parties
shall take such additional actions and execute such additional documentation as
may be required by the Partnership Agreement and the OP Agreement in order to
effect the transactions contemplated hereby.
1.3 Contribution of Certain Rights. Effective upon the Closing,
the Contributor hereby contributes to the Operating Partnership all of its
rights and interests, if any, including rights to indemnification in favor of
the Contributor, if any, under the agreements pursuant to which the Contributor
or its affiliates initially acquired the Interest transferred pursuant to this
Contribution Agreement.
1.4 Treatment as Contribution. The transfer, assignment and
exchange of interests effectuated with respect to the Operating Partnership,
pursuant to this Contribution Agreement, shall constitute a "Capital
Contribution" pursuant to Article 4 of the OP Agreement and is intended to be
governed by Section 721(a) of the Internal Revenue Code of 1986, as amended (the
"CODE").
1.5 Additional Documents. At the Closing of the Company's
contemplated initial public offering (the "IPO"), Contributor will enter into
with the Operating Partnership, the Company or the Underwriters for the IPO a
lock-up agreement, exchange rights agreement and registration rights agreement
substantially in the same form as those entered into by Lawrence H. Feldman at
the closing of the IPO.
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ARTICLE II
CLOSING
2.1 Conditions Precedent. The Closing of the ML Loan is a
condition precedent to the obligations of both parties to this Contribution
Agreement to effect the transactions contemplated by this Contribution Agreement
on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and
correct in all material respects on the date such representations and
warranties were made, and shall be true and correct in all material
respects on the Closing Date as if made at and as of such date;
(b) Each of the obligations of the Contributor to be
performed by it shall have been duly performed by it on or before the
Closing Date;
(c) Concurrently with the Closing, the Contributor shall
have executed and delivered to the Operating Partnership the documents
required to be delivered pursuant to Section 2.3 hereof;
(d) The Contributor shall have obtained all necessary
consents or approvals of governmental authorities or third parties to
the consummation of the transactions contemplated hereby and the
general partner of Stellar shall have distributed the Interest to the
Contributor;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted,
entered, promulgated or enforced by any court of competent jurisdiction
or governmental or regulatory authority or instrumentality that
prohibits the consummation of the transactions contemplated hereby, and
no litigation or governmental proceeding seeking such an order shall be
pending or threatened;
(g) There shall not have occurred between the date hereof
and the Closing Date any material adverse change in any of the
Partnership's assets or business; and
(h) The Operating Partnership shall have acquired at or
prior to the Closing all outstanding partnership interests in the
Partnership.
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The foregoing conditions may be waived by the Operating
Partnership in its sole and absolute discretion.
2.2 Time and Place. The date, time and place of the closing of the
transactions contemplated hereunder (the "CLOSING") shall be the day the
Operating Partnership receives the proceeds from the ML Loan (the "CLOSING
DATE"), at 10:00 a.m. in the office of Battle Fowler LLP, 75 East 55th Street,
New York, New York 10022. The transfers described in Sections 1.1 and 1.2 of
this Contribution Agreement, and all closing deliveries, and the consummation of
the ML Loan, shall be deemed concurrent for all purposes.
2.3 Closing Deliveries. At the Closing, the parties shall make,
execute, acknowledge and deliver, or cause to be made,executed, acknowledged and
delivered through the Attorney-in-Fact (as designated in Section 5.1 below), the
legal documents and other items (collectively, the "CLOSING DOCUMENTS")
necessary to carry out the intention of this Contribution Agreement, which
Closing Documents and other items shall include, without limitation, the
following:
(i) A Contribution and Assumption Agreement;
(ii) The Amendment evidencing the transfer of OP
Units to the Contributor;
(iii) The Partnership's books and records and
securities or other evidences of ownership held by the Contributor; and
(iv) An affidavit from the Contributor, stating
under penalty of perjury, the Contributors's United States Taxpayer
Identification Number and that the Contributor is not a foreign person
pursuant to section 1445(b)(2) of the Code and a comparable affidavit
satisfying California and any other withholding requirements.
2.4 Closing Costs. The Operating Partnership shall pay any
documentary transfer taxes, escrow charges, title charges and recording taxes or
fees incurred in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CONTRIBUTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Contributor hereby makes to the Operating Partnership, with respect to the
Interest, each of the representations and warranties set forth in this Article
III, which representations and warranties (unless otherwise noted) are true as
of the date hereof. As a condition to the Operating Partnership's obligation to
consummate the contribution
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of the Contributor's Interests to the capital of the Operating Partnership, such
representations and warranties must be true as of the Closing Date.
3.1 Title to Interest. (a) The Contributor owns beneficially and
of record, free and clear of any claim, lien, pledge (except for pledges
relating to the debt or equity financing of any of the properties held by the
Partnership (each, a "Property") or encumbrances arising under the Partnership
Agreement pursuant to which the Interest was issued (any such pledge, a
"PERMITTED PLEDGE")), voting agreement, option, charge, security interest,
mortgage, deed of trust, encumbrance, right of assignment, purchase right or
other rights of any nature whatsoever (each, an "ENCUMBRANCE"), and has full
power and authority to convey free and clear of any Encumbrances, its Interest
and, upon delivery of a Contribution and Assumption Agreement by the Contributor
conveying its Interest and delivery of the Consideration by the Operating
Partnership for such Interest as herein provided, the Operating Partnership will
acquire, as a contribution to its capital, good and valid title thereto, free
and clear of any Encumbrance, except Encumbrances created in favor of the
Operating Partnership by the transactions contemplated hereby.
(b) The Interest has been validly issued and the Contributor has
funded (or will fund before the same is past due) all capital contributions and
advances to the Partnership that are required to be funded or advanced prior to
the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with
respect to the Interest except as set forth in the Partnership Agreement.
(d) No Permitted Pledge will be in existence as of the date of the
Closing, and the Contributor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(e) In making the representations in this Section 3.1 regarding
the absence of Encumbrances, the Contributor may assume that the consents and
waivers of rights set forth in Section 6.9 hereof have been given by all
partners of the Partnership.
3.2 Organization; Authority; No Conflicts. (a) If the Contributor
is not a natural person, the Contributor is a corporation, limited partnership,
general partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its organization.
(b) Such Contributor has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of such Contributor pursuant to
this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
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(iii) to transfer, assign, convey and deliver all of such
Contributor's Interest to the Operating Partnership in accordance with
this Agreement.
(c) All applicable corporate, partnership, limited liability
company, trust or other action necessary for such Contributor to execute and
deliver this Agreement, the Closing Documents and each other agreement, document
and instrument executed by or on behalf of Contributor pursuant to this
Agreement, and to perform the transactions contemplated hereby and thereby, has
been taken, or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of
such Contributor pursuant to this Agreement constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligation of such
Contributor, each enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of such Contributor:
(i) does not and will not violate such Contributor's charter
and/or bylaws, partnership agreement, operating agreement or
declaration of trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to such Contributor or require
such Contributor to obtain any approval, consent or waiver of, or make
any filing with, any person or authority (governmental or otherwise)
that has not been obtained or made and which does not remain in effect;
and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which such
Contributor is a party or by which the property of such Contributor is
bound or affected, or result in the creation of any Encumbrance on any
of the property or assets of the Partnership.
(f) In making the representations set forth in this Section 3.2,
each Contributor may assume that
(i) the consents and waivers of rights set forth in Section
6.9 hereof have been given by all partners of the Partnership, and
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(ii) for purposes of making such representation as of the date
hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Contributor knows of no litigation or
proceeding, whether judicial, administrative or arbitral, pending or overtly
threatened, affecting all or any portion of Interest or such Contributor's
ability to consummate the transactions contemplated hereby.
(b) Such Contributor knows of no outstanding order, writ,
injunction or decree of any court, government, governmental entity or authority
or arbitration against or affecting all or any portion of the Interest, which in
any such case would impair such Contributor's ability to enter into and perform
all of its obligations under this Agreement.
3.4 No Other Agreements. (a) The Contributor has made no agreement
with, and will not enter into any agreement with, and has no obligation
(absolute or contingent) to, any other person or entity to sell, transfer,
dispose of or in any way encumber the Interest or restricting in any way such
Contributor's ability to contribute the Interest to the capital of the Operating
Partnership or to enter into any agreement with respect to the Interest.
(b) In making the representations set forth in this Section 3.4,
each Contributor may assume that
(i) the consents and waivers of rights set forth in Section
6.9 hereof have been given by all partners of the Partnership, and
(ii) for purposes of making such representations as of the
date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Contributor has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
the Operating Partnership to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Contributor, by reason of its business and financial
experience, together with the business and financial experience of those
persons, if any, retained by it to represent or advise it with respect to its
investment in OP Units,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of, and of making an informed investment
decision with respect to, an investment in OP Units,
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(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests, and
(C) is capable of bearing the economic risk of such
investment.
(ii) (A) The Contributor is an "accredited investor" as
defined in Rule 501 of the regulations promulgated under the Securities
Act of 1933, as amended (the "SECURITIES ACT").
(B) If the Contributor has retained or retains a
person to represent or advise it with respect to its
investment in OP Units, the Contributor will advise the
Operating Partnership of such retention and, at the Operating
Partnership's request, the Contributor shall, prior to or at
the Closing,
(I) acknowledge in writing such
representation, and
(II) cause such representative or advisor to
deliver a certificate to the Operating Partnership
containing such representations as may be reasonably
requested by the Operating Partnership.
(b) (i) The Contributor understands that an investment in the
Operating Partnership involves substantial risks.
(ii) The Contributor has been given the opportunity to make a
thorough investigation of the proposed activities of the Operating
Partnership.
(iii) The Contributor has been afforded the opportunity to
obtain any additional information requested by it.
(iv) The Contributor has had an opportunity to ask questions
of and receive answers from representatives of the Operating
Partnership concerning the Operating Partnership and its proposed
activities and the terms and conditions of an investment in OP Units.
(c) (i) The OP Units to be issued to the Contributor at the
Closing will be acquired by the Contributor for its own account, for investment
only and not with a view to, or with any intention of, a distribution or resale
thereof, in whole or in part, or the grant of any participation therein.
(ii) The Contributor was not formed for the specific purpose
of acquiring an interest in the Operating Partnership.
(d) (i) The Contributor acknowledges that
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(A) the OP Units to be issued to the Contributor at
the Closing have not been registered under the Securities Act
or state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and
applicable state securities laws and, if such OP Units are
represented by certificates, such certificates will bear a
legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of the Contributor contained herein,
(C) the OP Units to be issued to the Contributor at
the Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there is no public market for the OP Units, and
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act
or any state securities laws or to take any action that would
make available any exemption from the registration
requirements of such laws.
(ii) The Contributor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the OP Agreement and in the
lock-up agreement referred to in Section 1.9, such Contributor may have
to bear the economic risk of the investment commitment evidenced by
this Agreement and any OP Units issued hereunder for an indefinite
period of time.
(e) The address previously provided by the Contributor to the
Operating Partnership is the address of the Contributor's principal place of
business or, if a natural person, the address of the Contributor's residence,
and the Contributor has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal place of business or residence is situated.
3.7 Covenant to Remedy Breaches. The Contributor covenants to use
all reasonable efforts within its control
(a) to prevent the breach of any representation or
warranty of the Contributor hereunder,
(b) to satisfy all covenants of the Contributor
hereunder, and
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(c) to promptly clear any breach of a representation,
warranty or covenant of the Contributor hereunder upon its learning of
same.
3.8 Actions Prior to Closing. From the date hereof through the
Closing, the Contributor shall not:
(i) Sell or transfer all or any portion of the Interest; or
(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of the Interest.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP
As a material inducement to the Contributor to enter into this
Agreement and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Contributor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue OP Units to the Contributor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
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(d) The execution, delivery and performance of this Agreement,
each Closing Document to which the Operating Partnership is a party and each
such agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the OP Agreement;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into,
and covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Contributor to pay any finder's fee, brokerage commission or similar payment
in connection with the transactions contemplated hereby.
ARTICLE V
POWER OF ATTORNEY
5.1 Grant of Power of Attorney. The Contributor does hereby
irrevocably appoint the Operating Partnership (or its designee) and each of them
individually and any successor thereof from time to time (such Operating
Partnership or designee or any such successor of any of them acting in his, her
or its capacity as attorney-in-fact pursuant hereto, the "ATTORNEY-IN-FACT") as
the true and lawful attorney-in-fact and agent of the Contributor, to act in the
name, place and stead of the Contributor to make, execute, acknowledge and
deliver all such other contracts, orders, other writings (including without
limitation the execution of any Closing Documents or other documents relating to
the acquisition by the Operating Partnership of the Interest), to provide
information to the Securities and Exchange Commission and others about the
transactions contemplated hereby and, in general, to do all things and to take
all actions which the Attorney-in-Fact in its sole discretion may consider
necessary or proper in connection with or to carry out the transactions
contemplated by this Contribution Agreement, as fully as could the Contributor
if personally present and acting. Further, the Contributor hereby grants to the
Attorney-in-Fact a proxy (the "PROXY") to vote the Contributor's Interest on any
matter related to the Transactions
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<PAGE> 15
contemplated hereby or to the ML Loan presented to the partners of the
Partnership for a vote, including, but not limited to, the transfer of interests
in the Partnership by the other partners.
Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of the Contributor, by operation of law or by
the occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Contribution Agreement, the Attorney-in-Fact shall nevertheless be authorized
and directed to complete all such transactions as if such other act or events
had not occurred and regardless of notice thereof. The Contributor agrees that,
at the request of the Operating Partnership, it will promptly execute a separate
power of attorney and proxy on the same terms set forth in this ARTICLE 5, such
execution to be witnessed and notarized. The Contributor hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.
The Contributor acknowledges that the Operating Partnership has, and
any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
5.2 Limitation on Liability. It is understood that the
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney or Proxy granted by the Contributor hereby. The
Attorney-in-Fact makes no representations with respect to and shall have no
responsibility for the transactions contemplated hereby or the IPO, or the
acquisition of the Interest by the Operating Partnership and shall not be liable
for any error or judgment or for any act done or omitted or for any mistake of
fact or law except for its own gross negligence or bad faith. The Contributor
agrees to indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact
harmless against any loss, claim, damage or liability incurred on its part
arising out of or in connection with it acting as the Attorney-in-Fact under the
Power of Attorney or Proxy created by the Contributor hereby, as well as the
cost and expense of investigating and defending against any such loss, claim,
damage or liability, except to the extent such loss, claim, damage or liability
is due to the gross negligence or bad faith of the Attorney-in-Fact. The
Contributor agrees that the Attorney-in-Fact may consult with counsel of its own
choice (who may be counsel for the Operating Partnership or its successors or
affiliates), and it shall have full and complete authorization and protection
for any action taken or suffered by it hereunder in good faith and in accordance
with the opinion of such counsel. It is understood that the Attorney-in-Fact
may, without breaching any express or implied obligation to Contributor
hereunder, release, amend or modify any other power of attorney or proxy granted
by any other person under any related agreement.
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ARTICLE VI
MISCELLANEOUS
6.1 Amendment. (a) This Agreement may only be amended by a written
agreement duly executed by the Contributor and the Operating Partnership.
(b) No waiver of any provisions of this Agreement shall be valid
unless in writing and signed by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which
will be deemed an original and all of which shall constitute one and
the same instrument, and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without
giving effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall
be enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Contributor,
or by any Contributor without the prior written consent of the Operating
Partnership, and any attempted assignment without such consent shall be void and
of no effect; provided, further, however, that the Operating Partnership may
assign all or any portion of this Agreement and the Closing Documents and any
agreement contemplated hereunder or thereunder to the Company or to an affiliate
of the Operating Partnership or the Company without the consent of the
Contributor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
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6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision and to execute any amendment,
consent or agreement deemed necessary or desirable by the Operating Partnership
to effect such replacement.
6.7 Equitable Remedies. (a) The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached.
(b) It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any federal or state
court located in the State of New York (as to which the parties agree to submit
to jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must
or may be given under this Agreement or by law shall, except as otherwise
provided, be in writing and shall be deemed to have been given
(i) when physically received by personal delivery (which shall
include the confirmed receipt of a telecopied facsimile transmission),
(ii) three (3) business days after being deposited in the
United States certified or registered mail, return receipt requested,
postage prepaid, or
(iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day
delivery service (such as Federal Express);
addressed and delivered or telecopied in the case of a notice to the Operating
Partnership to the following address and telecopy number:
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Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Contributor, to the address and telecopy number set forth under the
Contributor's name on the signature page hereof.
6.9 Waiver of Rights; Consents with Respect to Partnership
Interests. (a) The Contributor acknowledges that the agreements contained herein
and the transactions contemplated hereby and any actions taken in contemplation
of the transactions contemplated hereby (including the declaration of any
dividend or distribution in the form of an additional interest in the
Partnership) may conflict with, and may not have been contemplated by, the
Partnership Agreement or another agreement among one or more holders of
interests in the Partnership or one or more of the partners of the Partnership.
(b) The Contributor expressly gives all Consents (and any consent
necessary to authorize the proper parties in interest to give all Consents) and
Waivers necessary or desirable to facilitate any Conveyance Action relating to
the Partnership (as such terms are defined below).
(c) The Contributor further agrees that the Contributor will take
no action to enjoin, or seek damages resulting from, any Conveyance Action by
any holder of a direct or indirect interest in the Partnership.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to the Partnership,
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(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein (whether or
not such partner or holder is a contributor under an agreement
containing terms similar to this Contribution Agreement) of its direct
or indirect interest in the Partnership to the Operating Partnership or
the Company or to another person in connection with the formation of
the Operating Partnership or the Company, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company,
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the prospectus relating to the IPO, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in the Partnership or an undivided
tenant-in-common interest in the Property represented by such
Partnership interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in the
Partnership, and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
(v) As used herein, the term "CONSENTS" means, with respect to
the Partnership, any consent deemed by the Operating Partnership to be
necessary or desirable under the Partnership Agreement or any other
agreement among all or any of the holders of interests therein or any
other agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions relating
to the Partnership or to amend the Partnership Agreement
and/or other agreements so that no provision thereof
prohibits, restricts, impairs or interferes with any
Conveyance Action (such amendment to include, without
limitation, the deletion of provisions which cause a default
under such agreement if interests therein are transferred for
other than cash),
-16-
<PAGE> 20
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of the Partnership upon the
Operating Partnership's or any such affiliate's acquisition of
a limited or general partner interest therein, respectively,
and to adopt such amendment as is necessary or desirable to
effect such admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition by the Operating
Partnership or any such affiliate of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of the Contributor or under the Partnership Agreement,
and
(D) to continue the Partnership following the
transfer of interests therein to the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
the Partnership, the waiving of any and all rights that the Contributor
may have with respect to, and (to the extent possible) that any other
person may have with respect to, or that may accrue to the Contributor
or other person upon the occurrence of, a Conveyance Action relating to
the Partnership, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in the Partnership (or the
property interests represented by such partnership interest)
or to sell the Contributor's or other person's direct or
indirect interest therein to another partner,
(D) rights to sell the Contributor's or other
person's direct or indirect interest therein at a price other
than as provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of the Partnership because of such
Conveyance Action.
6.10 Releases and Waivers. Each of the releases and waivers
enumerated in this Section 6.10 shall become effective only upon the Closing and
the exchange of the Interest for the OP Units pursuant to ARTICLE 2.
-17-
<PAGE> 21
(a) As of the Closing, the Contributor irrevocably
waives, releases and forever discharges the Operating
Partnership and the Operating Partnership's affiliates,
partners (including Lawrence H. Feldman), agents, attorneys,
successors and assigns of and from, any and all charges,
complaints, claims, liabilities, damages, actions, causes of
action, losses and costs of any nature whatsoever
(collectively, "CONTRIBUTOR CLAIMS"), known or unknown,
suspected or unsuspected, arising out of or relating to the
Partnership Agreement, this Contribution Agreement or any
other matter which exists at the Closing, except for
Contributor Claims arising from the breach of any
representation, warranty, covenant or obligation under this
Contribution Agreement.
(b) As of the Closing, the Operating Partnership
irrevocably waives, releases and forever discharges the
Contributor and the Contributor's agents, attorneys,
successors and assigns of and from, any and all charges,
complaints, claims, liabilities, damages, actions, causes of
action losses and costs of any nature whatsoever
(collectively, "OPERATING PARTNERSHIP CLAIMS"), known or
unknown, suspected or unsuspected, arising out of or relating
to the Partnership Agreement, this Contribution Agreement or
any other matter which exists at the Closing, except for
Operating Partnership Claims arising from the breach of any
representation, warranty, covenant or obligation under this
Contribution Agreement.
(c) As of the Closing, the Contributor waives and
relinquishes all rights and benefits otherwise afforded to the
Contributor under the Partnership Agreement including, without
limitation, any right to consent to or approve of the sale or
contribution by the other partners of the Partnership of their
partnership interests to the Company or the Operating
Partnership.
6.11 Confidentiality. (a) The Contributor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed Registration Statement
relating thereto with the Securities and Exchange Commission, and shall not
communicate at any time the terms of this Agreement to any person other than
counsel or advisors to the Contributor who agree to keep such terms confidential
and any lender holding a lien on any Property Interests.
(b) The Contributor shall treat all information received from the
Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate the same only to
counsel to the Contributor who agree to keep such information confidential.
6.12 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
-18-
<PAGE> 22
6.13 Survival. It is the express intention and agreement of the
parties hereto that the representations, warranties and covenants of the
Operating Partnership and the Contributor set forth in this Agreement shall
survive the consummation of the transactions contemplated hereby.
6.14 Time of the Essence. Time is of the essence with respect to
all obligations of the Contributor under this Agreement.
-19-
<PAGE> 23
[SIGNATURE PAGE TO CONTRIBUTION AGREEMENT CXX MINEOLA LIMITED PARTNERSHIP]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP,
L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
----------------------------
Name: Lawrence H. Feldman
Title: President
CONTRIBUTOR'S ADDRESS: CONTRIBUTOR:
411 Druid Road JEFFREY FELDMAN
- --------------------------
Clearwater, FL 34616
- --------------------------
By: /s/ Jeffrey Feldman
- -------------------------- -----------------------------------
- --------------------------
-20-
<PAGE> 24
EXHIBIT A
to
CONTRIBUTION AGREEMENT
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby assigns, transfers,
contributes and conveys to Tower Realty Operating Partnership, L.P. a Delaware
limited partnership (the "OPERATING PARTNERSHIP"), his or its entire legal and
beneficial right, title and interest in and to all general or limited
partnership interests (the "INTEREST") held by him or it in CXX Mineola Limited
Partnership (the "PARTNERSHIP"), including, without limitation, all rights to
receive distributions of money, profits and other assets from or relating to the
Partnership or the Interest, presently existing or hereafter at any time arising
or accruing TO HAVE AND TO HOLD the same unto the Operating Partnership, its
successors and assigns, forever.
Upon the execution and delivery hereof, the Operating Partnership
assumes all obligations in respect of the Interest.
Executed: April __, 1997 JEFFREY FELDMAN
By:
--------------------------
Name:
Title:
-21-
<PAGE> 25
SCHEDULE A
JEFFREY FELDMAN 1% limited partnership interest in CXX Mineola Limited
Partnership
-22-
<PAGE> 1
Exhibit 10.13
AMENDMENT TO
CONTRIBUTION AGREEMENT
This Amendment (this "Amendment"), dated as of May 30, 1997, amends
the Contribution Agreement, dated as of April 24, 1997, by and among Tower
Realty Operating Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership"), and Jeffrey Feldman.
Preliminary Statement
The Operating Partnership and the Contributor are parties to a
Contribution Agreement, dated as of April 24, 1997 (the "Agreement"), relating
to the transfer of the Contributor's ownership of an interest (the "Interest")
in CXX Mineola Limited Partnership, a New York limited partnership. The
Agreement sets forth certain provisions regarding such transfer in return for OP
Units that were to be provided at the time of such transfer. The Operating
Partnership and the Contributor wish to amend the Agreement to provide that the
OP Units will be transferred to the Contributor at the closing of the proposed
initial public offering (the "IPO") of Tower Realty Trust, Inc., the general
partner and a limited partner of the Operating Partnership (the "Company").
Capitalized terms used herein and not otherwise defined shall have the meaning
ascribed to such terms in the Agreement.
THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. The transfer of the OP Units to the Contributor will occur at
the closing of the IPO.
2. In the event that the closing of the IPO shall not have
occurred on or prior to December 31, 1997, the Operating Partnership shall sell,
assign, transfer and convey the Interest to the Contributor upon the payment of
all amounts outstanding pursuant to the Purchase Agreement dated as of March 31,
1997 among the Operating Partnership, the Company and the Investors named
therein, and the notes issued thereunder.
3. The Agreement, as amended by this Amendment, remains in full
force and effect.
4. This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
<PAGE> 2
5. This Agreement, as amended by this Amendment, shall be
governed in all respects, including validity, interpretation and effect, by the
laws of the State of New York without giving effect to the conflicts of law
provisions thereof.
IN WITNESS WHEREOF, the parties have duly executed this amendment as
of the date first written above.
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc.,
its General Partner
By: /s/ Lawrence H. Feldman
-------------------------------
Name:Lawrence Feldman
Title:President
JEFFREY FELDMAN
/s/ Jeffrey Feldman
-----------------------------------
<PAGE> 1
Exhibit 10.14
Second Amendment to
Contribution Agreement
This Second Amendment (this "Second Amendment"), dated as of May
30, 1997, amends the Contribution Agreement, dated as of April 24, 1997, by
and between Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "Operating Partnership") and Jeffrey Feldman (the
"Contributor") and rescinds the Amendment to Contribution Agreement dated as of
May, 1997.
Preliminary Statement
A. The Operating Partnership and the Contributor are parties to a
Contribution Agreement, dated as of April 24, 1997 (the "Agreement), relating to
the transfer of the Contributor's ownership of an interest (the "Interest") in
CXX Mineola Limited Partnership, a New York limited partnership (the
"Partnership"). The Contribution Agreement was amended by the parties pursuant
to an Amendment to the Contribution Agreement dated May, 1997 (the "First
Amendment"). Capitalized terms used herein and not otherwise defined shall have
the meaning ascribed to such terms in the Agreement.
B. The Partnership has distributed an undivided 1%
tenant-in-common interest in the property located at 120 Mineola Boulevard,
Mineola, New York (the "Property"), subject to its existing mortgage
indebtedness, to Contributor (the "Property Interest").
THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Agreement, as amended by the First Amendment, is hereby further amended as
follows:
1. The First Amendment is hereby terminated and shall have no
further force and effect.
2. Simultaneously with the execution and delivery of this Second
Amendment, Contributor will contribute to the Operating Partnership all of his
right, title and interest to the Property Interest in exchange for 600 OP Units.
Such contribution shall be made free and clear of any claim, lien or pledge
(except for pledges or mortgages relating to the debt or equity financing on the
Property) and shall be evidenced by a deed acceptable to the Operating
Partnership. The contribution of the Property Interest to the Operating
Partnership pursuant to this Second Amendment shall be in lieu of the
contribution to the Operating Partnership of the Partnership Interest in the
Partnership as set forth in the Agreement.
<PAGE> 2
3. The Agreement, as amended by this Amendment, remains in full
force and effect.
4. This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
5. The Operating Partnership and the Contributor now wish to
amend the Contribution Agreement to provide that this Agreement, as amended by
this Amendment, shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
IN WITNESS WHEREOF, the parties have duly executed this amendment as
of the date first written above.
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust Inc.,
its general partner
By: /s/ Lawrence H. Feldman
----------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive
Officer and President
JEFFREY FELDMAN
By: Lawrence H. Feldman, as designee of
the Operating Partnership pursuant
to Article V of the Agreement, as
Attorney-In-Fact
/s/ Lawrence H. Feldman
----------------------------------
Lawrence H. Feldman
2
<PAGE> 1
Exhibit 10.15
CONTRIBUTION AGREEMENT
(Cash--from prior owners of Stellar Associates)
BY AND AMONG
TOWER REALTY OPERATING PARTNERSHIP, L.P.
AND
LAURIE JACOBY
Dated as of April 29, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I CONTRIBUTION OF INTEREST AND EXCHANGE FOR CASH......................... 1
1.1 Contribution Transaction............................................... 1
1.2 Contribution of Certain Rights......................................... 2
1.3 Consideration.......................................................... 2
ARTICLE II CLOSING................................................................ 2
2.1 Conditions Precedent................................................... 2
2.3 Closing Deliveries..................................................... 3
2.4 Closing Costs.......................................................... 3
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
CONTRIBUTOR............................................................ 4
3.1 Title to Interest...................................................... 4
3.2 Organization; Authority; No Conflicts.................................. 4
3.3 Litigation............................................................. 6
3.4 No Other Agreements.................................................... 6
3.5 No Brokers............................................................. 6
3.6 Covenant to Remedy Breaches............................................ 6
3.7 Actions Prior to Closing............................................... 7
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
OPERATING PARTNERSHIP.................................................. 7
4.1 Authority.............................................................. 7
4.2 No Brokers............................................................. 8
ARTICLE V POWER OF ATTORNEY...................................................... 8
5.1 Grant of Power of Attorney............................................. 8
5.2 Limitation on Liability................................................ 9
ARTICLE VI MISCELLANEOUS.......................................................... 9
6.1 Amendment.............................................................. 9
6.2 Entire Agreement; Counterparts; Applicable Law......................... 10
6.3 Assignability.......................................................... 10
6.4 Titles................................................................. 10
6.5 Third Party Beneficiary................................................ 10
6.6 Severability........................................................... 10
6.7 Equitable Remedies..................................................... 11
6.8 Notices; Exercise of Option............................................ 11
6.9 Waiver of Rights; Consents with Respect to Partnership Interests....... 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.10 Releases and Waivers................................................... 14
6.11 Confidentiality........................................................ 15
6.12 Computation of Time.................................................... 15
6.13 Survival............................................................... 15
6.14 Time of the Essence.................................................... 15
</TABLE>
Exhibit
A. Contribution and Assumption Agreement
Schedule
A. Interest
-ii-
<PAGE> 4
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "AGREEMENT") dated as of the 29th
day of April, 1997 is entered into by and among TOWER REALTY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"),
and LAURIE JACOBY (the "CONTRIBUTOR").
R E C I T A L S:
A. The Contributor owns an interest as set forth on Schedule A
(the "INTEREST") in CXX Mineola Limited Partnership, a New York limited
partnership (the "PARTNERSHIP").
B. The Contributor owned a 20% limited partnership interest in
Stellar Associates, a New York limited partnership ("STELLAR"). As a result of
the bankruptcy of the general partner of Stellar, Stellar was dissolved (the
"DISSOLUTION"). Stellar had been the record owner of a 5% limited partnership of
the Partnership. Pursuant to the Dissolution, the general partner of Stellar
distributed or will distribute on or prior to the Closing (as defined in Section
2.2) to each of the partners of Stellar, including the Contributor, each such
partner's pro rata share, subject to a proportionate share of its liability, of
the Partnership, which is the Interest.
C. The Operating Partnership desires to acquire through a
contribution to capital from the Contributor, and the Contributor desires to
contribute to the Operating Partnership, on the terms and conditions set forth
herein, all of the Contributor's rights, title and interest as a partner of the
Partnership in exchange for cash.
D. The Operating Partnership desires to acquire the Interest in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner as well as a limited
partner of the Operating Partnership, and (ii) the proposed loan from Merrill
Lynch, Pierce, Fenner & Smith, Incorporated or an affiliate thereof (the "ML
LOAN") to the Partnership.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and the Contributor agree as follows:
<PAGE> 5
ARTICLE I
CONTRIBUTION OF INTEREST AND EXCHANGE FOR CASH
1.1 Contribution Transaction. At the Closing (as defined in
Section 2.2 herein) and subject to the terms and conditions contained in this
Contribution Agreement, the Contributor shall transfer to the Operating
Partnership, absolutely and unconditionally, all of the Interest (as such term
is defined in Recital A herein). The contribution of the Contributor's Interest
shall be evidenced by a "CONTRIBUTION AND ASSUMPTION AGREEMENT" in substantially
the form of EXHIBIT "A" attached hereto. The parties shall take such additional
actions and execute such additional documentation as may be required by the
agreement of limited partnership dated as of January 18, 1987 of the Partnership
(the "PARTNERSHIP AGREEMENT") in order to effect the transactions contemplated
hereby.
1.2 Contribution of Certain Rights. Effective upon the Closing,
the Contributor hereby contributes to the Operating Partnership all of its
rights and interests, if any, including rights to indemnification in favor of
the Contributor, if any, under the agreements pursuant to which the Contributor
or its affiliates initially acquired the Interest transferred pursuant to this
Contribution Agreement.
1.3 Consideration. The cash consideration (the "CONSIDERATION") to
be paid to the Contributor in respect of the Operating Partnership's purchase of
the Interest shall be $15,000. The Consideration shall be paid by bank check or
wire transfer as determined by the Operating Partnership.
ARTICLE II
CLOSING
2.1 Conditions Precedent. The Closing of the ML Loan is a
condition precedent to the obligations of the parties to this Contribution
Agreement to effect the transactions contemplated by this Contribution Agreement
on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and
correct in all material respects on the date such representations
and warranties were made, and shall be true and correct in all
material respects on the Closing Date as if made at and as of such
date;
-2-
<PAGE> 6
(b) Each of the obligations of the Contributor to be
performed by it shall have been duly performed by it on or before
the Closing Date;
(c) Concurrently with the Closing, the Contributor shall
have executed and delivered to the Operating Partnership the
documents required to be delivered pursuant to Section 2.3 hereof;
(d) The Contributor shall have obtained all necessary
consents or approvals of governmental authorities or third parties
to the consummation of the transactions contemplated hereby and the
general partner of Stellar shall have distributed the Interest to
the Contributor;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been
enacted, entered, promulgated or enforced by any court of competent
jurisdiction or governmental or regulatory authority or
instrumentality that prohibits the consummation of the transactions
contemplated hereby, and no litigation or governmental proceeding
seeking such an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof
and the Closing Date any material adverse change in any of the
Partnership's assets or business; and
(h) The Operating Partnership shall have acquired at or
prior to the Closing all outstanding partnership interests in the
Partnership.
The foregoing conditions may be waived by the Operating
Partnership in its sole and absolute discretion.
2.2 Time and Place. The date, time and place of the closing of the
transactions contemplated hereunder (the "CLOSING") shall be the day the
Operating Partnership receives the proceeds from the ML Loan (the "CLOSING
DATE"), at 10:00 a.m. in the office of Battle Fowler LLP, 75 East 55th Street,
New York, New York 10022. The transfers described in Sections 1.1 and 1.2 of
this Contribution Agreement, and all closing deliveries, and the consummation of
the ML Loan, shall be deemed concurrent for all purposes.
2.3 Closing Deliveries. At the Closing, the parties shall make,
execute, acknowledge and deliver, or cause to be made,executed, acknowledged and
delivered through the Attorney-in-Fact (as designated in Section 5.1 below), the
legal documents and other items (collectively, the "CLOSING DOCUMENTS")
necessary to carry out the intention of this Contribution Agreement, which
Closing Documents and other items shall include, without limitation, the
following:
-3-
<PAGE> 7
(i) A Contribution and Assumption Agreement;
(ii) The Partnership's books and records and securities
or other evidences of ownership held by the Contributor; and
(iii) An affidavit from the Contributor, stating under
penalty of perjury, the Contributors's United States Taxpayer
Identification Number and that the Contributor is not a
foreign person pursuant to section 1445(b)(2) of the Internal
Revenue Code of 1986, as amended (the "CODE") and a comparable
affidavit satisfying California and any other withholding
requirements.
2.4 Closing Costs. The Operating Partnership shall pay any
documentary transfer taxes, escrow charges, title charges and recording taxes or
fees incurred in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CONTRIBUTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Contributor hereby makes to the Operating Partnership, with respect to the
Interest, each of the representations and warranties set forth in this Article
III, which representations and warranties (unless otherwise noted) are true as
of the date hereof. As a condition to the Operating Partnership's obligation to
purchase the Interest in exchange of payment of the Consideration.
3.1 Title to Interest. (a) The Contributor owns beneficially and
of record, free and clear of any claim, lien, pledge (except for pledges
relating to the debt or equity financing of any of the properties held by the
Partnership (each, a "Property") or encumbrances arising under the Partnership
Agreement pursuant to which the Interest was issued (any such pledge, a
"PERMITTED PLEDGE")), voting agreement, option, charge, security interest,
mortgage, deed of trust, encumbrance, right of assignment, purchase right or
other rights of any nature whatsoever (each, an "ENCUMBRANCE"), and has full
power and authority to convey free and clear of any Encumbrances, its Interest
and, upon delivery of a Contribution and Assumption Agreement by the Contributor
conveying its Interest and delivery of the Consideration by the Operating
Partnership for such Interest as herein provided, the Operating Partnership will
acquire good and valid title thereto, free and clear of any Encumbrance, except
Encumbrances created in favor of the Operating Partnership by the transactions
contemplated hereby.
(b) The Interest has been validly issued and the Contributor has
funded (or will fund before the same is past due) all capital contributions and
advances to the Partnership that are required to be funded or advanced prior to
the date hereof and the Closing.
-4-
<PAGE> 8
(c) There are no agreements, instruments or understandings with
respect to the Interest except as set forth in the Partnership Agreement.
(d) No Permitted Pledge will be in existence as of the date of the
Closing, and the Contributor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(e) In making the representations in this Section 3.1 regarding
the absence of Encumbrances, the Contributor may assume that the consents and
waivers of rights set forth in Section 6.9 hereof have been given by all
partners of the Partnership.
3.2 Organization; Authority; No Conflicts. (a) If the Contributor
is not a natural person, the Contributor is a corporation, limited partnership,
general partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its organization.
(b) Such Contributor has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of such Contributor pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of such
Contributor's Interest to the Operating Partnership in accordance
with this Agreement.
(c) All applicable corporate, partnership, limited liability
company, trust or other action necessary for such Contributor to execute and
deliver this Agreement, the Closing Documents and each other agreement, document
and instrument executed by or on behalf of Contributor pursuant to this
Agreement, and to perform the transactions contemplated hereby and thereby, has
been taken, or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of
such Contributor pursuant to this Agreement constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligation of such
Contributor, each enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of such Contributor:
-5-
<PAGE> 9
(i) does not and will not violate such Contributor's charter
and/or bylaws, partnership agreement, operating agreement or
declaration of trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to such Contributor or require
such Contributor to obtain any approval, consent or waiver of, or
make any filing with, any person or authority (governmental or
otherwise) that has not been obtained or made and which does not
remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of
trust, mortgage, loan or credit agreement or any other agreement,
contract, instrument, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to
which such Contributor is a party or by which the property of such
Contributor is bound or affected, or result in the creation of any
Encumbrance on any of the property or assets of the Partnership.
(f) In making the representations set forth in this Section 3.2,
each Contributor may assume that
(i) the consents and waivers of rights set forth in Section
6.9 hereof have been given by all partners of the Partnership, and
(ii) for purposes of making such representation as of the date
hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Contributor knows of no litigation or
proceeding, whether judicial, administrative or arbitral, pending or overtly
threatened, affecting all or any portion of Interest or such Contributor's
ability to consummate the transactions contemplated hereby.
(b) Such Contributor knows of no outstanding order, writ,
injunction or decree of any court, government, governmental entity or authority
or arbitration against or affecting all or any portion of the Interest, which in
any such case would impair such Contributor's ability to enter into and perform
all of its obligations under this Agreement.
3.4 No Other Agreements. (a) The Contributor has made no
agreement with, and will not enter into any agreement with, and has no
obligation (absolute or contingent) to, any other person or entity to sell,
transfer, dispose of or in any way encumber the Interest or restricting in any
way such Contributor's ability to contribute the Interest to the capital of the
Operating Partnership or to enter into any agreement with respect to the
Interest.
(b) In making the representations set forth in this Section 3.4,
the Contributor may assume that
-6-
<PAGE> 10
(i) the consents and waivers of rights set forth in Section
6.9 hereof have been given by all partners of the Partnership, and
(ii) for purposes of making such representations as of the
date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Contributor has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
the Operating Partnership to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
3.6 Covenant to Remedy Breaches. The Contributor covenants to use
all reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of
the Contributor hereunder,
(b) to satisfy all covenants of the Contributor hereunder, and
(c) to promptly clear any breach of a representation, warranty
or covenant of the Contributor hereunder upon its learning of same.
3.7 Actions Prior to Closing. From the date hereof through the
Closing, the Contributor shall not:
(i) Sell or transfer all or any portion of the Interest;
or
(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of the Interest.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP
As a material inducement to the Contributor to enter into this
Agreement and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Contributor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
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<PAGE> 11
4.1 Authority. (a) The Operating Partnership is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware.
(b) The Operating Partnership has full right, authority, power
and capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document
and instrument to be executed and delivered by or on behalf of it
pursuant to this Agreement; and
(ii) to perform the transactions contemplated hereby and
thereby.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement,
each Closing Document to which the Operating Partnership is a party and each
such agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the agreement of limited
partnership of the Operating Partnership dated as of March 24, 1997
(the "OP AGREEMENT");
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership
or require the Operating Partnership to obtain any approval, consent
or waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of
trust, mortgage, loan or credit agreement, any other material
agreement, contract, instrument, lease, permit or authorization, or
any order, writ, judgment, injunction, decree, determination or
arbitration award to which the Operating Partnership is a party or
by which the property of the Operating Partnership is bound or
affected.
4.2 No Brokers. The Operating Partnership has not entered into,
and covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Contributor to pay any finder's fee, brokerage commission or similar payment
in connection with the transactions contemplated hereby.
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<PAGE> 12
ARTICLE V
POWER OF ATTORNEY
5.1 Grant of Power of Attorney. The Contributor does hereby
irrevocably appoint the Operating Partnership (or its designee) and each of them
individually and any successor thereof from time to time (such Operating
Partnership or designee or any such successor of any of them acting in his, her
or its capacity as attorney-in-fact pursuant hereto, the "ATTORNEY-IN-FACT") as
the true and lawful attorney-in-fact and agent of the Contributor, to act in the
name, place and stead of the Contributor to make, execute, acknowledge and
deliver all such other contracts, orders, other writings (including without
limitation the execution of any Closing Documents or other documents relating to
the acquisition by the Operating Partnership of the Interest), to provide
information to the Securities and Exchange Commission and others about the
transactions contemplated hereby and, in general, to do all things and to take
all actions which the Attorney-in-Fact in its sole discretion may consider
necessary or proper in connection with or to carry out the transactions
contemplated by this Contribution Agreement, as fully as could the Contributor
if personally present and acting. Further, the Contributor hereby grants to the
Attorney-in-Fact a proxy (the "PROXY") to vote the Contributor's Interest on any
matter related to the Transactions contemplated hereby or to the ML Loan
presented to the partners of the Partnership for a vote, including, but not
limited to, the transfer of interests in the Partnership by the other partners.
Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of the Contributor, by operation of law or by
the occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Contribution Agreement, the Attorney-in-Fact shall nevertheless be authorized
and directed to complete all such transactions as if such other act or events
had not occurred and regardless of notice thereof. The Contributor agrees that,
at the request of the Operating Partnership, it will promptly execute a separate
power of attorney and proxy on the same terms set forth in this ARTICLE 5, such
execution to be witnessed and notarized. The Contributor hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.
The Contributor acknowledges that the Operating Partnership has, and
any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
5.2 Limitation on Liability. It is understood that the
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney or Proxy granted by the Contributor hereby. The
Attorney-in-Fact makes no representations with respect to and shall have no
responsibility for the transactions contemplated hereby or the Company's
contemplated initial public offering (the "IPO"), or the acquisition of the
Interest by the Operating Partnership and shall not be liable for any error or
judgment or for any act done or omitted or for any mistake of fact or law except
for its own gross negligence or bad faith. The Contributor agrees to
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<PAGE> 13
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney or Proxy created by the Contributor hereby, as well as the cost and
expense of investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is due to
the gross negligence or bad faith of the Attorney-in-Fact. The Contributor
agrees that the Attorney-in-Fact may consult with counsel of its own choice (who
may be counsel for the Operating Partnership or its successors or affiliates),
and it shall have full and complete authorization and protection for any action
taken or suffered by it hereunder in good faith and in accordance with the
opinion of such counsel. It is understood that the Attorney-in-Fact may, without
breaching any express or implied obligation to Contributor hereunder, release,
amend or modify any other power of attorney or proxy granted by any other person
under any related agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Amendment. (a) This Agreement may only be amended by a
written agreement duly executed by the Contributor and the Operating
Partnership.
(b) No waiver of any provisions of this Agreement shall be valid
unless in writing and signed by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This
Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which
will be deemed an original and all of which shall constitute one and
the same instrument, and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York
without giving effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and
shall be enforceable by and inure to the benefit of, the parties hereto and
their respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Contributor,
or by any Contributor without the prior written consent of the Operating
Partnership, and any attempted assignment without such consent shall be void and
of no effect; provided,
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<PAGE> 14
further, however, that the Operating Partnership may assign all or any portion
of this Agreement and the Closing Documents and any agreement contemplated
hereunder or thereunder to the Company or to an affiliate of the Operating
Partnership or the Company without the consent of the Contributor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. (a) The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached.
(b) It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any federal or state
court located in the State of New York (as to which the parties agree to submit
to jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must
or may be given under this Agreement or by law shall, except as otherwise
provided, be in writing and shall be deemed to have been given
(i) when physically received by personal delivery (which shall
include the confirmed receipt of a telecopied facsimile
transmission),
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<PAGE> 15
(ii) three (3) business days after being deposited in the
United States certified or registered mail, return receipt
requested, postage prepaid, or
(iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day
delivery service (such as Federal Express);
addressed and delivered or telecopied in the case of a notice to the Operating
Partnership to the following address and telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Contributor, to the address and telecopy number set forth under the
Contributor's name on the signature page hereof.
6.9 Waiver of Rights; Consents with Respect to Partnership
Interests. (a) The Contributor acknowledges that the agreements contained herein
and the transactions contemplated hereby and any actions taken in contemplation
of the transactions contemplated hereby (including the declaration of any
dividend or distribution in the form of an additional interest in the
Partnership) may conflict with, and may not have been contemplated by, the
Partnership Agreement or another agreement among one or more holders of
interests in the Partnership or one or more of the partners of the partnership.
(b) The Contributor expressly gives all Consents (and any consent
necessary to authorize the proper parties in interest to give all Consents) and
Waivers necessary or desirable to facilitate any Conveyance Action relating to
the Partnership (as such terms are defined below).
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<PAGE> 16
(c) The Contributor further agrees that the Contributor will take
no action to enjoin, or seek damages resulting from, any Conveyance Action by
any holder of a direct or indirect interest in the Partnership.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to the Partnership,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein (whether or
not such partner or holder is a contributor under an agreement
containing terms similar to this Contribution Agreement) of its
direct or indirect interest in the Partnership to the Operating
Partnership or the Company or to another person in connection with
the formation of the Operating Partnership or the Company, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company,
(B) the direct or indirect acquisition by the Operating
Partnership or the Company of any such direct or indirect
interest, or
(C) the transactions described in or contemplated by the
prospectus relating to the IPO, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing,
including, without limitation, the following (provided that the same
are taken in furtherance of the foregoing):
(A) any sale or distribution to any person of a direct
or indirect interest in the Partnership or an undivided
tenant-in-common interest in the Property represented by such
Partnership interest,
(B) the entering into of any agreement with any person
or entity that grants to such person or entity the right to
purchase a direct or indirect interest in the Partnership, and
(C) the giving of the Consents and Waivers contained in
this Section 6.9 or consents or waivers similar thereto in
form or purpose.
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<PAGE> 17
(v) As used herein, the term "CONSENTS" means, with respect to
the Partnership, any consent deemed by the Operating Partnership to
be necessary or desirable under the Partnership Agreement or any
other agreement among all or any of the holders of interests therein
or any other agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions relating to
the Partnership or to amend the Partnership Agreement and/or
other agreements so that no provision thereof prohibits,
restricts, impairs or interferes with any Conveyance Action
(such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if
interests therein are transferred for other than cash),
(B) to admit the Operating Partnership (or the Company
or any affiliate of the Operating Partnership or the Company
in accordance with Section 6.3 above) as a substitute limited
partner or general partner of the Partnership upon the
Operating Partnership's or any such affiliate's acquisition of
a limited or general partner interest therein, respectively,
and to adopt such amendment as is necessary or desirable to
effect such admission,
(C) to adopt any amendment as may be deemed desirable by
the Operating Partnership, either simultaneously with or
immediately prior to the acquisition by the Operating
Partnership or any such affiliate of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of the Contributor or under the Partnership Agreement,
and
(D) to continue the Partnership following the transfer
of interests therein to the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
the Partnership, the waiving of any and all rights that the
Contributor may have with respect to, and (to the extent possible)
that any other person may have with respect to, or that may accrue
to the Contributor or other person upon the occurrence of, a
Conveyance Action relating to the Partnership, including, but not
limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect interest
of another partner in the Partnership (or the property
interests represented by such partnership interest) or
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<PAGE> 18
to sell the Contributor's or other person's direct or indirect
interest therein to another partner,
(D) rights to sell the Contributor's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of the Partnership because of such
Conveyance Action.
6.10 Releases and Waivers. Each of the releases and waivers
enumerated in this Section 6.10 shall become effective only upon the Closing
pursuant to ARTICLE 2.
(a) As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the
Operating Partnership's affiliates, partners (including Lawrence H.
Feldman), agents, attorneys, successors and assigns of and from, any
and all charges, complaints, claims, liabilities, damages, actions,
causes of action, losses and costs of any nature whatsoever
(collectively, "CONTRIBUTOR CLAIMS"), known or unknown, suspected or
unsuspected, arising out of or relating to the Partnership
Agreement, this Contribution Agreement or any other matter which
exists at the Closing, except for Contributor Claims arising from
the breach of any representation, warranty, covenant or obligation
under this Contribution Agreement.
(b) As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and the
Contributor's agents, attorneys, successors and assigns of and from,
any and all charges, complaints, claims, liabilities, damages,
actions, causes of action losses and costs of any nature whatsoever
(collectively, "OPERATING PARTNERSHIP CLAIMS"), known or unknown,
suspected or unsuspected, arising out of or relating to the
Partnership Agreement, this Contribution Agreement or any other
matter which exists at the Closing, except for Operating Partnership
Claims arising from the breach of any representation, warranty,
covenant or obligation under this Contribution Agreement.
(c) As of the Closing, the Contributor waives and relinquishes
all rights and benefits otherwise afforded to the Contributor under
the Partnership Agreement including, without limitation, any right
to consent to or approve of the sale or contribution by the other
partners of the Partnership of their partnership interests to the
Company or the Operating Partnership.
6.11 Confidentiality. (a) The Contributor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed Registration Statement
relating thereto with the Securities and Exchange Commission, and shall not
communicate at any time the terms of this Agreement to any person other than
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<PAGE> 19
counsel or advisors to the Contributor who agree to keep such terms confidential
and any lender holding a lien on any Property Interests.
(b) The Contributor shall treat all information received from the
Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate the same only to
counsel to the Contributor who agree to keep such information confidential.
6.12 Computation of Time. Any time period provided for herein
which shall end on a Saturday, Sunday or bank or legal holiday shall extend to
5:00 p.m. of the next full business day. All times are New York City time.
6.13 Survival. It is the express intention and agreement of the
parties hereto that the representations, warranties and covenants of the
Operating Partnership and the Contributor set forth in this Agreement shall
survive the consummation of the transactions contemplated hereby.
6.14 Time of the Essence. Time is of the essence with respect to
all obligations of the Contributor under this Agreement.
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<PAGE> 20
[SIGNATURE PAGE TO CONTRIBUTION AGREEMENT: CXX MINEOLA LIMITED PARTNERSHIP]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP,
L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
----------------------------
Name: Lawrence H. Feldman
Title: President
CONTRIBUTOR'S ADDRESS: CONTRIBUTOR:
245-77 Avenue LAURIE JACOBY
Douglaston, NY 11362
- ----------------------------
- ----------------------------
- ---------------------------- By: /s/ Laurie Jacoby
---------------------------------
Name:
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<PAGE> 21
EXHIBIT A
to
CONTRIBUTION AGREEMENT
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency
of which are hereby acknowledged, the undersigned hereby assigns, transfers,
contributes and conveys to Tower Realty Operating Partnership, L.P. a Delaware
limited partnership (the "OPERATING PARTNERSHIP"), his or its entire legal and
beneficial right, title and interest in and to all general or limited
partnership interests (the "INTEREST") held by him or it in CXX Mineola Limited
Partnership (the "PARTNERSHIP"), including, without limitation, all rights to
receive distributions of money, profits and other assets from or relating to the
Partnership or the Interest, presently existing or hereafter at any time arising
or accruing TO HAVE AND TO HOLD the same unto the Operating Partnership, its
successors and assigns, forever.
Upon the execution and delivery hereof, the Operating Partnership
assumes all obligations in respect of the Interest.
Executed: April __, 1997 LAURIE JACOBY
By:
-------------------------------
Name:
Title:
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<PAGE> 22
SCHEDULE A
LAURIE JACOBY 1% limited partnership interest in CXX Mineola Limited
Partnership
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<PAGE> 1
Exhibit 10.16
First Amendment to
Contribution Agreement
This First Amendment (this "First Amendment"), dated as of May 30,
1997, amends the Contribution Agreement, dated as of April, 1997, by and between
Tower Realty Operating Partnership, L.P. (the "Operating Partnership") and
Laurie Jacoby (the "Contributor").
Preliminary Statement
A. The Operating Partnership and the Contributor are parties to a
Contribution Agreement, dated as of April, 1997 (the "Agreement), relating to
the transfer of the Contributor's ownership of an interest (the "Interest") in
CXX Mineola Limited Partnership, a New York limited partnership (the
"Partnership"). Capitalized terms used herein and not otherwise defined shall
have the meaning ascribed to such terms in the Agreement.
B. The Partnership has distributed an undivided 1% tenant-in-
common interest in the property located at 120 Mineola Boulevard, Mineola, New
York (the "Property"), subject to its existing mortgage indebtedness, to
Contributor (the "Property Interest").
THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Agreement as amended by the First Amendment is hereby amended as follows:
1. Simultaneously with the execution and delivery of this First
Amendment, Contributor will contribute to the Operating Partnership all of his
right, title and interest to the Property Interest in exchange for $15,000. Such
contribution shall be made free and clear of any claim, lien or pledge (except
for pledges or mortgages relating to the debt or equity financing on the
Property) and shall be evidenced by a deed acceptable to the Operating
Partnership. The contribution of the Property Interest to the Operating
Partnership pursuant to this Second Amendment shall be in lieu of the
contribution to the Operating Partnership of the Partnership Interest in the
Partnership as set forth in the Agreement.
2. The Agreement, as amended by this Amendment, remains in full
force and effect.
3. This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
<PAGE> 2
4. The Operating Partnership and the Contributor now wish to
amend the Contribution Agreement to provide that this Agreement, as amended by
this Amendment, shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the 0000000conflicts of law provisions thereof.
IN WITNESS WHEREOF, the parties have duly executed this amendment as
of the date first written above.
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust Inc.,
its general partner
By: /s/ Lawrence H. Feldman
-----------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive
Officer and President
LAURIE JACOBY
By: Lawrence H. Feldman, as designee of
the Operating Partnership pursuant
to Article V of the Agreement, as
Attorney-In-Fact
/s/ Lawrence H. Feldman
-----------------------------------
Lawrence H. Feldman
2
<PAGE> 1
Exhibit 10.17
CONTRIBUTION AGREEMENT
(OP Units)
BY AND AMONG
TOWER REALTY OPERATING PARTNERSHIP, L.P.
AND
BAMA EQUITIES, INC.
Dated as of April 17, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
<S> <C>
CONTRIBUTION OF INTEREST AND EXCHANGE FOR OP UNITS.......................... 1
1.1 Contribution Transaction........................................................ 1
1.2 Exchange of OP Units............................................................ 2
1.3 Contribution of Certain Rights.................................................. 2
1.4 Treatment as Contribution....................................................... 2
1.5 Additional Documents............................................................ 2
ARTICLE II
CLOSING........................................... 2
2.1 Conditions Precedent............................................................ 2
2.3 Closing Deliveries.............................................................. 3
2.4 Closing Costs................................................................... 4
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE CONTRIBUTOR..................................... 4
3.1 Title to Interest............................................................... 4
3.2 Organization; Authority; No Conflicts........................................... 5
3.3 Litigation...................................................................... 6
3.4 No Other Agreements............................................................. 6
3.5 No Brokers...................................................................... 6
3.6 Investment Representations and Warranties....................................... 7
3.7 Covenant to Remedy Breaches..................................................... 9
3.8 Actions Prior to Closing........................................................ 9
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP................................ 9
4.1 Authority....................................................................... 9
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.2 No Brokers..................................................................... 10
ARTICLE V
POWER OF ATTORNEY.................................... 11
5.1 Grant of Power of Attorney..................................................... 11
5.2 Limitation on Liability........................................................ 11
ARTICLE VI
MISCELLANEOUS........................................ 12
6.1 Amendment...................................................................... 12
6.2 Entire Agreement; Counterparts; Applicable Law................................. 12
6.3 Assignability.................................................................. 12
6.4 Titles......................................................................... 13
6.5 Third Party Beneficiary........................................................ 13
6.6 Severability................................................................... 13
6.7 Equitable Remedies............................................................. 13
6.8 Notices; Exercise of Option.................................................... 13
6.9 Waiver of Rights; Consents with Respect to Partnership Interests............... 14
6.10 Releases and Waivers........................................................... 17
6.11 Confidentiality................................................................ 17
6.12 Computation of Time............................................................ 18
6.13 Survival....................................................................... 18
6.14 Time of the Essence............................................................ 18
</TABLE>
Exhibit
A. Contribution and Assumption Agreement
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<PAGE> 4
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "AGREEMENT") dated as of the 17th
day of April, 1997 is entered into by and among TOWER REALTY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"),
and Bama Equities, Inc. (the "CONTRIBUTOR").
R E C I T A L S:
A. The Contributor own an interest (the "INTEREST") in CXX
Mineola Limited Partnership, a New York limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to acquire through a
contribution to capital from the Contributor, and the Contributor desires to
contribute to the Operating Partnership, on the terms and conditions set forth
herein, all of the Contributor's rights, title and interest as a partner of the
Partnership in exchange for units or limited partnership interests ("OP UNITS")
in the Operating Partnership.
C. The Operating Partnership desires to acquire the Interest
in connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner as well as a limited
partner of the Operating Partnership, and (ii) the proposed loan from Merrill
Lynch, Pierce, Fenner & Smith, Incorporated or an affiliate thereof (the "ML
LOAN") to the Partnership.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and the Contributor agree as follows:
ARTICLE I
CONTRIBUTION OF INTEREST AND EXCHANGE FOR OP UNITS
1.1 Contribution Transaction. At the Closing (as defined in
Section 2.2 herein) and subject to the terms and conditions contained in this
Contribution Agreement, the Contributor shall transfer to the Operating
Partnership, absolutely and unconditionally, all of his Interest (as such term
is defined in Recital B herein). The contribution of the Contributor's Interest
shall be evidenced by a "CONTRIBUTION AND ASSUMPTION AGREEMENT" in substantially
the form of EXHIBIT "A" attached hereto. The parties shall take such additional
actions and execute such additional documentation as may be required by the
agreement of limited partnership dated as of January 18, 1987 of the Partnership
(the "PARTNERSHIP AGREEMENT") and the agreement of
<PAGE> 5
limited partnership dated as of March 24, 1997 of the Operating Partnership (the
"OP AGREEMENT") in order to effect the transactions contemplated hereby.
1.2 Exchange of OP Units. The Operating Partnership shall, in
exchange for the Interest, transfer to the Contributor 4,000 OP Units (the
"CONSIDERATION"). The transfer of the OP Units to the contributor shall be
evidenced by an amendment (the "AMENDMENT") to the OP Agreement. The parties
shall take such additional actions and execute such additional documentation as
may be required by the Partnership Agreement and the OP Agreement in order to
effect the transactions contemplated hereby.
1.3 Contribution of Certain Rights. Effective upon the
Closing, the Contributor hereby contributes to the Operating Partnership all of
its rights and interests, if any, including rights to indemnification in favor
of the Contributor, if any, under the agreements pursuant to which the
Contributor or its affiliates initially acquired the Interest transferred
pursuant to this Contribution Agreement.
1.4 Treatment as Contribution. The transfer, assignment and
exchange of interests effectuated with respect to the Operating Partnership,
pursuant to this Contribution Agreement, shall constitute a "Capital
Contribution" pursuant to Article 4 of the OP Agreement and is intended to be
governed by Section 721(a) of the Internal Revenue Code of 1986, as amended (the
"CODE").
1.5 Additional Documents. At the Closing of the Company's
contemplated initial public offering (the "IPO"), Contributor will enter into
with the Operating Partnership, the Company or the Underwriters for the IPO a
lock-up agreement, exchange rights agreement and registration rights agreement
substantially in the same form as those entered into by Lawrence H.
Feldman at the closing of the IPO.
ARTICLE II
CLOSING
2.1 Conditions Precedent. The Closing of the ML Loan is a
condition precedent to the obligations of both parties to this Contribution
Agreement to effect the transactions contemplated by this Contribution Agreement
on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and
correct in all material respects on the date such representations
and warranties were made, and shall be true and correct in all
material respects on the Closing Date as if made at and as of such
date;
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(b) Each of the obligations of the Contributor to be
performed by it shall have been duly performed by it on or before
the Closing Date;
(c) Concurrently with the Closing, the Contributor shall
have executed and delivered to the Operating Partnership the
documents required to be delivered pursuant to Section 2.3 hereof;
(d) The Contributor shall have obtained all necessary
consents or approvals of governmental authorities or third parties
to the consummation of the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, stature, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been
enacted, entered, promulgated or enforced by any court of competent
jurisdiction or governmental or regulatory authority or
instrumentality that prohibits the consummation of the transactions
contemplated hereby, and no litigation or governmental proceeding
seeking such an order shall be pending or threatened; and
(g) There shall not have occurred between the date hereof
and the Closing Date any material adverse change in any of the
Partnership's assets or business.
The foregoing conditions may be waived by the Operating Partnership
in its sole and absolute discretion.
2.2 Time and Place. The date, time and place of the closing of
the transactions contemplated hereunder (the "CLOSING") shall be the day the
Operating Partnership receives the proceeds from the ML Loan (the "CLOSING
DATE"), at 10:00 a.m. in the office of Battle Fowler LLP, 75 East 55th Street,
New York, New York 10022. The transfers described in Section 1.1 and 1.2 of this
Contribution Agreement, and all closing deliveries, and the consummation of the
ML Loan, shall be deemed concurrent for all purposes.
2.3 Closing Deliveries. At the Closing, the parties shall make,
execute, acknowledge and deliver, or cause to be made,executed, acknowledged and
delivered through the Attorney-in-Fact (as designated in Section 6.1 below), the
legal documents and other items (collectively, the "CLOSING DOCUMENTS")
necessary to carry out the intention of this Contribution Agreement, which
Closing Documents and other items shall include, without limitation, the
following:
(i) A Contribution and Assumption Agreement;
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(ii) The Amendment evidencing the transfer of OP Units
to the Contributor;
(iii) The Partnership's books and records and securities
or other evidences of ownership held by the Contributor; and
(iv) An affidavit from the Contributor, stating under
penalty of perjury, the Contributors's United States Taxpayer
Identification Number and that the Contributor is not a
foreign person pursuant to section 1445(b)(2) of the Code and
a comparable affidavit satisfying California and any other
withholding requirements.
2.4 Closing Costs. The Operating Partnership shall pay any
documentary transfer taxes, escrow charges, title charges and recording taxes or
fees incurred in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CONTRIBUTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Contributor hereby makes to the Operating Partnership, with respect to the
Interest, each of the representations and warranties set forth in this Article
III, which representations and warranties (unless otherwise noted) are true as
of the date hereof. As a condition to the Operating Partnership's obligation to
consummate the contribution of the Contributor's Interests to the capital of the
Operating Partnership, such representations and warranties must be true as of
the Closing Date.
3.1 Title to Interest. (a) The Contributor owns beneficially
and of record, free and clear of any claim, lien, pledge (except for pledges
relating to the debt or equity financing of any of the properties held by the
Partnership (each, a "Property") or encumbrances arising under the Partnership
Agreement pursuant to which the Interest was issued (any such pledge, a
"PERMITTED PLEDGE")), voting agreement, option, charge, security interest,
mortgage, deed of trust, encumbrance, right of assignment, purchase right or
other rights of any nature whatsoever (each, an "ENCUMBRANCE"), and has full
power and authority to convey free and clear of any Encumbrances, its Interest
and, upon delivery of a Contribution and Assumption Agreement by the Contributor
conveying its Interest and delivery of the Consideration by the Operating
Partnership for such Interest as herein provided, the Operating Partnership will
acquire, as a contribution to its capital, good and valid title thereto, free
and clear of any Encumbrance, except Encumbrances created in favor of the
Operating Partnership by the transactions contemplated hereby.
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(b) The Interest has been validly issued and the Contributor
has funded (or will fund before the same is past due) all capital contributions
and advances to the Partnership that are required to be funded or advanced prior
to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with
respect to the Interest except as set forth in the Partnership Agreement.
(d) No Permitted Pledge will be in existence as of the date of
the Closing, and the Contributor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(e) In making the representations in this Section 3.1 regarding
the absence of Encumbrances, the Contributor may assume that the consents and
waivers of rights set forth in Section 6.9 hereof have been given by all
partners of the Partnership.
3.2 Organization; Authority; No Conflicts. (a) If the Contributor
is not a natural person, the Contributor is a corporation, limited partnership,
general partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its organization.
(b) Such Contributor has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of such Contributor pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of such
Contributor's Interest to the Operating Partnership in accordance
with this Agreement.
(c) All applicable corporate, partnership, limited liability
company, trust or other action necessary for such Contributor to execute and
deliver this Agreement, the Closing Documents and each other agreement, document
and instrument executed by or on behalf of Contributor pursuant to this
Agreement, and to perform the transactions contemplated hereby and thereby, has
been taken, or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of
such Contributor pursuant to this Agreement constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligation of such
Contributor, each enforceable in accordance with its respective terms.
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<PAGE> 9
(e) Except for any breaches, violations or defaults which will
be waived or cured, or discharged or repaid prior to or contemporaneously with
the Closing, the execution, delivery and performance of this Agreement, the
Closing Documents and each other agreement, document and instrument to be
executed and delivered by or on behalf of such Contributor:
(i) does not and will not violate such Contributor's charter
and/or bylaws, partnership agreement, operating agreement or
declaration of trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to such Contributor or require
such Contributor to obtain any approval, consent or waiver of, or
make any filing with, any person or authority (governmental or
otherwise) that has not been obtained or made and which does not
remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of
trust, mortgage, loan or credit agreement or any other agreement,
contract, instrument, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to
which such Contributor is a party or by which the property of such
Contributor is bound or affected, or result in the creation of any
Encumbrance on any of the property or assets of the Partnership.
(f) In making the representations set forth in this Section 3.2,
each Contributor may assume that
(i) the consents and waivers of rights set forth in Section
6.9 hereof have been given by all partners of the Partnership, and
(ii) for purposes of making such representation as of the date
hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Contributor knows of no litigation or
proceeding, whether judicial, administrative or arbitral, pending or overtly
threatened, affecting all or any portion of Interest or such Contributor's
ability to consummate the transactions contemplated hereby.
(b) Such Contributor knows of no outstanding order, writ,
injunction or decree of any court, government, governmental entity or authority
or arbitration against or affecting all or any portion of the Interest, which in
any such case would impair such Contributor's ability to enter into and perform
all of its obligations under this Agreement.
3.4 No Other Agreements. (a) The Contributor has made no agreement
with, and will not enter into any agreement with, and has no obligation
(absolute or contingent) to, any other person or entity to sell, transfer,
dispose of or in any way encumber the Interest or restricting in
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<PAGE> 10
any way such Contributor's ability to contribute the Interest to the capital of
the Operating Partnership or to enter into any agreement with respect to the
Interest.
(b) In making the representations set forth in this Section 3.4,
each Contributor may assume that
(i) the consents and waivers of rights set forth in Section
6.9 hereof have been given by all partners of the Partnership, and
(ii) for purposes of making such representations as of the
date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Contributor has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
the Operating Partnership to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Contributor, by reason of its business and financial
experience, together with the business and financial experience of those
persons, if any, retained by it to represent or advise it with respect to its
investment in OP Units,
(A) has such knowledge, sophistication and experience in
financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of, and of making an informed investment
decision with respect to, an investment in OP Units,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests, and
(C) is capable of bearing the economic risk of such
investment.
(ii) (A) The Contributor is an "accredited investor" as
defined in Rule 501 of the regulations promulgated under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
(B) If the Contributor has retained or retains a person
to represent or advise it with respect to its investment in OP
Units, the Contributor will advise the Operating Partnership
of such retention and, at the Operating Partnership's request,
the Contributor shall, prior to or at the Closing,
(I) acknowledge in writing such representation,
and
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(II) cause such representative or advisor to
deliver a certificate to the Operating Partnership
containing such representations as may be reasonably
requested by the Operating Partnership.
(b) (i) The Contributor understands that an investment in the
Operating Partnership involves substantial risks.
(ii) The Contributor has been given the opportunity to make a
thorough investigation of the proposed activities of the Operating
Partnership.
(iii) The Contributor has been afforded the opportunity to
obtain any additional information requested by it.
(iv) The Contributor has had an opportunity to ask questions
of and receive answers from representatives of the Operating
Partnership concerning the Operating Partnership and its proposed
activities and the terms and conditions of an investment in OP
Units.
(c) (i) The OP Units to be issued to the Contributor at the
Closing will be acquired by the Contributor for its own account, for investment
only and not with a view to, or with any intention of, a distribution or resale
thereof, in whole or in part, or the grant of any participation therein.
(ii) The Contributor was not formed for the specific purpose
of acquiring an interest in the Operating Partnership.
(d) (i) The Contributor acknowledges that
(A) the OP Units to be issued to the Contributor at the
Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and
applicable state securities laws and, if such OP Units are
represented by certificates, such certificates will bear a
legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of the Contributor contained herein,
(C) the OP Units to be issued to the Contributor at the
Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there is no public market for the OP Units, and
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<PAGE> 12
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act
or any state securities laws or to take any action that would
make available any exemption from the registration
requirements of such laws.
(ii) The Contributor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the OP Agreement and in the
lock-up agreement referred to in Section 1.9, such Contributor may
have to bear the economic risk of the investment commitment
evidenced by this Agreement and any OP Units issued hereunder for an
indefinite period of time.
(e) The address previously provided by the Contributor to the
Operating Partnership is the address of the Contributor's principal place of
business or, if a natural person, the address of the Contributor's residence,
and the Contributor has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal place of business or residence is situated.
3.7 Covenant to Remedy Breaches. The Contributor covenants to use
all reasonable efforts within its control
(a) to prevent the breach of any representation or warranty
of the Contributor hereunder,
(b) to satisfy all covenants of the Contributor hereunder,
and
(c) to promptly clear any breach of a representation,
warranty or covenant of the Contributor hereunder upon its learning
of same.
3.8 Actions Prior to Closing. From the date hereof through
the Closing, the Contributor shall not:
(i) Sell or transfer all or any portion of the Interest;
or
(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of the Interest.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP
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As a material inducement to the Contributor to enter into this
Agreement and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Contributor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document
and instrument to be executed and delivered by or on behalf of it
pursuant to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue OP Units to the Contributor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the
Operating Partnership is a party and each agreement, document and instrument
executed and delivered by the Operating Partnership pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Operating Partnership, each enforceable in
accordance with its respective terms.
(d) The execution, delivery and performance of this Agreement,
each Closing Document to which the Operating Partnership is a party and each
such agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the OP Agreement;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership
or require the Operating Partnership to obtain any approval, consent
or waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of
trust, mortgage, loan or credit agreement, any other material
agreement, contract, instrument, lease, permit or authorization, or
any order, writ, judgment,
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injunction, decree, determination or arbitration award to which the
Operating Partnership is a party or by which the property of the
Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered
into, and covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Contributor to pay any finder's fee, brokerage commission or similar payment
in connection with the transactions contemplated hereby.
ARTICLE V
POWER OF ATTORNEY
5.1 Grant of Power of Attorney. The Contributor does hereby
irrevocably appoint the Operating Partnership (or its designee) and each of them
individually and any successor thereof from time to time (such Operating
Partnership or designee or any such successor of any of them acting in his, her
or its capacity as attorney-in-fact pursuant hereto, the "ATTORNEY-IN-FACT") as
the true and lawful attorney-in-fact and agent of the Contributor, to act in the
name, place and stead of the Contributor to make, execute, acknowledge and
deliver all such other contracts, orders, other writings (including without
limitation the execution of any Closing Documents or other documents relating to
the acquisition by the Operating Partnership of the Interest), to provide
information to the Securities and Exchange Commission and others about the
transactions contemplated hereby and, in general, to do all things and to take
all actions which the Attorney-in-Fact in its sole discretion may consider
necessary or proper in connection with or to carry out the transactions
contemplated by this Contribution Agreement, as fully as could the Contributor
if personally present and acting. Further, the Contributor hereby grants to the
Attorney-in-Fact a proxy (the "PROXY") to vote the Contributor's Interest on any
matter related to the Transactions contemplated hereby or to the ML Loan
presented to the partners of the Partnership for a vote, including, but not
limited to, the transfer of interests in the Partnership by the other partners.
Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of the Contributor, by operation of law or by
the occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Contribution Agreement, the Attorney-in-Fact shall nevertheless be authorized
and directed to complete all such transactions as if such other act or events
had not occurred and regardless of notice thereof. The Contributor agrees that,
at the request of the Operating Partnership, it will promptly execute a separate
power of attorney and proxy on the same terms set forth in this ARTICLE 6, such
execution to be witnessed and notarized. The Contributor hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.
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The Contributor acknowledges that the Operating Partnership has, and
any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
5.2 Limitation on Liability. It is understood that the
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney or Proxy granted by the Contributor hereby. The
Attorney-in-Fact makes no representations with respect to and shall have no
responsibility for the transactions contemplated hereby or the IPO, or the
acquisition of the Interest by the Operating Partnership and shall not be liable
for any error or judgment or for any act done or omitted or for any mistake of
fact or law except for its own gross negligence or bad faith. The Contributor
agrees to indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact
harmless against any loss, claim, damage or liability incurred on its part
arising out of or in connection with it acting as the Attorney-in-Fact under the
Power of Attorney or Proxy created by the Contributor hereby, as well as the
cost and expense of investigating and defending against any such loss, claim,
damage or liability, except to the extent such loss, claim, damage or liability
is due to the gross negligence or bad faith of the Attorney-in-Fact. The
Contributor agrees that the Attorney-in-Fact may consult with counsel of its own
choice (who may be counsel for the Operating Partnership or its successors or
affiliates), and it shall have full and complete authorization and protection
for any action taken or suffered by it hereunder in good faith and in accordance
with the opinion of such counsel. It is understood that the Attorney-in-Fact
may, without breaching any express or implied obligation to Contributor
hereunder, release, amend or modify any other power of attorney or proxy granted
by any other person under any related agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Amendment. (a) This Agreement may only be amended by a written
agreement duly executed by the Contributor and the Operating Partnership.
(b) No waiver of any provisions of this Agreement shall be
valid unless in writing and signed by the party against whom enforcement is
sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which
will be deemed an original and all of which shall constitute one and
the same instrument, and
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(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York
without giving effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and
shall be enforceable by and inure to the benefit of, the parties hereto and
their respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Contributor,
or by any Contributor without the prior written consent of the Operating
Partnership, and any attempted assignment without such consent shall be void and
of no effect; provided, further, however, that the Operating Partnership may
assign all or any portion of this Agreement and the Closing Documents and any
agreement contemplated hereunder or thereunder to the Company or to an affiliate
of the Operating Partnership or the Company without the consent of the
Contributor.
6.4 Titles. The titles and captions of the Articles, Sections
and paragraphs of this Agreement are included for convenience of reference only
and shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or
the application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision and to execute any amendment,
consent or agreement deemed necessary or desirable by the Operating Partnership
to effect such replacement.
6.7 Equitable Remedies. (a) The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached.
(b) It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any federal or state
court located in the State of New York (as to which the
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parties agree to submit to jurisdiction for the purposes of such action), this
being in addition to any other remedy to which they are entitled under this
Agreement or otherwise at law or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must
or may be given under this Agreement or by law shall, except as otherwise
provided, be in writing and shall be deemed to have been given
(i) when physically received by personal delivery (which shall
include the confirmed receipt of a telecopied facsimile
transmission),
(ii) three (3) business days after being deposited in the
United States certified or registered mail, return receipt
requested, postage prepaid, or
(iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day
delivery service (such as Federal Express);
addressed and delivered or telecopied in the case of a notice to the Operating
Partnership to the following address and telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice to the
Contributor, to the address and telecopy number set forth under the
Contributor's name on the signature page hereof.
6.9 Waiver of Rights; Consents with Respect to Partnership
Interests. (a) The Contributor acknowledges that the agreements contained herein
and the transactions contemplated hereby and any actions taken in contemplation
of the transactions contemplated hereby (including the declaration of any
dividend or distribution in the form of an additional interest in the
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Partnership) may conflict with, and may not have been contemplated by, the
Partnership Agreement or another agreement among one or more holders of
interests in the Partnership or one or more of the partners of the partnership.
(b) The Contributor expressly gives all Consents (and any
consent necessary to authorize the proper parties in interest to give all
Consents) and Waivers necessary or desirable to facilitate any Conveyance Action
relating to the Partnership (as such terms are defined below).
(c) The Contributor further agrees that the Contributor will
take no action to enjoin, or seek damages resulting from, any Conveyance Action
by any holder of a direct or indirect interest in the Partnership.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to the Partnership,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein (whether or
not such partner or holder is a contributor under an agreement
containing terms similar to this Contribution Agreement) of its
direct or indirect interest in the Partnership to the Operating
Partnership or the Company or to another person in connection with
the formation of the Operating Partnership or the Company, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company,
(B) the direct or indirect acquisition by the Operating
Partnership or the Company of any such direct or indirect
interest, or
(C) the transactions described in or contemplated by the
prospectus relating to the IPO, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing,
including, without limitation, the following (provided that the same
are taken in furtherance of the foregoing):
(A) any sale or distribution to any person of a direct
or indirect interest in the Partnership or an undivided
tenant-in-common interest in the Property represented by such
Partnership interest,
-15-
<PAGE> 19
(B) the entering into of any agreement with any person
or entity that grants to such person or entity the right to
purchase a direct or indirect interest in the Partnership, and
(C) the giving of the Consents and Waivers contained in
this Section 6.9 or consents or waivers similar thereto in
form or purpose.
(v) As used herein, the term "CONSENTS" means, with respect to
the Partnership, any consent deemed by the Operating Partnership to
be necessary or desirable under the Partnership Agreement or any
other agreement among all or any of the holders of interests therein
or any other agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions relating to
the Partnership or to amend the Partnership Agreement and/or
other agreements so that no provision thereof prohibits,
restricts, impairs or interferes with any Conveyance Action
(such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if
interests therein are transferred for other than cash),
(B) to admit the Operating Partnership (or the Company
or any affiliate of the Operating Partnership or the Company
in accordance with Section 6.3 above) as a substitute limited
partner or general partner of the Partnership upon the
Operating Partnership's or any such affiliate's acquisition of
a limited or general partner interest therein, respectively,
and to adopt such amendment as is necessary or desirable to
effect such admission,
(C) to adopt any amendment as may be deemed desirable by
the Operating Partnership, either simultaneously with or
immediately prior to the acquisition by the Operating
Partnership or any such affiliate of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of the Contributor or under the Partnership Agreement,
and
(D) to continue the Partnership following the transfer
of interests therein to the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
the Partnership, the waiving of any and all rights that the
Contributor may have with respect to, and (to the extent possible)
that any other person may have with respect to, or that may accrue
to the Contributor or other person upon the occurrence of, a
Conveyance Action relating to the Partnership, including, but not
limited to, the following rights:
-16-
<PAGE> 20
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect interest
of another partner in the Partnership (or the property
interests represented by such partnership interest) or to sell
the Contributor's or other person's direct or indirect
interest therein to another partner,
(D) rights to sell the Contributor's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of the Partnership because of such
Conveyance Action.
6.10 Releases and Waivers. Each of the releases and waivers
enumerated in this Section 6.10 shall become effective only upon the Closing and
the exchange of the Interest for the OP Units pursuant to ARTICLE 1.
(a) As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the
Operating Partnership's affiliates, partners (including Lawrence H.
Feldman), agents, attorneys, successors and assigns of and from, any
and all charges, complaints, claims, liabilities, damages, actions,
causes of action, losses and costs of any nature whatsoever
(collectively, "CONTRIBUTOR CLAIMS"), known or unknown, suspected or
unsuspected, arising out of or relating to the Partnership
Agreement, this Contribution Agreement or any other matter which
exists at the Closing, except for Contributor Claims arising from
the breach of any representation, warranty, covenant or obligation
under this Contribution Agreement.
(b) As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and the
Contributor's agents, attorneys, successors and assigns of and from,
any and all charges, complaints, claims, liabilities, damages,
actions, causes of action losses and costs of any nature whatsoever
(collectively, "OPERATING PARTNERSHIP CLAIMS"), known or unknown,
suspected or unsuspected, arising out of or relating to the
Partnership Agreement, this Contribution Agreement or any other
matter which exists at the Closing, except for Operating Partnership
Claims arising from the breach of any representation, warranty,
covenant or obligation under this Contribution Agreement.
(c) As of the Closing, the Contributor waives and relinquishes
all rights and benefits otherwise afforded to the Contributor under
the Partnership Agreement including, without limitation, any right
to consent to or approve of the sale or contribution by the
-17-
<PAGE> 21
other partners of the Partnership of their partnership interests to
the Company or the Operating Partnership.
6.11 Confidentiality. (a) The Contributor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed Registration Statement
relating thereto with the Securities and Exchange Commission, and shall not
communicate at any time the terms of this Agreement to any person other than
counsel or advisors to the Contributor who agree to keep such terms confidential
and any lender holding a lien on any Property Interests.
(b) The Contributor shall treat all information received from
the Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate the same only to
counsel to the Contributor who agree to keep such information confidential.
6.12 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.13 Survival. It is the express intention and agreement of
the parties hereto that the representations, warranties and covenants of the
Operating Partnership and the Contributor set forth in this Agreement shall
survive the consummation of the transactions contemplated hereby.
6.14 Time of the Essence. Time is of the essence with respect to
all obligations of the Contributor under this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP,
L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
-------------------------------
Name: Lawrence H. Feldman
Title: President
-18-
<PAGE> 22
CONTRIBUTOR'S ADDRESS: CONTRIBUTOR:
- -------------------------- BAMA EQUITIES, INC.
- --------------------------
- --------------------------
- -------------------------- By: /s/ Maurice A. Deane
- -------------------------- -----------------------------------
Name: Maurice A. Deane
Title: President
-19-
<PAGE> 23
EXHIBIT A
to
CONTRIBUTION AGREEMENT
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby assigns, transfers,
contributes and conveys to Tower Realty Operating Partnership, L.P. a Delaware
limited partnership (the "OPERATING PARTNERSHIP"), his or its entire legal and
beneficial right, title and interest in and to all general or limited
partnership interests (the "INTEREST") held by him or it in CXX Mineola Limited
Partnership (the "PARTNERSHIP"), including, without limitation, all rights to
receive distributions of money, profits and other assets from or relating to the
Partnership or the Interest, presently existing or hereafter at any time arising
or accruing TO HAVE AND TO HOLD the same unto the Operating Partnership, its
successors and assigns, forever.
Upon the execution and delivery hereof, the Operating Partnership
assumes all obligations in respect of the Partnership Interest.
Executed: April __, 1997 BAMA EQUITIES, INC.
By:
-----------------------------------
Name:
Title:
-20-
<PAGE> 1
Exhibit 10.18
Amendment to
Contribution Agreement
This Amendment (this "Amendment"), dated as of May 6, 1997, amends the
Contribution Agreement, dated as of April 17, 1997, by and among Tower Realty
Operating Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"), and Bama Equities, Inc.
Preliminary Statement
The Operating Partnership and the Contributor are parties to a
Contribution Agreement, dated as of April 17, 1997 (the "Agreement"), relating
to the transfer of the Contributor's ownership of an interest (the "Interest")
in CXX Mineola Limited Partnership, a New York limited partnership. The
Agreement sets forth certain provisions regarding such transfer in return for OP
Units that were to be provided at the time of such transfer. The Operating
Partnership and the Contributor wish to amend the Agreement to provide that the
OP Units will be transferred to the Contributor at the closing of the proposed
initial public offering (the "IPO") of Tower Realty Trust, Inc., the general
partner and a limited partner of the Operating Partnership (the "Company").
Capitalized terms used herein and not otherwise defined shall have the meaning
ascribed to such terms in the Agreement.
THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. The transfer of the OP Units to the Contributor will occur at the
closing of the IPO.
2. In the event that the closing of the IPO shall not have occurred on or
prior to December 31, 1997, the Operating Partnership shall sell, assign,
transfer and convey the Interest to the Contributor upon the payment of all
amounts outstanding pursuant to the Purchase Agreement dated as of March 31,
1997 among the Operating Partnership, the Company and the Investors named
therein, and the notes issued thereunder.
3. The Agreement, as amended by this Amendment, remains in full force and
effect.
4. This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE> 2
5. This Agreement, as amended by this Amendment, shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of New York without giving effect to the conflicts of law provisions
thereof.
IN WITNESS WHEREOF, the parties have duly executed this amendment as of
the date first written above.
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc.,
its General Partner
By: /s/ Lawrence Feldman
------------------------------------
Name: Lawrence Feldman
Title: President
BAMA EQUITIES, INC.
/s/ Maurice Deane
----------------------------------------
Name: Maurice Deane
Title: President
<PAGE> 1
Exhibit 10.19
Second Amendment to
Contribution Agreement
This Second Amendment (this "Second Amendment"), dated as of
May 30, 1997, amends the Contribution Agreement, dated as of April 17, 1997, by
and between Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "Operating Partnership") and Bama Equities, Inc. (the
"Contributor") and rescinds the Amendment to Contribution Agreement dated as of
May 6, 1997.
Preliminary Statement
A. The Operating Partnership and the Contributor are parties
to a Contribution Agreement, dated as of April 17, 1997 (the "Agreement),
relating to the transfer of the Contributor's ownership of an interest (the
"Interest") in CXX Mineola Limited Partnership, a New York limited partnership
(the "Partnership"). The Contribution Agreement was amended by the parties
pursuant to an Amendment to the Contribution Agreement dated May 6, 1997 (the
"First Amendment"). Capitalized terms used herein and not otherwise defined
shall have the meaning ascribed to such terms in the Agreement.
B. The Partnership has distributed an undivided 50%
tenant-in-common interest in the property located at 120 Mineola Boulevard,
Mineola, New York (the "Property"), subject to its existing mortgage
indebtedness, to Contributor (the "Property Interest").
THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Agreement, as amended by the First Amendment, is hereby further amended as
follows:
1. The First Amendment is hereby terminated and shall have no
further force and effect.
2. Simultaneously with the execution and delivery of this
Second Amendment, Contributor will contribute to the Operating Partnership all
of his right, title and interest to the Property Interest in exchange for 4,000
OP Units. Such contribution shall be made free and clear of any claim, lien or
pledge (except for pledges or mortgages relating to the debt or equity financing
on the Property) and shall be evidenced by a deed acceptable to the Operating
Partnership. The contribution of the Property Interest to the Operating
Partnership pursuant to this Second Amendment shall be in lieu of the
contribution to the Operating Partnership of the Partnership Interest in the
Partnership as set forth in the Agreement.
<PAGE> 2
3. The Agreement, as amended by this Amendment, remains in
full force and effect.
4. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5. The Operating Partnership and the Contributor now wish to
amend the Contribution Agreement to provide that this Agreement, as amended by
this Amendment, shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
IN WITNESS WHEREOF, the parties have duly executed this
amendment as of the date first written above.
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust Inc.,
its general partner
By: /s/ Lawrence H. Feldman
---------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive
Officer and President
BAMA EQUITIES, INC.
By: Lawrence H. Feldman, as designee of
the Operating Partnership pursuant
to Article V of the Agreement, as
Attorney-In-Fact
/s/ Lawrence H. Feldman
-----------------------
Lawrence H. Feldman
-2-
<PAGE> 1
Exhibit 10.20
CONTRIBUTION AGREEMENT
(Cash--from prior owners of Stellar Associates)
BY AND AMONG
TOWER REALTY OPERATING PARTNERSHIP, L.P.
AND
VALERIE HERTS
Dated as of April 29, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I CONTRIBUTION OF INTEREST AND EXCHANGE FOR CASH.......................................... 1
1.1 Contribution Transaction................................................................ 1
1.2 Contribution of Certain Rights.......................................................... 2
1.3 Consideration........................................................................... 2
ARTICLE II CLOSING................................................................................. 2
2.1 Conditions Precedent.................................................................... 2
2.3 Closing Deliveries...................................................................... 3
2.4 Closing Costs........................................................................... 3
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
CONTRIBUTOR............................................................................. 4
3.1 Title to Interest....................................................................... 4
3.2 Organization; Authority; No Conflicts................................................... 4
3.3 Litigation.............................................................................. 6
3.4 No Other Agreements..................................................................... 6
3.5 No Brokers.............................................................................. 6
3.6 Covenant to Remedy Breaches............................................................. 6
3.7 Actions Prior to Closing................................................................ 7
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
OPERATING PARTNERSHIP................................................................... 7
4.1 Authority............................................................................... 7
4.2 No Brokers.............................................................................. 8
ARTICLE V POWER OF ATTORNEY....................................................................... 8
5.1 Grant of Power of Attorney.............................................................. 8
5.2 Limitation on Liability................................................................. 9
ARTICLE VI MISCELLANEOUS........................................................................... 9
6.1 Amendment............................................................................... 9
6.2 Entire Agreement; Counterparts; Applicable Law.......................................... 10
6.3 Assignability........................................................................... 10
6.4 Titles.................................................................................. 10
6.5 Third Party Beneficiary................................................................. 10
6.6 Severability............................................................................ 10
6.7 Equitable Remedies...................................................................... 11
6.8 Notices; Exercise of Option............................................................. 11
6.9 Waiver of Rights; Consents with Respect to Partnership Interests........................ 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.10 Releases and Waivers................................................................ 14
6.11 Confidentiality..................................................................... 15
6.12 Computation of Time................................................................. 15
6.13 Survival............................................................................ 15
6.14 Time of the Essence................................................................. 15
</TABLE>
Exhibit
A. Contribution and Assumption Agreement
Schedule
A. Interest
-ii-
<PAGE> 4
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "AGREEMENT") dated as of the 29th day
of April, 1997 is entered into by and among TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and VALERIE
HERTS (the "CONTRIBUTOR").
R E C I T A L S:
A. The Contributor owns an interest as set forth on Schedule A (the
"INTEREST") in CXX Mineola Limited Partnership, a New York limited partnership
(the "PARTNERSHIP").
B. The Contributor owned a 20% limited partnership interest in
Stellar Associates, a New York limited partnership ("STELLAR"). As a result of
the bankruptcy of the general partner of Stellar, Stellar was dissolved (the
"DISSOLUTION"). Stellar had been the record owner of a 5% limited partnership of
the Partnership. Pursuant to the Dissolution, the general partner of Stellar
distributed or will distribute on or prior to the Closing (as defined in Section
2.2) to each of the partners of Stellar, including the Contributor, each such
partner's pro rata share, subject to a proportionate share of its liability, of
the Partnership, which is the Interest.
C. The Operating Partnership desires to acquire through a
contribution to capital from the Contributor, and the Contributor desires to
contribute to the Operating Partnership, on the terms and conditions set forth
herein, all of the Contributor's rights, title and interest as a partner of the
Partnership in exchange for cash.
D. The Operating Partnership desires to acquire the Interest in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner as well as a limited
partner of the Operating Partnership, and (ii) the proposed loan from Merrill
Lynch, Pierce, Fenner & Smith, Incorporated or an affiliate thereof (the "ML
LOAN") to the Partnership.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and the Contributor agree as follows:
<PAGE> 5
ARTICLE I
CONTRIBUTION OF INTEREST AND EXCHANGE FOR CASH
1.1 Contribution Transaction. At the Closing (as defined in Section
2.2 herein) and subject to the terms and conditions contained in this
Contribution Agreement, the Contributor shall transfer to the Operating
Partnership, absolutely and unconditionally, all of the Interest (as such term
is defined in Recital A herein). The contribution of the Contributor's Interest
shall be evidenced by a "CONTRIBUTION AND ASSUMPTION AGREEMENT" in substantially
the form of EXHIBIT "A" attached hereto. The parties shall take such additional
actions and execute such additional documentation as may be required by the
agreement of limited partnership dated as of January 18, 1987 of the Partnership
(the "PARTNERSHIP AGREEMENT") in order to effect the transactions contemplated
hereby.
1.2 Contribution of Certain Rights. Effective upon the Closing, the
Contributor hereby contributes to the Operating Partnership all of its rights
and interests, if any, including rights to indemnification in favor of the
Contributor, if any, under the agreements pursuant to which the Contributor or
its affiliates initially acquired the Interest transferred pursuant to this
Contribution Agreement.
1.3 Consideration. The cash consideration (the "CONSIDERATION") to
be paid to the Contributor in respect of the Operating Partnership's purchase of
the Interest shall be $15,000. The Consideration shall be paid by bank check or
wire transfer as determined by the Operating Partnership.
ARTICLE II
CLOSING
2.1 Conditions Precedent. The Closing of the ML Loan is a condition
precedent to the obligations of the parties to this Contribution Agreement to
effect the transactions contemplated by this Contribution Agreement on the
Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and
correct in all material respects on the date such representations and
warranties were made, and shall be true and correct in all material
respects on the Closing Date as if made at and as of such date;
-2-
<PAGE> 6
(b) Each of the obligations of the Contributor to be performed by it
shall have been duly performed by it on or before the Closing Date;
(c) Concurrently with the Closing, the Contributor shall have executed
and delivered to the Operating Partnership the documents required to be
delivered pursuant to Section 2.3 hereof;
(d) The Contributor shall have obtained all necessary consents or
approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby and the general partner of Stellar shall
have distributed the Interest to the Contributor;
(e) The Contributor shall not have breached any of its covenants
contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order, injunction,
stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or
governmental or regulatory authority or instrumentality that prohibits the
consummation of the transactions contemplated hereby, and no litigation or
governmental proceeding seeking such an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof and the
Closing Date any material adverse change in any of the Partnership's assets
or business; and
(h) The Operating Partnership shall have acquired at or prior to the
Closing all outstanding partnership interests in the Partnership.
The foregoing conditions may be waived by the Operating
Partnership in its sole and absolute discretion.
2.2 Time and Place. The date, time and place of the closing of the
transactions con templated hereunder (the "CLOSING") shall be the day the
Operating Partnership receives the proceeds from the ML Loan (the "CLOSING
DATE"), at 10:00 a.m. in the office of Battle Fowler LLP, 75 East 55th Street,
New York, New York 10022. The transfers described in Sections 1.1 and 1.2 of
this Contribution Agreement, and all closing deliveries, and the consummation of
the ML Loan, shall be deemed concurrent for all purposes.
2.3 Closing Deliveries. At the Closing, the parties shall make,
execute, acknowledge and deliver, or cause to be made,executed, acknowledged and
delivered through the Attorney-in- Fact (as designated in Section 5.1 below),
the legal documents and other items (collectively, the "CLOSING DOCUMENTS")
necessary to carry out the intention of this Contribution Agreement, which
Closing Documents and other items shall include, without limitation, the
following:
-3-
<PAGE> 7
(i) Contribution and Assumption Agreement;
(ii) The Partnership's books and records and securities or other
evidences of ownership held by the Contributor; and
(iii) An affidavit from the Contributor, stating under penalty of
perjury, the Contributors's United States Taxpayer Identification Number and
that the Contributor is not a foreign person pursuant to section 1445(b)(2)
of the Internal Revenue Code of 1986, as amended (the "CODE") and a
comparable affidavit satisfying California and any other withholding
requirements.
2.4 Closing Costs. The Operating Partnership shall pay any documentary
transfer taxes, escrow charges, title charges and recording taxes or fees
incurred in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CONTRIBUTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Contributor hereby makes to the Operating Partnership, with respect to the
Interest, each of the representations and warranties set forth in this Article
III, which representations and warranties (unless otherwise noted) are true as
of the date hereof. As a condition to the Operating Partnership's obligation to
purchase the Interest in exchange of payment of the Consideration.
3.1 Title to Interest. (a) The Contributor owns beneficially and of
record, free and clear of any claim, lien, pledge (except for pledges relating
to the debt or equity financing of any of the properties held by the Partnership
(each, a "Property") or encumbrances arising under the Partnership Agreement
pursuant to which the Interest was issued (any such pledge, a "PERMITTED
PLEDGE")), voting agreement, option, charge, security interest, mortgage, deed
of trust, encumbrance, right of assignment, purchase right or other rights of
any nature whatsoever (each, an "ENCUMBRANCE"), and has full power and authority
to convey free and clear of any Encumbrances, its Interest and, upon delivery of
a Contribution and Assumption Agreement by the Contributor conveying its
Interest and delivery of the Consideration by the Operating Partnership for such
Interest as herein provided, the Operating Partnership will acquire good and
valid title thereto, free and clear of any Encumbrance, except Encumbrances
created in favor of the Operating Partnership by the transactions contemplated
hereby.
(b) The Interest has been validly issued and the Contributor has funded
(or will fund before the same is past due) all capital contributions and
advances to the Partnership that are required to be funded or advanced prior to
the date hereof and the Closing.
-4-
<PAGE> 8
(c) There are no agreements, instruments or understandings with
respect to the Interest except as set forth in the Partnership Agreement.
(d) No Permitted Pledge will be in existence as of the date of the
Closing, and the Contributor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(e) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Contributor may assume that the consents and
waivers of rights set forth in Section 6.9 hereof have been given by all
partners of the Partnership.
3.2 Organization; Authority; No Conflicts. (a) If the Contributor is
not a natural person, the Contributor is a corporation, limited partnership,
general partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its organization.
(b) Such Contributor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of such Contributor pursuant to
this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of such
Contributor's Interest to the Operating Partnership in accordance with
this Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for such Contributor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of Contributor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of such
Contributor pursuant to this Agreement constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligation of such
Contributor, each enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of such Contributor:
-5-
<PAGE> 9
(i) does not and will not violate such Contributor's charter
and/or bylaws, partnership agreement, operating agreement or
declaration of trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to such Contributor or require
such Contributor to obtain any approval, consent or waiver of, or make
any filing with, any person or authority (governmental or otherwise)
that has not been obtained or made and which does not remain in effect;
and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which such
Contributor is a party or by which the property of such Contributor is
bound or affected, or result in the creation of any Encumbrance on any
of the property or assets of the Partnership.
(f) In making the representations set forth in this Section 3.2, each
Contributor may assume that
(i) the consents and waivers of rights set forth in Section
6.9 hereof have been given by all partners of the Partnership, and
(ii) for purposes of making such representation as of the date
hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Contributor knows of no litigation or
proceeding, whether judicial, administrative or arbitral, pending or overtly
threatened, affecting all or any portion of Interest or such Contributor's
ability to consummate the transactions contemplated hereby.
(b) Such Contributor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of the Interest, which in any such case
would impair such Contributor's ability to enter into and perform all of its
obligations under this Agreement.
3.4 No Other Agreements. (a) The Contributor has made no agreement
with, and will not enter into any agreement with, and has no obligation
(absolute or contingent) to, any other person or entity to sell, transfer,
dispose of or in any way encumber the Interest or restricting in any way such
Contributor's ability to contribute the Interest to the capital of the Operating
Partnership or to enter into any agreement with respect to the Interest.
(b) In making the representations set forth in this Section 3.4, the
Contributor may assume that
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(i) the consents and waivers of rights set forth in Section
6.9 hereof have been given by all partners of the Partnership, and
(ii) for purposes of making such representations as of the
date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Contributor has not entered into, and covenants
that it will not enter into, any agreement, arrangement or understanding with
any person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.6 Covenant to Remedy Breaches. The Contributor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of
the Contributor hereunder,
(b) to satisfy all covenants of the Contributor hereunder, and
(c) to promptly clear any breach of a representation, warranty
or covenant of the Contributor hereunder upon its learning of same.
3.7 Actions Prior to Closing. From the date hereof through the Closing,
the Contributor shall not:
(i) Sell or transfer all or any portion of the Interest; or
(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of the Interest.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP
As a material inducement to the Contributor to enter into this
Agreement and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Contributor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
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4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement; and
(ii) to perform the transactions contemplated hereby and
thereby.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the agreement of limited
partnership of the Operating Partnership dated as of March 24, 1997
(the "OP AGREEMENT");
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Contributor to pay any finder's fee, brokerage commission or similar payment
in connection with the transactions contemplated hereby.
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ARTICLE V
POWER OF ATTORNEY
5.1 Grant of Power of Attorney. The Contributor does hereby irrevocably
appoint the Operating Partnership (or its designee) and each of them
individually and any successor thereof from time to time (such Operating
Partnership or designee or any such successor of any of them acting in his, her
or its capacity as attorney-in-fact pursuant hereto, the "ATTORNEY-IN-FACT") as
the true and lawful attorney-in-fact and agent of the Contributor, to act in the
name, place and stead of the Contributor to make, execute, acknowledge and
deliver all such other contracts, orders, other writings (including without
limitation the execution of any Closing Documents or other documents relating to
the acquisition by the Operating Partnership of the Interest), to provide
information to the Securities and Exchange Commission and others about the
transactions contemplated hereby and, in general, to do all things and to take
all actions which the Attorney-in- Fact in its sole discretion may consider
necessary or proper in connection with or to carry out the transactions
contemplated by this Contribution Agreement, as fully as could the Contributor
if personally present and acting. Further, the Contributor hereby grants to the
Attorney-in-Fact a proxy (the "PROXY") to vote the Contributor's Interest on any
matter related to the Transactions contemplated hereby or to the ML Loan
presented to the partners of the Partnership for a vote, including, but not
limited to, the transfer of interests in the Partnership by the other partners.
Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of the Contributor, by operation of law or by
the occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Contribution Agreement, the Attorney-in-Fact shall nevertheless be authorized
and directed to complete all such transactions as if such other act or events
had not occurred and regardless of notice thereof. The Contributor agrees that,
at the request of the Operating Partnership, it will promptly execute a separate
power of attorney and proxy on the same terms set forth in this ARTICLE 5, such
execution to be witnessed and notarized. The Contributor hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.
The Contributor acknowledges that the Operating Partnership has, and
any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
5.2 Limitation on Liability. It is understood that the Attorney-in-Fact
assumes no responsibility or liability to any person by virtue of the Power of
Attorney or Proxy granted by the Contributor hereby. The Attorney-in-Fact makes
no representations with respect to and shall have no responsibility for the
transactions contemplated hereby or the Company's contemplated initial public
offering (the "IPO"), or the acquisition of the Interest by the Operating
Partnership and shall not be liable for any error or judgment or for any act
done or omitted or for any mistake of fact or law except for its own gross
negligence or bad faith. The Contributor agrees to
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<PAGE> 13
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney or Proxy created by the Contributor hereby, as well as the cost and
expense of investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is due to
the gross negligence or bad faith of the Attorney-in-Fact. The Contributor
agrees that the Attorney-in-Fact may consult with counsel of its own choice (who
may be counsel for the Operating Partnership or its successors or affiliates),
and it shall have full and complete authorization and protection for any action
taken or suffered by it hereunder in good faith and in accordance with the
opinion of such counsel. It is understood that the Attorney-in-Fact may, without
breaching any express or implied obligation to Contributor hereunder, release,
amend or modify any other power of attorney or proxy granted by any other person
under any related agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Amendment. (a) This Agreement may only be amended by a written
agreement duly executed by the Contributor and the Operating Partnership.
(b) No waiver of any provisions of this Agreement shall be valid
unless in writing and signed by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which
will be deemed an original and all of which shall constitute one and
the same instrument, and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without
giving effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Contributor,
or by any Contributor without the prior written consent of the Operating
Partnership, and any attempted assignment without such consent shall be void and
of no effect; provided,
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<PAGE> 14
further, however, that the Operating Partnership may assign all or any portion
of this Agreement and the Closing Documents and any agreement contemplated
hereunder or thereunder to the Company or to an affiliate of the Operating
Partnership or the Company without the consent of the Contributor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. (a) The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached.
(b) It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement or by law shall, except as otherwise provided, be
in writing and shall be deemed to have been given
(i) when physically received by personal delivery (which shall
include the confirmed receipt of a telecopied facsimile transmission),
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<PAGE> 15
(ii) three (3) business days after being deposited in the
United States certified or registered mail, return receipt requested,
postage prepaid, or
(iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day
delivery service (such as Federal Express);
addressed and delivered or telecopied in the case of a notice to the Operating
Partnership to the following address and telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Contributor, to the address and telecopy number set forth under the
Contributor's name on the signature page hereof.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Contributor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of an additional interest in the Partnership) may
conflict with, and may not have been contemplated by, the Partnership Agreement
or another agreement among one or more holders of interests in the Partnership
or one or more of the partners of the partnership.
(b) The Contributor expressly gives all Consents (and any consent
necessary to authorize the proper parties in interest to give all Consents) and
Waivers necessary or desirable to facilitate any Conveyance Action relating to
the Partnership (as such terms are defined below).
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<PAGE> 16
(c) The Contributor further agrees that the Contributor will take no
action to enjoin, or seek damages resulting from, any Conveyance Action by any
holder of a direct or indirect interest in the Partnership.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to the Partnership,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein (whether or
not such partner or holder is a contributor under an agreement
containing terms similar to this Contribution Agreement) of its direct
or indirect interest in the Partnership to the Operating Partnership or
the Company or to another person in connection with the formation of
the Operating Partnership or the Company, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company,
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the prospectus relating to the IPO, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in the Partnership or an undivided
tenant-in-common interest in the Property represented by such
Partnership interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in the
Partnership, and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
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<PAGE> 17
(v) As used herein, the term "CONSENTS" means, with respect to
the Partnership, any consent deemed by the Operating Partnership to be
necessary or desirable under the Partnership Agreement or any other
agreement among all or any of the holders of interests therein or any
other agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions relating
to the Partnership or to amend the Partnership Agreement
and/or other agreements so that no provision thereof
prohibits, restricts, impairs or interferes with any
Conveyance Action (such amendment to include, without
limitation, the deletion of provisions which cause a default
under such agreement if interests therein are transferred for
other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of the Partnership upon the
Operating Partnership's or any such affiliate's acquisition of
a limited or general partner interest therein, respectively,
and to adopt such amendment as is necessary or desirable to
effect such admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition by the Operating
Partnership or any such affiliate of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of the Contributor or under the Partnership Agreement,
and
(D) to continue the Partnership following the
transfer of interests therein to the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
the Partnership, the waiving of any and all rights that the Contributor
may have with respect to, and (to the extent possible) that any other
person may have with respect to, or that may accrue to the Contributor
or other person upon the occurrence of, a Conveyance Action relating to
the Partnership, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in the Partnership (or the
property interests represented by such partnership interest)
or
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<PAGE> 18
to sell the Contributor's or other person's direct or indirect
interest therein to another partner,
(D) rights to sell the Contributor's or other
person's direct or indirect interest therein at a price other
than as provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of the Partnership because of such
Conveyance Action.
6.10 Releases and Waivers. Each of the releases and waivers enumerated
in this Section 6.10 shall become effective only upon the Closing pursuant to
ARTICLE 2.
(a) As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the
Operating Partnership's affiliates, partners (including Lawrence H.
Feldman), agents, attorneys, successors and assigns of and from, any
and all charges, complaints, claims, liabilities, damages, actions,
causes of action, losses and costs of any nature whatsoever
(collectively, "CONTRIBUTOR CLAIMS"), known or unknown, suspected or
unsuspected, arising out of or relating to the Partnership Agreement,
this Contribution Agreement or any other matter which exists at the
Closing, except for Contributor Claims arising from the breach of any
representation, warranty, covenant or obligation under this
Contribution Agreement.
(b) As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and the
Contributor's agents, attorneys, successors and assigns of and from,
any and all charges, complaints, claims, liabilities, damages, actions,
causes of action losses and costs of any nature whatsoever
(collectively, "OPERATING PARTNERSHIP CLAIMS"), known or unknown,
suspected or unsuspected, arising out of or relating to the Partnership
Agreement, this Contribution Agreement or any other matter which exists
at the Closing, except for Operating Partnership Claims arising from
the breach of any representation, warranty, covenant or obligation
under this Contribution Agreement.
(c) As of the Closing, the Contributor waives and relinquishes
all rights and benefits otherwise afforded to the Contributor under the
Partnership Agreement including, without limitation, any right to
consent to or approve of the sale or contribution by the other partners
of the Partnership of their partnership interests to the Company or the
Operating Partnership.
6.11 Confidentiality. (a) The Contributor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed Registration Statement
relating thereto with the Securities and Exchange Commission, and shall not
communicate at any time the terms of this Agreement to any person other than
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<PAGE> 19
counsel or advisors to the Contributor who agree to keep such terms confidential
and any lender holding a lien on any Property Interests.
(b) The Contributor shall treat all information received from the
Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate the same only to
counsel to the Contributor who agree to keep such information confidential.
6.12 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.13 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Operating
Partnership and the Contributor set forth in this Agreement shall survive the
consummation of the transactions contemplated hereby.
6.14 Time of the Essence. Time is of the essence with respect to all
obligations of the Contributor under this Agreement.
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<PAGE> 20
[SIGNATURE PAGE TO CONTRIBUTION AGREEMENT: CXX MINEOLA LIMITED PARTNERSHIP]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP,
L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
___________________________
Name: Lawrence H. Feldman
Title: President
CONTRIBUTOR'S ADDRESS: CONTRIBUTOR:
100 Mimosa Drive__________ VALERIE HERTS
Roslyn, NY 11576__________
__________________________
__________________________
__________________________ By: /s/ Valerie Herts Kalnitsky
____________________________
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<PAGE> 21
EXHIBIT A
to
CONTRIBUTION AGREEMENT
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby assigns, transfers,
contributes and conveys to Tower Realty Operating Partnership, L.P. a Delaware
limited partnership (the "OPERATING PARTNERSHIP"), his or its entire legal and
beneficial right, title and interest in and to all general or limited
partnership interests (the "INTEREST") held by him or it in CXX Mineola Limited
Partnership (the "PARTNERSHIP"), including, without limitation, all rights to
receive distributions of money, profits and other assets from or relating to the
Partnership or the Interest, presently existing or hereafter at any time arising
or accruing TO HAVE AND TO HOLD the same unto the Operating Partnership, its
successors and assigns, forever.
Upon the execution and delivery hereof, the Operating Partnership
assumes all obligations in respect of the Interest.
Executed: April __, 1997 VALERIE HERTS
By:___________________
Name:
Title:
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<PAGE> 22
SCHEDULE A
VALERIE HERTS 1% limited partnership interest in CXX Mineola Limited
Partnership
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<PAGE> 1
Exhibit 10.21
First Amendment to
Contribution Agreement
This First Amendment (this "First Amendment"), dated as of May
30 , 1997, amends the Contribution Agreement, dated as of April, 1997, by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership") and Valerie Herts Kalnitzky (the "Contributor").
Preliminary Statement
A. The Operating Partnership and the Contributor are parties
to a Contribution Agreement, dated as of April, 1997 (the "Agreement), relating
to the transfer of the Contributor's ownership of an interest (the "Interest")
in CXX Mineola Limited Partnership, a New York limited partnership (the
"Partnership"). Capitalized terms used herein and not otherwise defined shall
have the meaning ascribed to such terms in the Agreement.
B. The Partnership has distributed an undivided 1%
tenant-in-common interest in the property located at 120 Mineola Boulevard,
Mineola, New York (the "Property"), subject to its existing mortgage
indebtedness, to Contributor (the "Property Interest").
THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Agreement is hereby amended as follows:
1. Simultaneously with the execution and delivery of this
First Amendment, Contributor will contribute to the Operating Partnership all of
his right, title and interest to the Property Interest in exchange for $15,000.
Such contribution shall be made free and clear of any claim, lien or pledge
(except for pledges or mortgages relating to the debt or equity financing on the
Property) and shall be evidenced by a deed acceptable to the Operating
Partnership. The contribution of the Property Interest to the Operating
Partnership pursuant to this Second Amendment shall be in lieu of the
contribution to the Operating Partnership of the Partnership Interest in the
Partnership as set forth in the Agreement.
2. The Agreement, as amended by this Amendment, remains in
full force and effect.
3. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 2
4. The Operating Partnership and the Contributor now wish to
amend the Contribution Agreement to provide that this Agreement, as amended by
this Amendment, shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
IN WITNESS WHEREOF, the parties have duly executed this
amendment as of the date first written above.
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust Inc.,
its general partner
By: /s/ Lawrence H. Feldman
--------------------------------
Name: Lawrence H. Feldman
Title: Chairman, Chief Executive
Officer and President
VALERIE HERTS KALNITZKY
By: Lawrence H. Feldman, as designee of
the Operating Partnership pursuant
to Article V of the Agreement, as
Attorney-In-Fact
/s/ Lawrence H. Feldman
--------------------------------
Lawrence H. Feldman
2
<PAGE> 1
Exhibit 10.22
ASSIGNMENT AGREEMENT
In exchange of $15,000, the receipt and sufficiency of which is hereby
acknowledged, the undersigned hereby assigns, transfers, contributes and conveys
to Tower Realty Operating Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership"), his entire right, title and interest in and tot all
limited partnership interests (the "Interest") held by him in Stellar
Associates, L.P. (the "Partnership"), including, without limitation, all rights
to receive distributions of money, profits and other assets from or relating to
the Partnership or the Interest, presently existing or hereafter at any time
arising or accruing after the date hereof TO HAVE AND TO HOLD the same unto the
Operating Partnership, its successors and assigns, forever. This assignment is
made without recourse or warranty express or implied except that the undersigned
represents and warrants that he has not transferred, pledged, hypothecated, sold
or otherwise transferred the Interest to any other party.
Upon the execution and delivery hereof, the undersigned withdraws from the
Partnership for all purposes and the operating Partnership assumes all
obligations in respect of the Interest.
Executed: As of April 29, 1997
CHARLES M. KOTICK, AS NOMINEE
By: /s/ Charles M. Kotick
-------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.23
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "AGREEMENT") dated as of the 30th day
of May, 1997 is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and Allan B.
Mendelsohn, as Chapter 7 Trustee of Edward Feldman (the "CONTRIBUTOR").
R E C I T A L S:
A. The Contributor owns direct and indirect interests (the "INTERESTS")
in Tower 45 Associates Limited Partnership, a New York limited partnership ("T45
ASSOCIATES"), Maitland Property Investors, Ltd., a Florida limited partnership
("MAITLAND"), and Maitland Associates, Ltd., a [Florida] limited partnership
(the "GROUND LESSOR" and collectively with T45 Associates and Maitland, the
"PARTNERSHIPS"). Included among the interests is certain common stock of Tower
45, Inc. ("T45 INC."), the general partner of T45 Associates, and certain common
stock of Lake Success Realty Investors, Inc. ("LAKE SUCCESS"), the corporate
general partner of Maitland.
B. The Contributor is currently involved in bankruptcy proceedings (the
"BANKRUPTCY PROCEEDINGS") and, consequently, the transactions herein must be
approved by the U.S. Bankruptcy Court for the Eastern District of New York (the
"BANKRUPTCY COURT") and Allan B. Mendelsohn, Trustee on behalf of the Estate of
Edward and Rosalie Feldman (the "TRUSTEE").
C. The Operating Partnership desires to acquire from the Contributor
the Interests, and the Contributor desires to sell, assign, transfer and convey
to the Operating Partnership, on the terms and conditions set forth herein, all
of the Contributor's direct and indirect rights, title and interest as a partner
of the Partnerships in exchange for cash.
D. The Operating Partnership desires to acquire the Interests in
connection with the ongoing formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner as well as a limited
partner of the Operating Partnership.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and the Contributor agree as follows:
<PAGE> 2
ARTICLE I
TRANSFER OF INTERESTS AND EXCHANGE FOR CASH
1.1 Contribution Transaction. At the Closing (as defined in Section 2.2
herein) and subject to the terms and conditions contained in this Contribution
Agreement, the Contributor shall transfer, absolutely and unconditionally, (i)
to the Operating Partnership, all of the Interests other than the common stock
of T45 Inc. and Lake Success, and (ii) upon the request of the Operating
Partnership, to Tower QRS No. 2 Corp., a wholly-owned subsidiary of the Company,
or another assignee or designee of the Operating Partnership, the common stock
of T45 Inc. and Lake Success. The transfer of the Contributor's Interests shall
be evidenced by a "CONTRIBUTION AND ASSUMPTION AGREEMENT" in substantially the
form of EXHIBIT "A" attached hereto. The parties shall take such additional
actions and execute such additional documentation as may be required by the
agreements of limited partnership of each of the Partnerships (each, a the
"PARTNERSHIP AGREEMENT") in order to effect the transactions contemplated
hereby.
1.2 Transfer of Certain Rights. Subject to Section 1.1(ii) above,
effective upon the Closing, the Contributor hereby transfers to the Operating
Partnership all of its rights and interests, if any, including rights to
indemnification in favor of the Contributor, if any, under the agreements
pursuant to which the Contributor or its affiliates initially acquired the
Interests transferred pursuant to this Contribution Agreement.
1.3 Consideration. The cash consideration (the "CONSIDERATION") to be
paid to the Contributor in respect of the Operating Partnership's purchase of
the Interests shall be $1,500,000.00.
ARTICLE II
CLOSING
2.1 Conditions Precedent. The obligations of the Operating Partnership
to effect the transactions contemplated hereby shall be subject to the following
conditions:
(a) Each of the obligations of the Contributor to be performed
by it shall have been duly performed by it on or before the Closing
Date;
(b) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents
required to be delivered pursuant to Section 2.3 hereof;
(c) The Contributor shall have obtained all necessary consents
or approvals of governmental authorities or third parties to the
consummation of the transactions
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<PAGE> 3
contemplated hereby including all consents or approvals of the
Bankruptcy Court and Trustee;
(d) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(e) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted,
entered, promulgated or enforced by any court of competent jurisdiction
or governmental or regulatory authority or instrumentality that
prohibits the consummation of the transactions contemplated hereby, and
no litigation or governmental proceeding seeking such an order shall be
pending or threatened; and
(f) There shall not have occurred between the date hereof and
the Closing Date any material adverse change in any of the
Partnership's assets or business.
The foregoing conditions may be waived by the Operating
Partnership in its sole and absolute discretion.
2.2 Time and Place. The date, time and place of the closing of the
transactions contemplated hereunder (the "CLOSING") shall be May [15], 1997 (the
"CLOSING DATE"), at 10:01 a.m. in the office of Battle Fowler LLP, 75 East 55th
Street, New York, New York 10022 or at such other place and time as the parties
shall agree. The transfers described in Sections 1.1 and 1.2 of this
Contribution Agreement, and all closing deliveries, shall be deemed concurrent
for all purposes.
2.3 Closing Deliveries. At the Closing, the parties shall make,
execute, acknowledge and deliver, or cause to be made,executed, acknowledged and
delivered through the Attorney-in-Fact (as designated in Section 5.1 below), the
legal documents and other items (collectively, the "CLOSING DOCUMENTS")
necessary to carry out the intention of this Contribution Agreement, which
Closing Documents and other items shall include, without limitation, the
following:
(i) A Contribution and Assumption Agreement;
(ii) The Partnership's books and records and securities or
other evidences of ownership held by the Contributor; and
(iii) An affidavit from the Contributor, stating under
penalty of perjury, the Contributor's United States Taxpayer
Identification Number and that the Contributor is not a foreign person
pursuant to section 1445(b)(2) of the Internal Revenue Code of 1986, as
amended (the "CODE") and a comparable affidavit satisfying California
and any other withholding requirements.
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<PAGE> 4
2.4 Closing Costs. The Operating Partnership shall pay any documentary
transfer taxes, escrow charges, title charges and recording taxes or fees
incurred in connection with the transactions contemplated hereby.
2.5 Trustee's Exculpatory Clause. The Contributor is the bankruptcy
Trustee of the estate of Edward and Rosalie Feldman, and is executing this
Agreement solely in his capacity as Trustee and pursuant to Bankruptcy Court
order. The Operating Partnership acknowledges that the Trustee has no knowledge
of the facts recited herein, or as to the ability of the Trustee to satisfy any
of the terms, conditions, representations or warranties contained herein. The
Trustee's sole obligations hereunder shall be to deliver the Interests, free and
clear of all claims, liens, encumbrances pursuant to Bankruptcy Court order
covering the subject matter of this Agreement, except that certain interests in
T45 Associates are being transferred subject to liens and security interests in
favor of RSH Associates and GECC in accordance with an order of the bankruptcy
court as the same may be amended, and to execute and deliver an Agreement of
Assignment, Withdrawal, Admission. Neither the Trustee nor the estate of
Edward Feldman shall be liable in the event of any breach of this Agreement
or such Agreement of Assignment, Withdrawal, Admission, other than a breach
arising from the failure so to deliver the Interests.
ARTICLE III
[INTENTIONALLY LEFT BLANK]
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP
As a material inducement to the Contributor to enter into this
Agreement and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Contributor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement; and
(ii) to perform the transactions contemplated hereby and
thereby.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating
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<PAGE> 5
Partnership pursuant to this Agreement constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligation of the
Operating Partnership, each enforceable in accordance with its respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the agreement of limited
partnership of the Operating Partnership dated as of March 24, 1997
(the "OP AGREEMENT");
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Contributor to pay any finder's fee, brokerage commission or similar payment
in connection with the transactions contemplated hereby.
ARTICLE V
POWER OF ATTORNEY
5.1 Grant of Power of Attorney. The Contributor does hereby irrevocably
appoint the Operating Partnership (or its designee) and each of them
individually and any successor thereof from time to time (such Operating
Partnership or designee or any such successor of any of them acting in his, her
or its capacity as attorney-in-fact pursuant hereto, the "ATTORNEY-IN-FACT") as
the true and lawful attorney-in-fact and agent of the Contributor, to act in the
name, place and stead of the Contributor to make, execute, acknowledge and
deliver all such other contracts, orders, other writings (including without
limitation the execution of any Closing Documents or other documents relating to
the acquisition by the Operating Partnership of the Interests), to provide
information to the Securities and Exchange Commission and others about the
transactions contemplated hereby and, in general, to do all things and to take
all actions
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<PAGE> 6
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could the Contributor if personally present
and acting. Further, the Contributor hereby grants to the Attorney-in-Fact a
proxy (the "PROXY") to vote the Contributor's Interests on any matter related to
the Transactions contemplated hereby presented to the partners of any
Partnership for a vote, including, but not limited to, the transfer of interests
in such Partnership by the other partners.
Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of the Contributor, by operation of law or by
the occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Contribution Agreement, the Attorney-in-Fact shall nevertheless be authorized
and directed to complete all such transactions as if such other act or events
had not occurred and regardless of notice thereof. The Contributor agrees that,
at the request of the Operating Partnership, it will promptly execute a separate
power of attorney and proxy on the same terms set forth in this ARTICLE 5, such
execution to be witnessed and notarized. The Contributor hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.
The Contributor acknowledges that the Operating Partnership has, and
any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
5.2 Limitation on Liability. It is understood that the Attorney-in-Fact
assumes no responsibility or liability to any person by virtue of the Power of
Attorney or Proxy granted by the Contributor hereby. The Attorney-in-Fact makes
no representations with respect to and shall have no responsibility for the
transactions contemplated hereby or the Company's contemplated initial public
offering (the "IPO"), or the acquisition of the Interests by the Operating
Partnership and shall not be liable for any error or judgment or for any act
done or omitted or for any mistake of fact or law except for its own gross
negligence or bad faith. The Contributor agrees to indemnify the
Attorney-in-Fact for and to hold the Attorney-in-Fact harmless against any loss,
claim, damage or liability incurred on its part arising out of or in connection
with it acting as the Attorney-in-Fact under the Power of Attorney or Proxy
created by the Contributor hereby, as well as the cost and expense of
investigating and defending against any such loss, claim, damage or liability,
except to the extent such loss, claim, damage or liability is due to the gross
negligence or bad faith of the Attorney-in-Fact. The Contributor agrees that the
Attorney-in-Fact may consult with counsel of its own choice (who may be counsel
for the Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to Contributor hereunder, release, amend or
modify any other power of attorney or proxy granted by any other person under
any related agreement.
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<PAGE> 7
ARTICLE VI
MISCELLANEOUS
6.1 Amendment. (a) This Agreement may only be amended by a written
agreement duly executed by the Contributor and the Operating Partnership.
(b) No waiver of any provisions of this Agreement shall be valid unless
in writing and signed by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which
will be deemed an original and all of which shall constitute one and
the same instrument, and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without
giving effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Contributor,
or by any Contributor without the prior written consent of the Operating
Partnership, and any attempted assignment without such consent shall be void and
of no effect; provided, further, however, that the Operating Partnership may
assign all or any portion of this Agreement and the Closing Documents and any
agreement contemplated hereunder or thereunder to the Company or to an affiliate
of the Operating Partnership or the Company without the consent of the
Contributor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
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<PAGE> 8
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. (a) The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached.
(b) It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices. Any notice or demand which must or may be given under this
Agreement or by law shall, except as otherwise provided, be in writing and shall
be deemed to have been given
(i) when physically received by personal delivery (which shall
include the confirmed receipt of a telecopied facsimile transmission),
(ii) three (3) business days after being deposited in the
United States certified or registered mail, return receipt requested,
postage prepaid, or
(iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day
delivery service (such as Federal Express);
addressed and delivered or telecopied in the case of a notice to the Operating
Partnership to the following address and telecopy number:
Tower Realty Operating Partnership, L.P.
120 West 45th Street, 24th Floor
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
-8-
<PAGE> 9
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Contributor, to the address and telecopy number set forth under the
Contributor's name on the signature page hereof.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Contributor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of an additional interest in a Partnership) may
conflict with, and may not have been contemplated by, a Partnership Agreement or
another agreement among one or more holders of interests in a Partnership or one
or more of the partners of a Partnership.
(b) The Contributor expressly gives all Consents (and any consent
necessary to authorize the proper parties in interest to give all Consents) and
Waivers necessary or desirable to facilitate any Conveyance Action relating to a
Partnership (as such terms are defined below).
(c) The Contributor further agrees that the Contributor will take no
action to enjoin, or seek damages resulting from, any Conveyance Action by any
holder of a direct or indirect interest in a Partnership.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to a Partnership,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein (whether or
not such partner or holder is a contributor under an agreement
containing terms similar to this Contribution Agreement) of its direct
or indirect interest in such Partnership to the Operating Partnership
or the Company or to another person in connection with the formation of
the Operating Partnership or the Company, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company,
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<PAGE> 10
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the prospectus relating to the IPO, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in such Partnership or an
undivided tenant-in-common interest in the Property
represented by such partnership interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in such
Partnership, and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
(v) As used herein, the term "CONSENTS" means, with respect to
a Partnership, any consent deemed by the Operating Partnership to be
necessary or desirable under the applicable Partnership Agreement or
any other agreement among all or any of the holders of interests
therein or any other agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions relating
to such Partnership or to amend such Partnership Agreement
and/or other agreements so that no provision thereof
prohibits, restricts, impairs or interferes with any
Conveyance Action (such amendment to include, without
limitation, the deletion of provisions which cause a default
under such agreement if interests therein are transferred for
other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of such Partnership upon
the Operating Partnership's or any such affiliate's
acquisition of a limited or general partner interest therein,
respectively, and to adopt such amendment as is necessary or
desirable to effect such admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition by the Operating
Partnership or any such affiliate of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of the Contributor or under such Partnership Agreement,
and
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<PAGE> 11
(D) to continue such Partnership following the
transfer of interests therein to the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
a Partnership, the waiving of any and all rights that the Contributor
may have with respect to, and (to the extent possible) that any other
person may have with respect to, or that may accrue to the Contributor
or other person upon the occurrence of, a Conveyance Action relating to
such Partnership including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in such Partnership (or the
property interests represented by such partnership interest),
or to sell the Contributor's or other person's direct or
indirect interest therein to another partner,
(D) rights to sell the Contributor's or other
person's direct or indirect interest therein at a price other
than as provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such Partnership because of such
Conveyance Action.
(b) As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and the
Contributor's agents, attorneys, successors and assigns of and from,
any and all charges, complaints, claims, liabilities, damages, actions,
causes of action losses and costs of any nature whatsoever
(collectively, "OPERATING PARTNERSHIP CLAIMS"), known or unknown,
suspected or unsuspected, arising out of or relating to any Partnership
Agreement, this Contribution Agreement or any
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<PAGE> 12
other matter which exists at the Closing, except for Operating
Partnership Claims arising from the breach of any representation,
warranty, covenant or obligation under this Contribution Agreement.
(c) As of the Closing, the Contributor waives and relinquishes
all rights and benefits otherwise afforded to the Contributor under any
Partnership Agreement including, without limitation, any right to
consent to or approve of the sale or contribution by the other partners
of the applicable Partnership of their partnership interests to the
Company or the Operating Partnership.
6.11 Confidentiality. (a) The Contributor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed a Registration Statement
relating thereto with the Securities and Exchange Commission, and shall not
communicate at any time the terms of this Agreement to any person other than
counsel or advisors to the Contributor who agree to keep such terms confidential
and any lender holding a lien on any Property Interests.
(b) Except as is necessary to disclose in Ed Feldman's bankruptcy case,
the Contributor shall treat all information received from the Operating
Partnership or its counsel or advisors pertaining to the Operating Partnership
or the Company confidential and shall disseminate the same only to counsel to
the Contributor who agree to keep such information confidential.
6.12 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.13 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Operating
Partnership set forth in this Agreement shall survive the consummation of the
transactions contemplated hereby.
6.14 Time of the Essence. Time is of the essence with respect to all
obligations of the Contributor under this Agreement.
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<PAGE> 13
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP,
L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/Lawrence H. Feldman
----------------------------
Name: Lawrence H. Feldman
Title: President
CONTRIBUTOR'S ADDRESS: CONTRIBUTOR:
ALLAN B. MENDELSOHN, Trustee ALLAN B. MENDELSOHN,
c/o Salomon, Green & Ostrow, P.C. as Chapter 7 Trustee of EDWARD FELDMAN
919 Third Avenue
New York, New York 10022
By: /s/Allan B. Mendelsohn
----------------------------
Name: Allan B. Mendelsohn
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<PAGE> 14
EXHIBIT A
to
CONTRIBUTION AGREEMENT
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby assigns, transfers,
contributes and conveys to [Tower Realty Operating Partnership, L.P. a Delaware
limited partnership (the "ASSIGNEE"), his or its entire legal and beneficial
right, title and interest in and to all general or limited partnership interests
(the "INTEREST") held by him or it in [name of Partnership] (the "PARTNERSHIP"),
including, without limitation, all rights to receive distributions of money,
profits and other assets from or relating to the Partnership or the Interest
presently existing or hereafter at any time arising or accruing TO HAVE AND TO
HOLD the same unto the Assignee, its successors and assigns, forever.
Upon the execution and delivery hereof, the Assignee assumes all
obligations in respect of the Interest.
Executed: May 15, 1997 ALLAN B. MENDELSOHN,
-- as Chapter 7 Trustee of EDWARD FELDMAN
2:12 PM
By: /s/ Allan B. Mendelsohn
----------------------------
Name:
Title:
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<PAGE> 1
Exhibit 10.24
TOWER 45
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 28th day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and DANA II
ASSOCIATES LIMITED PARTNERSHIP (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns a limited partner interest in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to purchase for cash and through a
contribution to capital from the Grantor, and the Grantor desires to grant to
the Operating Partnership, an option to acquire, on the terms and conditions set
forth herein, all interests owned by the Grantor in the Partnership as set forth
on Schedule A attached hereto and any other direct or indirect interests the
Grantor may have, whether now owned or hereinafter acquired, in the Partnership,
or in the properties owned by the Partnership (collectively, the "INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to purchase for cash
and through a contribution to the capital of the Operating Partnership all the
Grantor's right, title and interest in the Interests, including but not limited
to, the Interest set forth on Schedule A attached hereto, on the terms and
conditions set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership during
the 10 business day period commencing on the first business day following the
removal of each such prohibition, stay, order, injunction, action, proceeding or
similar limitation in effect at that time. Subject to the foregoing, if the
Operating Partnership does not exercise the Option by the Option Termination
Date, such Option shall be deemed terminated and shall be of no further force or
effect and the Grantor shall have no further obligations hereunder.
<PAGE> 2
1.3 Acquisition Consideration. (a) The consideration (the "ACQUISITION
CONSIDERATION") to be received by each Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an amount equal to
$300.00 (three hundred dollars). The Acquisition Consideration shall be paid in
the form of a combination of (i) cash and/or (ii) units of limited partnership
interest in the Operating Partnership ("OP UNITS"), in the percentages and
allocations set forth on Schedule B attached hereto. To the extent a percentage
of the Acquisition Consideration includes one or more OP Units, as set forth on
Schedule B, the number of OP Units the Grantor shall be entitled to receive upon
the exercise of the Option with respect to such percentage shall equal the
quotient of
(A) the amount of Acquisition Consideration to be
paid in OP Units, divided by
(B) the midpoint of the proposed per share offering
price for the shares of Common Stock as set forth in the final
preliminary prospectus included in the Company's Registration
Statement on Form S-11 prepared and filed with the Securities
and Exchange Commission in connection with the IPO.
1.4 Lock-Up Agreements. The OP Units to be issued to the Grantor
hereunder shall be subject to Lock-Up Agreements to be executed at the Closing
(as hereinafter defined) by the Operating Partnership and the Grantor,
substantially in the forms attached as Exhibits A and B attached hereto, whereby
the Grantor will not be permitted to transfer OP Units for up to two years after
the Closing, except as otherwise permitted under such agreement.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise of
the Option, the Grantor shall, in accordance with Section 2.2 hereof, transfer,
assign, and convey to the Operating Partnership and the Operating Partnership
shall accept as a contribution to its capital from the Grantor, all right, title
and interest in and to the Interests, free and clear of all Encumbrances (as
defined in Section 3.1(a)), in exchange for the Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute and
deliver all closing documents (the "CLOSING DOCUMENTS") required by the
Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP as
escrow agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the Company
is sufficient, as determined by the Operating Partnership in its reasonable
discretion, to enable the Operating Partnership (i) to acquire all the
Interests, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO (the "REGISTRATION STATEMENT"), as the same shall be in
effect on the day of the Offerings Closing.
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(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee
(A) the Acquisition Consideration (any cash portion
of which shall be delivered in immediately available funds by
check or wire transfer),
(B) a certificate of the general partner of the
Operating Partnership (the "GENERAL PARTNER") certifying that
the Grantor has been or will be, effective as of the Closing,
admitted as a limited partner of the Operating Partnership and
that the Operating Partnership's books and records indicate or
will indicate that the Grantor is the holder of the number of
OP Units that Grantor is entitled to receive pursuant to
Section 1.3, and
(C) if such OP Units are to be represented by
certificates, a certificate or certificates in the name of the
Grantor representing the number of OP Units to which the
Grantor is entitled; and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or
any third party necessary in order to consummate the contribution of
the Interests, or there exists an order or judgment enjoining,
restraining or prohibiting, or assessing substantial damages in respect
of such consummation, or there shall be any action or proceeding
instituted or threatened in writing to enjoin, restrain, prohibit or
assess substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the
contribution of all of the Interests, notify the Escrow Agent of such
election and direct the Escrow Agent to return the Grantor's Closing
Documents to the Grantor, or
(y) in all other cases, equitably adjust the delivery with
respect to the Grantor pursuant to clause (c)(i) above to reflect the
portion of the Grantor's Interests with respect to which the purchase
is actually being made(provided, that, in no event shall the
Acquisition Consideration, as adjusted hereunder, consist of less than
one OP Unit), which adjustment shall be determined in the Operating
Partnership's reasonable discretion, and shall in all events be binding
upon the Grantor.
(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter
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remain in effect and the Operating Partnership may thereafter exercise the
Option again at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be
in the form attached hereto as Exhibit C attached hereto and shall contain a
warranty of title that the Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article
III hereof, or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent
that the Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
(i) the Grantor is a corporation, limited partnership, general
partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of
this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the
Grantor's charter and/or bylaws, partnership agreement,
operating agreement and articles of organization or
declaration of trust, as applicable, or, to the knowledge of
such counsel, any indenture, deed of trust, mortgage, loan or
credit agreement or other material agreement or instrument to
which the Grantor is a party or by which it or its assets or
properties are bound or affected, except for such breach or
violation as the Operating Partnership has represented and
warranted will be waived or cured, or discharged or repaid
prior to or contemporaneously with the Closing;
(B) to the knowledge of such counsel, constitute a
violation or any order, judgment or decree to which the
Grantor is a party or by which it or any of its assets or
properties are bound or affected; or
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(C) to the knowledge of such counsel, result in the
creation of any lien, charge or encumbrance upon any of the
Grantor's assets or properties, except for Permitted Pledges
(as defined in Section 3.1(a)); and
(iii) all applicable corporate, partnership, limited liability
company or trust action necessary for the Grantor to execute and deliver this
Agreement and the Closing Documents and to perform the transactions contemplated
hereby and thereby has been taken and that the same have been validly executed
and delivered and are the valid and binding obligations of the Grantor
enforceable against it in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) The Lock-up Agreements and a duly executed signature page to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, a copy of which is attached hereto as Exhibit D (the "PARTNERSHIP
AGREEMENT").
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Interests to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated
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by this Agreement, including instruments or documents deemed necessary or
desirable by the Operating Partnership to effect and evidence the purchase of
the Grantor's Interests by the Operating Partnership in accordance with the
terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity financing
of any real property owned by the Partnership (any such pledge, a "PERMITTED
PLEDGE")), voting agreement, option, charge, security interest, mortgage, deed
of trust, encumbrance, right of assignment, purchase right or other rights of
any nature whatsoever (each, an "ENCUMBRANCE"), and has full power and authority
to convey free and clear of any Encumbrances, its Interests and, upon delivery
of an Assignment by the Grantor conveying its Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Interests as
herein provided, the Operating Partnership will acquire good and valid title
thereto, free and clear of any Encumbrance, except Encumbrances created in favor
of the Operating Partnership by the transactions contemplated hereby.
(b) Each of the Grantor's Interests representing an interest in the
Partnership has been validly issued and the Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Interest represents an interest that are required to
be funded or advanced prior to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with respect
to any of the Interests except, in the case of any Interest constituting an
interest in the Partnership, as set forth in the partnership agreement of the
Partnership.
(d) The Grantor has no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto
(the"Other Partnerships and Properties") except for the Interests identified on
Exhibit A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantor may assume that the consents and waivers of
rights set forth in Section 6.9 hereof have been given by all partners of the
Partnership, partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such) in which
the Grantor's Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
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(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Grantor or require the
Grantor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which the property of the Grantor is bound or
affected, or result in the creation of any Encumbrance on any of the
property or assets of any Partnership in which any Interest of the
Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released.
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3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of its Interests, which in any such case
would impair the Grantor's ability to enter into and perform all of its
obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in
connection with the contribution of Interests to the capital of the
Operating Partnership (which Private Placement Memorandum includes a
draft Registration Statement, the Summary of Partnership Agreement
Provisions (the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters
(the "TAX MATTERS SUMMARY"), and understands the risks of, and other
considerations relating to, an investment in OP Units.
(ii) The Grantor, by reason of its business and financial
experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with
respect to its investment in OP Units,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in OP Units,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
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(iii) (A) The Grantor is an "accredited investor" as defined
in Rule 501 of the regulations promulgated under the
Securities Act.
(B) If the Grantor has retained or retains a person
to represent or advise it with respect to its investment in OP
Units, the Grantor will advise the Operating Partnership of
such retention and, at the Operating Partnership's request,
the Grantor shall, prior to or at the Closing,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Operating Partnership
containing such representations as may be reasonably
requested by the Operating Partnership.
(b) (i) The Grantor understands that an investment in the Operating
Partnership involves substantial risks.
(ii) The Grantor has been given the opportunity to make a
thorough investigation of the proposed activities of the Operating
Partnership and has been furnished with materials relating to the
Operating Partnership and its proposed activities, including, without
limitation, the Private Placement Memorandum, the Partnership Summary
and the Tax Matters Summary.
(iii) The Grantor has been afforded the opportunity to obtain
any additional information requested by it.
(iv) The Grantor has had an opportunity to ask questions of
and receive answers from representatives of the Operating Partnership
concerning the Operating Partnership and its proposed activities and
the terms and conditions of an investment in OP Units.
(v) The Grantor has relied and is making its investment
decision based upon the Private Placement Memorandum, the Partnership
Summary, the Tax Matters Summary and other written information provided
to the Grantor by or on behalf of the Operating Partnership.
(c) (i) The OP Units to be issued to the Grantor at the Closing will be
acquired by the Grantor for its own account, for investment only and
not with a view to, or with any intention of, a distribution or resale
thereof, in whole or in part, or the grant of any participation
therein.
(ii) The Grantor was not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
(d) (i) The Grantor acknowledges that
(A) the OP Units to be issued to the Grantor at the
Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and
applicable state securities laws and, if such OP Units are
represented by certificates, such certificates will bear a
legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of the Grantor contained herein,
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(C) the OP Units to be issued to the Grantor at the
Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there is no public market for such OP Units, and
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act
or any state securities laws or to take any action that would
make available any exemption from the registration
requirements of such laws.
(ii) The Grantor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in
the Lockup Agreements, the Grantor may have to bear the economic risk
of the investment commitment evidenced by this Agreement and any OP
Units issued hereunder for an indefinite period of time.
(e) The address set forth under the Grantor's signature on the
signature page hereto is the address of the Grantor's principal place of
business or, if a natural person, the address of the Grantor's residence, and
the Grantor has no present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which such principal
place of business or residence is situated.
3.7 Private Placement Memorandum. (a) The Grantor understands and
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of the Grantor.
(b) Without limiting the foregoing, such changes may include the
deletion (or addition) of one or more properties expected to be acquired by the
Operating Partnership and changes in the amount of the indebtedness expected to
be repaid with the proceeds of the Offerings.
(c) The Operating Partnership shall not be obligated to obtain the
Grantor's consent as a result of such changes, although such changes could
affect the nature and value of the Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
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4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue OP Units to each Grantor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V: POWER OF ATTORNEY
5.1 Grant of Power of Attorney. (a) The Grantor does hereby irrevocably
appoint Lawrence H. Feldman, Robert Cox and the Operating Partnership, and each
of them individually, with full power of substitution (each such person or the
Operating Partnership or any such successor of any of them acting in his, her or
its capacity as attorney-in-fact pursuant hereto, an "ATTORNEY-IN-FACT"), as the
true and lawful attorney-in-fact and agent of the Grantor, to act in the name,
place and stead of the Grantor:
(i) To take for the Grantor all steps deemed necessary or
advisable by the Operating Partnership in connection with the
Offerings, including without limitation
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(A) filing a registration statement and amendments
thereto (the "Registration Statement") under the Securities
Act which describes the benefit to be received by the Grantor
in connection with the formation of the Company and the
offering of the Company's Common Stock,
(B) distributing a preliminary prospectus and
prospectus regarding the offering of the Company's Common
Stock (respectively, the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed
necessary or desirable to lawfully effect the IPO, and
preliminary and final offering memoranda regarding the
offering of the Company's Common Stock in the concurrent
private placement, which contain such information as is deemed
necessary or desirable to effect the concurrent private
placement,
(C) to enter into the Lock-Up Agreements, and
(D) to take such other steps as the Attorney-in-Fact
may deem necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the
sale of the Grantor's Interests to the Operating Partnership, and any
consents contemplated by Section 6.9 hereof) and, in general, to do all
things and to take all actions which the Attorney-in-Fact in its sole
discretion may consider necessary or proper in connection with or to
carry out the transactions contemplated by this Agreement and the
Closing Documents as fully as could the Grantor if personally present
and acting.
(b) (i) The Power of Attorney granted by the Grantor pursuant to this
Article V and all authority conferred hereby is granted and conferred
subject to and in consideration of the interest of the Operating
Partnership and the Company and is for the purpose of completing the
transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantor granted hereby and
all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act
of the Grantor or by operation of law, whether by the death,
disability, incapacity, dissolution or liquidation of the Grantor or by
the occurrence of any other event or events (including without
limitation the termination of any trust or estate for which the Grantor
is acting as a fiduciary or fiduciaries), and if, after the execution
hereof, the Grantor shall die or become disabled or incapacitated or is
dissolved or liquidated, or if any other such event or events shall
occur before the completion of the transactions contemplated by this
Agreement, each Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such death,
disability, incapacity, dissolution, liquidation or other event or
events had not occurred and regardless of notice thereof.
(c) The Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
(d) The Grantor acknowledges that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transactions contemplated by this
Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantor hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
12
<PAGE> 13
Prospectus or any Preliminary Prospectus, nor for any aspect of either Offering,
and it shall not be liable for any error of judgment or for any act done or
omitted or for any mistake of fact or law except for its own gross negligence or
bad faith.
(c) The Grantor agrees to indemnify each Attorney-in-Fact for and to
hold each Attorney-in-Fact harmless against any loss, claim, damage or liability
incurred or in part arising out of or in connection with its acting as
Attorney-in-Fact under the Power of Attorney created by the Grantor hereby, as
well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantor agrees that each Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership
and/or the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.3 Ratification; Third Party Reliance. The Grantor does hereby ratify
and confirm all that any Attorney-in-Fact shall lawfully do or cause to be done
by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement without notice to or the consent of any Grantor
for the purpose of adding additional Grantors as parties hereto or deleting
Grantors as parties hereto and conforming Exhibits A and B in connection with
such additions or deletions. No waiver of any provisions of this Agreement shall
be valid unless in writing and signed by the party against whom enforcement is
sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
13
<PAGE> 14
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
14
<PAGE> 15
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which an Interest of the Grantor
represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership
interest in any property,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein of its direct
or indirect interest in such partnership to the Operating Partnership
or the Company or to another person in connection with the formation of
the Operating Partnership or the Company as described in the
Registration Statement, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the Registration Statement, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in such partnership or an
undivided tenant-in-common interest in the property
represented by such partnership interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in such
partnership, and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
15
<PAGE> 16
(v) As used herein, the term "CONSENTS" means, with respect to
any such partnership, any consent deemed by the Operating Partnership
to be necessary or desirable under the partnership agreement of such
partnership or any other agreement among all or any of the holders of
interests therein or any other agreement relating thereto or referred
to therein
(A) to permit any and all Conveyance Actions relating
to such partnership or to amend such partnership agreement
and/or other agreements so that no provision thereof prohibit,
restricts, impairs or interferes with any Conveyance Action
(such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if
interests therein are transferred for other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of such partnership upon
the Operating Partnership's acquisition of a limited or
general partner interest therein, respectively, and to adopt
such amendment as is necessary or desirable to effect such
admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of any Grantor hereunder or under the applicable
partnership agreement, and
(D) to continue such partnership following the
transfer of interests therein to the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
a partnership of which an Interest represents a direct or indirect
interest, the waiving of any and all rights that the Grantor may have
with respect to, and (to the extent possible) that any other person may
have with respect to, or that may accrue to the Grantor or other person
upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in such partnership (or the
Interests represented by such partnership interest) or to sell
the Grantor's or other person's direct or indirect interest
therein to another partner,
(D) rights to sell the Grantor's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such
Conveyance Action.
(f) The Grantor by its execution hereof
(i) with respect to each Other Partnership in which an
Interest owned by the Grantor represents a direct or indirect interest
therein, gives such consent as is necessary to cause each Partnership,
as applicable,
16
<PAGE> 17
to have authority to transfer all or substantially all of the assets of
such Partnership to the Operating Partnership on such terms and
conditions as such Other Partnership and the Operating Partnership may
agree; and
(ii) agrees that the Grantor's Acquisition Consideration may
be reduced to reflect such direct transfer of assets and the consequent
receipt of cash and other consideration directly by such Other
Partnership, provided that the total consideration to be received by
the Grantor either directly hereunder or indirectly through the receipt
of distributions from an Other Partnership shall equal Grantor's
Acquisition Consideration.
(g) (i) The Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of each
partnership in which an Interest of the Grantor represents, directly or
indirectly, a limited partner or general partner interest, an amendment
thereto to enable such partnership, to the extent permissible under
applicable law,
(A) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner therein and/or a substitute general partner
therein if the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) by the exercise of the
Option acquires a limited partnership interest or a general
partnership interest in such partnership,
(B) to redeem the interest of any other partner
therein who has not agreed to become a party to this
Agreement,
(C) to distribute to all partners thereof, including
any partner who has not agreed to become a party to this
Agreement, OP Units and cash (in such proportions to each
partner therein as the general partner or general partners
thereof may determine, provided that the Grantor receives as a
result of all such distributions and the direct payment of
consideration hereunder, the amount of cash that is in
conformity with the Acquisition Consideration of the Grantor
provided for herein), and thereafter, at the Operating
Partnership's option, to dissolve, and
(D) any such other amendment as the Operating
Partnership may deem desirable,
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of any Grantor hereunder or under the applicable
partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of the Grantor
execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel or advisors to
the Grantor who agree to keep such terms confidential and any lender holding a
lien on any Interests.
(b) The Grantor shall treat all information received from the Operating
Partnership or its counsel or advisors pertaining to the Operating Partnership
or the Company confidential and shall disseminate same only to counsel to the
Grantor who agree to keep such information confidential.
17
<PAGE> 18
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Grantor set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
18
<PAGE> 19
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Robert Cox
-----------------------------------
Name: Robert Cox
Title: Executive Vice President
GRANTOR:
DANA II ASSOCIATES LIMITED PARTNERSHIP
By: each of its partners
/s/ Lawrence H. Feldman
-----------------------------------------------------
Lawrence H. Feldman
/s/ Stanley B. Grey
-----------------------------------------------------
Stanley B. Grey
/s/ Michael C. Zerner
-----------------------------------------------------
Michael C. Zerner
STELLAR ASSOCIATES
By: each of its partners
/s/ Valerie Herts
-----------------------------------------------------
Valerie Herts
/s/ Lawrence H. Feldman
-----------------------------------------------------
Lawrence H. Feldman
/s/ Jeffrey Feldman
-----------------------------------------------------
Jeffrey Feldman
19
<PAGE> 20
Schedule A
Interests
Grantor's Name & Address Description of Interests
Dana II Associates Limited Partnership 2.80% Class A
c/o Feldman Limited Partner Interest in
120 West 45th Street the Partnership.
New York, NY 10036
<PAGE> 21
Schedule B
Form of Acquisition Consideration
Six (6) OP Units, with the
remaining balance paid in cash.
<PAGE> 22
Schedule C
Exceptions to Title
Pledge to General Electric Real Estate Equities, Inc.
("GE") pursuant to the Pledge and Security Agreement,
dated September 29, 1989, in connection with the
related Assignment Agreement, dated September 29,
1989 (together, the "Dana Agreements").
The Grantor hereby consents to the assignment by GE
to the Operating Partnership of all of GE's right,
title and interest in and to the Dana Agreements.
<PAGE> 23
Schedule D
Interests in Other Partnerships and Properties
None
Other Partnerships and Properties
<TABLE>
<CAPTION>
Property Partnership Owner
<S> <C> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
15. Maitland Forum Maitland Property Investors, Ltd.
Maitland, Florida
</TABLE>
<PAGE> 1
Exhibit 10.25
TOWER 45
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 28th day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and TOWER 45
VENTURES LIMITED PARTNERSHIP (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns a limited partner interest in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to purchase for cash and through a
contribution to capital from the Grantor, and the Grantor desires to grant to
the Operating Partnership, an option to acquire, on the terms and conditions set
forth herein, all interests owned by the Grantor in the Partnership as set forth
on Schedule A attached hereto and any other direct or indirect interests the
Grantor may have, whether now owned or hereinafter acquired, in the Partnership,
or in the properties owned by the Partnership (collectively, the "INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to purchase for cash
and through a contribution to the capital of the Operating Partnership all the
Grantor's right, title and interest in the Interests, including but not limited
to, the Interest set forth on Schedule A attached hereto, on the terms and
conditions set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership during
the 10 business day period commencing on the first business day following the
removal of each such prohibition, stay, order, injunction, action, proceeding or
similar limitation in effect at that time. Subject to the foregoing, if the
Operating Partnership does not exercise the Option by the Option Termination
Date, such Option shall be deemed terminated and shall be of no further force or
effect and the Grantor shall have no further obligations hereunder.
1.3 Acquisition Consideration. (a) The consideration (the "ACQUISITION
CONSIDERATION") to be received by each Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an amount
<PAGE> 2
equal to $300.00 (three hundred dollars). The Acquisition Consideration shall be
paid in the form of a combination of (i) cash and/or (ii) units of limited
partnership interest in the Operating Partnership ("OP UNITS"), in the
percentages and allocations set forth on Schedule B attached hereto. To the
extent a percentage of the Acquisition Consideration includes one or more OP
Units, as set forth on Schedule B, the number of OP Units the Grantor shall be
entitled to receive upon the exercise of the Option with respect to such
percentage shall equal the quotient of
(A) the amount of Acquisition Consideration to be
paid in OP Units, divided by
(B) the midpoint of the proposed per share offering
price for the shares of Common Stock as set forth in the final
preliminary prospectus included in the Company's Registration
Statement on Form S-11 prepared and filed with the Securities
and Exchange Commission in connection with the IPO.
1.4 Lock-Up Agreements. The OP Units to be issued to the Grantor
hereunder shall be subject to Lock-Up Agreements to be executed at the Closing
(as hereinafter defined) by the Operating Partnership and the Grantor,
substantially in the forms attached as Exhibits A and B attached hereto, whereby
the Grantor will not be permitted to transfer OP Units for up to two years after
the Closing, except as otherwise permitted under such agreement.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise of
the Option, the Grantor shall, in accordance with Section 2.2 hereof, transfer,
assign, and convey to the Operating Partnership and the Operating Partnership
shall accept as a contribution to its capital from the Grantor, all right, title
and interest in and to the Interests, free and clear of all Encumbrances (as
defined in Section 3.1(a)), in exchange for the Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute and
deliver all closing documents (the "CLOSING DOCUMENTS") required by the
Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP as
escrow agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the Company
is sufficient, as determined by the Operating Partnership in its reasonable
discretion, to enable the Operating Partnership (i) to acquire all the
Interests, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO (the "REGISTRATION STATEMENT"), as the same shall be in
effect on the day of the Offerings Closing.
2
<PAGE> 3
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee
(A) the Acquisition Consideration (any cash portion
of which shall be delivered in immediately available funds by
check or wire transfer),
(B) a certificate of the general partner of the
Operating Partnership (the "GENERAL PARTNER") certifying that
the Grantor has been or will be, effective as of the Closing,
admitted as a limited partner of the Operating Partnership and
that the Operating Partnership's books and records indicate or
will indicate that the Grantor is the holder of the number of
OP Units that Grantor is entitled to receive pursuant to
Section 1.3, and
(C) if such OP Units are to be represented by
certificates, a certificate or certificates in the name of the
Grantor representing the number of OP Units to which the
Grantor is entitled; and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or
any third party necessary in order to consummate the contribution of
the Interests, or there exists an order or judgment enjoining,
restraining or prohibiting, or assessing substantial damages in respect
of such consummation, or there shall be any action or proceeding
instituted or threatened in writing to enjoin, restrain, prohibit or
assess substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the
contribution of all of the Interests, notify the Escrow Agent of such
election and direct the Escrow Agent to return the Grantor's Closing
Documents to the Grantor, or
(y) in all other cases, equitably adjust the delivery with
respect to the Grantor pursuant to clause (c)(i) above to reflect the
portion of the Grantor's Interests with respect to which the purchase
is actually being made(provided, that, in no event shall the
Acquisition Consideration, as adjusted hereunder, consist of less than
one OP Unit), which adjustment shall be determined in the Operating
Partnership's reasonable discretion, and shall in all events be binding
upon the Grantor.
(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter
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remain in effect and the Operating Partnership may thereafter exercise the
Option again at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "Assignment"), which shall be in
the form attached hereto as Exhibit C attached hereto and shall contain a
warranty of title that the Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and warranties
and the satisfaction of all covenants contained in Article III hereof,
or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent
that the Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
(i) the Grantor is a corporation, limited partnership, general
partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of
this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the Grantor's
charter and/or bylaws, partnership agreement, operating agreement
and articles of organization or declaration of trust, as
applicable, or, to the knowledge of such counsel, any indenture,
deed of trust, mortgage, loan or credit agreement or other
material agreement or instrument to which the Grantor is a party
or by which it or its assets or properties are bound or affected,
except for such breach or violation as the Operating Partnership
has represented and warranted will be waived or cured, or
discharged or repaid prior to or contemporaneously with the
Closing;
(B) to the knowledge of such counsel, constitute a
violation or any order, judgment or decree to which the Grantor
is a party or by which it or any of its assets or properties are
bound or affected; or
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(C) to the knowledge of such counsel, result in the creation of
any lien, charge or encumbrance upon any of the Grantor's assets or
properties, except for Permitted Pledges (as defined in Section 3.1(a));
and
(iii) all applicable corporate, partnership, limited liability company
or trust action necessary for the Grantor to execute and deliver this Agreement
and the Closing Documents and to perform the transactions contemplated hereby
and thereby has been taken and that the same have been validly executed and
delivered and are the valid and binding obligations of the Grantor enforceable
against it in accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) The Lock-up Agreements and a duly executed signature page to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, a copy of which is attached hereto as Exhibit D (the "PARTNERSHIP
AGREEMENT").
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Interests to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assistance. The Grantor will, from time to time, execute and
deliver to the Operating Partnership all such other and further instruments and
documents and take or cause to be taken all such other and further action as the
Operating Partnership may reasonably request in order to effect the transactions
contemplated
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by this Agreement, including instruments or documents deemed necessary or
desirable by the Operating Partnership to effect and evidence the purchase of
the Grantor's Interests by the Operating Partnership in accordance with the
terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into this
Agreement and to consummate the transactions contemplated hereby, the Grantor
hereby makes to the Operating Partnership each of the representations and
warranties set forth in this Article III, which representations and warranties
(unless otherwise noted) are true as of the date hereof. As a condition to the
Operating Partnership's obligation to purchase the Interests after the exercise
of the Option, such representations and warranties must be true as of the
Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C
attached hereto, the Grantor owns beneficially and of record, free and clear of
any claim, lien, pledge (except for pledges relating to the debt or equity
financing of any real property owned by the Partnership (any such pledge, a
"PERMITTED PLEDGE")), voting agreement, option, charge, security interest,
mortgage, deed of trust, encumbrance, right of assignment, purchase right or
other rights of any nature whatsoever (each, an "ENCUMBRANCE"), and has full
power and authority to convey free and clear of any Encumbrances, its Interests
and, upon delivery of an Assignment by the Grantor conveying its Interests and
delivery of the Acquisition Consideration by the Operating Partnership for such
Interests as herein provided, the Operating Partnership will acquire good and
valid title thereto, free and clear of any Encumbrance, except Encumbrances
created in favor of the Operating Partnership by the transactions contemplated
hereby.
(b) Each of the Grantor's Interests representing an interest in the
Partnership has been validly issued and the Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Interest represents an interest that are required to
be funded or advanced prior to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with respect
to any of the Interests except, in the case of any Interest constituting an
interest in the Partnership, as set forth in the partnership agreement of the
Partnership.
(d) The Grantor has no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto (the
"Other Partnerships and Properties") except for the Interests identified on
Exhibit A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantor may assume that the consents and waivers of
rights set forth in Section 6.9 hereof have been given by all partners of the
Partnership, partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such) in which
the Grantor's Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
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<PAGE> 7
(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Grantor or require the
Grantor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which the property of the Grantor is bound or
affected, or result in the creation of any Encumbrance on any of the
property or assets of any Partnership in which any Interest of the
Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released.
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<PAGE> 8
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of its Interests, which in any such case
would impair the Grantor's ability to enter into and perform all of its
obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in
connection with the contribution of Interests to the capital of the
Operating Partnership (which Private Placement Memorandum includes a
draft Registration Statement, the Summary of Partnership Agreement
Provisions (the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters
(the "TAX MATTERS SUMMARY"), and understands the risks of, and other
considerations relating to, an investment in OP Units.
(ii) The Grantor, by reason of its business and financial
experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with
respect to its investment in OP Units,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in OP Units,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
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(iii) (A) The Grantor is an "accredited investor" as defined
in Rule 501 of the regulations promulgated under the
Securities Act.
(B) If the Grantor has retained or retains a person
to represent or advise it with respect to its investment in OP
Units, the Grantor will advise the Operating Partnership of
such retention and, at the Operating Partnership's request,
the Grantor shall, prior to or at the Closing,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Operating Partnership
containing such representations as may be reasonably
requested by the Operating Partnership.
(b) (i) The Grantor understands that an investment in the Operating
Partnership involves substantial risks.
(ii) The Grantor has been given the opportunity to make a
thorough investigation of the proposed activities of the Operating
Partnership and has been furnished with materials relating to the
Operating Partnership and its proposed activities, including, without
limitation, the Private Placement Memorandum, the Partnership Summary
and the Tax Matters Summary.
(iii) The Grantor has been afforded the opportunity to obtain
any additional information requested by it.
(iv) The Grantor has had an opportunity to ask questions of
and receive answers from representatives of the Operating Partnership
concerning the Operating Partnership and its proposed activities and
the terms and conditions of an investment in OP Units.
(v) The Grantor has relied and is making its investment
decision based upon the Private Placement Memorandum, the Partnership
Summary, the Tax Matters Summary and other written information provided
to the Grantor by or on behalf of the Operating Partnership.
(c) (i) The OP Units to be issued to the Grantor at the Closing will be
acquired by the Grantor for its own account, for investment only and
not with a view to, or with any intention of, a distribution or resale
thereof, in whole or in part, or the grant of any participation
therein.
(ii) The Grantor was not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
(d) (i) The Grantor acknowledges that
(A) the OP Units to be issued to the Grantor at the
Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and
applicable state securities laws and, if such OP Units are
represented by certificates, such certificates will bear a
legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of the Grantor contained herein,
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(C) the OP Units to be issued to the Grantor at the
Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there is no public market for such OP Units, and
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act
or any state securities laws or to take any action that would
make available any exemption from the registration
requirements of such laws.
(ii) The Grantor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in
the Lockup Agreements, the Grantor may have to bear the economic risk
of the investment commitment evidenced by this Agreement and any OP
Units issued hereunder for an indefinite period of time.
(e) The address set forth under the Grantor's signature on the
signature page hereto is the address of the Grantor's principal place of
business or, if a natural person, the address of the Grantor's residence, and
the Grantor has no present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which such principal
place of business or residence is situated.
3.7 Private Placement Memorandum. (a) The Grantor understands and
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of the Grantor.
(b) Without limiting the foregoing, such changes may include the
deletion (or addition) of one or more properties expected to be acquired by the
Operating Partnership and changes in the amount of the indebtedness expected to
be repaid with the proceeds of the Offerings.
(c) The Operating Partnership shall not be obligated to obtain the
Grantor's consent as a result of such changes, although such changes could
affect the nature and value of the Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
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4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue OP Units to each Grantor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V: POWER OF ATTORNEY
5.1 Grant of Power of Attorney. (a) The Grantor does hereby irrevocably
appoint Lawrence H. Feldman, Robert Cox and the Operating Partnership, and each
of them individually, with full power of substitution (each such person or the
Operating Partnership or any such successor of any of them acting in his, her or
its capacity as attorney-in-fact pursuant hereto, an "ATTORNEY-IN-FACT"), as the
true and lawful attorney-in-fact and agent of the Grantor, to act in the name,
place and stead of the Grantor:
(i) To take for the Grantor all steps deemed necessary or
advisable by the Operating Partnership in connection with the
Offerings, including without limitation
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(A) filing a registration statement and amendments
thereto (the "Registration Statement") under the Securities
Act which describes the benefit to be received by the Grantor
in connection with the formation of the Company and the
offering of the Company's Common Stock,
(B) distributing a preliminary prospectus and
prospectus regarding the offering of the Company's Common
Stock (respectively, the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed
necessary or desirable to lawfully effect the IPO, and
preliminary and final offering memoranda regarding the
offering of the Company's Common Stock in the concurrent
private placement, which contain such information as is deemed
necessary or desirable to effect the concurrent private
placement,
(C) to enter into the Lock-Up Agreements, and
(D) to take such other steps as the Attorney-in-Fact
may deem necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the
sale of the Grantor's Interests to the Operating Partnership, and any
consents contemplated by Section 6.9 hereof) and, in general, to do all
things and to take all actions which the Attorney-in-Fact in its sole
discretion may consider necessary or proper in connection with or to
carry out the transactions contemplated by this Agreement and the
Closing Documents as fully as could the Grantor if personally present
and acting.
(b) (i) The Power of Attorney granted by the Grantor pursuant to this
Article V and all authority conferred hereby is granted and conferred
subject to and in consideration of the interest of the Operating
Partnership and the Company and is for the purpose of completing the
transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantor granted hereby and
all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act
of the Grantor or by operation of law, whether by the death,
disability, incapacity, dissolution or liquidation of the Grantor or by
the occurrence of any other event or events (including without
limitation the termination of any trust or estate for which the Grantor
is acting as a fiduciary or fiduciaries), and if, after the execution
hereof, the Grantor shall die or become disabled or incapacitated or is
dissolved or liquidated, or if any other such event or events shall
occur before the completion of the transactions contemplated by this
Agreement, each Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such death,
disability, incapacity, dissolution, liquidation or other event or
events had not occurred and regardless of notice thereof.
(c) The Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
(d) The Grantor acknowledges that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transactions contemplated by this
Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantor hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
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Prospectus or any Preliminary Prospectus, nor for any aspect of either Offering,
and it shall not be liable for any error of judgment or for any act done or
omitted or for any mistake of fact or law except for its own gross negligence or
bad faith.
(c) The Grantor agrees to indemnify each Attorney-in-Fact for and to
hold each Attorney-in-Fact harmless against any loss, claim, damage or liability
incurred or in part arising out of or in connection with its acting as
Attorney-in-Fact under the Power of Attorney created by the Grantor hereby, as
well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantor agrees that each Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership
and/or the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.3 Ratification; Third Party Reliance. The Grantor does hereby ratify
and confirm all that any Attorney-in-Fact shall lawfully do or cause to be done
by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement without notice to or the consent of any Grantor
for the purpose of adding additional Grantors as parties hereto or deleting
Grantors as parties hereto and conforming Exhibits A and B in connection with
such additions or deletions. No waiver of any provisions of this Agreement shall
be valid unless in writing and signed by the party against whom enforcement is
sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
13
<PAGE> 14
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
14
<PAGE> 15
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which an Interest of the Grantor
represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership
interest in any property,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein of its direct
or indirect interest in such partnership to the Operating Partnership
or the Company or to another person in connection with the formation of
the Operating Partnership or the Company as described in the
Registration Statement, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the Registration Statement, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in such partnership or an
undivided tenant-in-common interest in the property
represented by such partnership interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in such
partnership, and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
15
<PAGE> 16
(v) As used herein, the term "CONSENTS" means, with respect to
any such partnership, any consent deemed by the Operating Partnership
to be necessary or desirable under the partnership agreement of such
partnership or any other agreement among all or any of the holders of
interests therein or any other agreement relating thereto or referred
to therein
(A) to permit any and all Conveyance Actions relating
to such partnership or to amend such partnership agreement
and/or other agreements so that no provision thereof prohibit,
restricts, impairs or interferes with any Conveyance Action
(such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if
interests therein are transferred for other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of such partnership upon
the Operating Partnership's acquisition of a limited or
general partner interest therein, respectively, and to adopt
such amendment as is necessary or desirable to effect such
admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of any Grantor hereunder or under the applicable
partnership agreement, and
(D) to continue such partnership following the
transfer of interests therein to the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
a partnership of which an Interest represents a direct or indirect
interest, the waiving of any and all rights that the Grantor may have
with respect to, and (to the extent possible) that any other person may
have with respect to, or that may accrue to the Grantor or other person
upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in such partnership (or the
Interests represented by such partnership interest) or to sell
the Grantor's or other person's direct or indirect interest
therein to another partner,
(D) rights to sell the Grantor's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such
Conveyance Action.
(f) The Grantor by its execution hereof
(i) with respect to each Other Partnership in which an
Interest owned by the Grantor represents a direct or indirect interest
therein, gives such consent as is necessary to cause each Partnership,
as applicable,
16
<PAGE> 17
to have authority to transfer all or substantially all of the assets of
such Partnership to the Operating Partnership on such terms and
conditions as such Other Partnership and the Operating Partnership may
agree; and
(ii) agrees that the Grantor's Acquisition Consideration may
be reduced to reflect such direct transfer of assets and the consequent
receipt of cash and other consideration directly by such Other
Partnership, provided that the total consideration to be received by
the Grantor either directly hereunder or indirectly through the receipt
of distributions from an Other Partnership shall equal Grantor's
Acquisition Consideration.
(g) (i) The Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of each
partnership in which an Interest of the Grantor represents, directly or
indirectly, a limited partner or general partner interest, an amendment
thereto to enable such partnership, to the extent permissible under
applicable law,
(A) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner therein and/or a substitute general partner
therein if the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) by the exercise of the
Option acquires a limited partnership interest or a general
partnership interest in such partnership,
(B) to redeem the interest of any other partner
therein who has not agreed to become a party to this
Agreement,
(C) to distribute to all partners thereof, including
any partner who has not agreed to become a party to this
Agreement, OP Units and cash (in such proportions to each
partner therein as the general partner or general partners
thereof may determine, provided that the Grantor receives as a
result of all such distributions and the direct payment of
consideration hereunder, the amount of cash that is in
conformity with the Acquisition Consideration of the Grantor
provided for herein), and thereafter, at the Operating
Partnership's option, to dissolve, and
(D) any such other amendment as the Operating
Partnership may deem desirable,
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of any Grantor hereunder or under the applicable
partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of the Grantor
execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel or advisors to
the Grantor who agree to keep such terms confidential and any lender holding a
lien on any Interests.
(b) The Grantor shall treat all information received from the Operating
Partnership or its counsel or advisors pertaining to the Operating Partnership
or the Company confidential and shall disseminate same only to counsel to the
Grantor who agree to keep such information confidential.
17
<PAGE> 18
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Grantor set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
18
<PAGE> 19
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Robert Cox
-----------------------------------
Name: Robert Cox
Title: Executive Vice President
GRANTOR:
TOWER 45 VENTURES LIMITED PARTNERSHIP
By: each of its partners
/s/ Lawrence H. Feldman
-----------------------------------------------------
Lawrence H. Feldman
/s/ Stanley B. Grey
-----------------------------------------------------
Stanley B. Grey
/s/ Michael C. Zerner
-----------------------------------------------------
Michael C. Zerner
STELLAR ASSOCIATES
By: each of its partners
/s/ Valerie Herts
-----------------------------------------------------
Valerie Herts
/s/ Lawrence H. Feldman
-----------------------------------------------------
Lawrence H. Feldman
/s/ Jeffrey Feldman
-----------------------------------------------------
Jeffrey Feldman
19
<PAGE> 20
Schedule A
Interests
Grantor's Name & Address Description of Interests
Tower 45 Ventures Limited Partnership Five percent (5%) Feldman Class A
c/o Feldman Limited Partner Interest in
120 West 45th Street the Partnership.
New York, NY 10036
<PAGE> 21
Schedule B
Form of Acquisition Consideration
Six (6) OP Units, with the
remaining balance paid in cash.
<PAGE> 22
Schedule C
Exceptions to Title
None
<PAGE> 23
Schedule D
Interests in Other Partnerships and Properties
None
Other Partnerships and Properties
<TABLE>
<CAPTION>
Property Partnership Owner
<S> <C> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
15. Maitland Forum Maitland Property Investors, Ltd.
Maitland, Florida
</TABLE>
<PAGE> 1
Exhibit 10.26
TOWER 45
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 31st day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and FELDMAN
TOWER 45, INC. (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns a general partner interest in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to purchase for cash and through a
contribution to capital from the Grantor, and the Grantor desires to grant to
the Operating Partnership, an option to acquire, on the terms and conditions set
forth herein, all interests owned by the Grantor in the Partnership as set forth
on Schedule A attached hereto and any other direct or indirect interests the
Grantor may have, whether now owned or hereinafter acquired, in the Partnership,
or in the properties owned by the Partnership (collectively, the "INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to purchase for cash
and through a contribution to the capital of the Operating Partnership all the
Grantor's right, title and interest in the Interests, including but not limited
to, the Interest set forth on Schedule A attached hereto, on the terms and
conditions set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership during
the 10 business day period commencing on the first business day following the
removal of each such prohibition, stay, order, injunction, action, proceeding or
similar limitation in effect at that time. Subject to the foregoing, if the
Operating Partnership does not exercise the Option by the Option Termination
Date, such Option shall be deemed terminated and shall be of no further force or
effect and the Grantor shall have no further obligations hereunder.
<PAGE> 2
1.3 Acquisition Consideration. (a) The consideration (the "ACQUISITION
CONSIDERATION") to be received by each Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an amount equal to
$100.00 (one hundred dollars). The Acquisition Consideration shall be paid in
the form of a combination of (i) cash and/or (ii) units of limited partnership
interest in the Operating Partnership ("OP UNITS"), in the percentages and
allocations set forth on Schedule B attached hereto. To the extent a percentage
of the Acquisition Consideration includes one or more OP Units, as set forth on
Schedule B, the number of OP Units the Grantor shall be entitled to receive upon
the exercise of the Option with respect to such percentage shall equal the
quotient of
(A) the amount of Acquisition Consideration to be
paid in OP Units, divided by
(B) the midpoint of the proposed per share offering
price for the shares of Common Stock as set forth in the final
preliminary prospectus included in the Company's Registration
Statement on Form S-11 prepared and filed with the Securities
and Exchange Commission in connection with the IPO.
1.4 Lock-Up Agreements. The OP Units to be issued to the Grantor
hereunder shall be subject to Lock-Up Agreements to be executed at the Closing
(as hereinafter defined) by the Operating Partnership and the Grantor,
substantially in the forms attached as Exhibits A and B attached hereto, whereby
the Grantor will not be permitted to transfer OP Units for up to two years after
the Closing, except as otherwise permitted under such agreement.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise of
the Option, the Grantor shall, in accordance with Section 2.2 hereof, transfer,
assign, and convey to the Operating Partnership and the Operating Partnership
shall accept as a contribution to its capital from the Grantor, all right, title
and interest in and to the Interests, free and clear of all Encumbrances (as
defined in Section 3.1(a)), in exchange for the Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute and
deliver all closing documents (the "CLOSING DOCUMENTS") required by the
Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP as
escrow agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the Company
is sufficient, as determined by the Operating Partnership in its reasonable
discretion, to enable the Operating Partnership (i) to acquire all the
Interests, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO (the "REGISTRATION STATEMENT"), as the same shall be in
effect on the day of the Offerings Closing.
2
<PAGE> 3
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee
(A) the Acquisition Consideration (any cash portion
of which shall be delivered in immediately available funds by
check or wire transfer),
(B) a certificate of the general partner of the
Operating Partnership (the "GENERAL PARTNER") certifying that
the Grantor has been or will be, effective as of the Closing,
admitted as a limited partner of the Operating Partnership and
that the Operating Partnership's books and records indicate or
will indicate that the Grantor is the holder of the number of
OP Units that Grantor is entitled to receive pursuant to
Section 1.3, and
(C) if such OP Units are to be represented by
certificates, a certificate or certificates in the name of the
Grantor representing the number of OP Units to which the
Grantor is entitled; and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or
any third party necessary in order to consummate the contribution of
the Interests, or there exists an order or judgment enjoining,
restraining or prohibiting, or assessing substantial damages in respect
of such consummation, or there shall be any action or proceeding
instituted or threatened in writing to enjoin, restrain, prohibit or
assess substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the
contribution of all of the Interests, notify the Escrow Agent of such
election and direct the Escrow Agent to return the Grantor's Closing
Documents to the Grantor, or
(y) in all other cases, equitably adjust the delivery with
respect to the Grantor pursuant to clause (c)(i) above to reflect the
portion of the Grantor's Interests with respect to which the purchase
is actually being made (provided, that, in no event shall the
Acquisition Consideration, as adjusted hereunder, consist of less than
one OP Unit), which adjustment shall be determined in the Operating
Partnership's reasonable discretion, and shall in all events be binding
upon the Grantor.
(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter
3
<PAGE> 4
remain in effect and the Operating Partnership may thereafter exercise the
Option again at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be
in the form attached hereto as Exhibit C attached hereto and shall contain a
warranty of title that the Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article
III hereof, or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent
that the Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
(i) the Grantor is a corporation, limited partnership, general
partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of
this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the
Grantor's charter and/or bylaws, partnership agreement,
operating agreement and articles of organization or
declaration of trust, as applicable, or, to the knowledge of
such counsel, any indenture, deed of trust, mortgage, loan or
credit agreement or other material agreement or instrument to
which the Grantor is a party or by which it or its assets or
properties are bound or affected, except for such breach or
violation as the Operating Partnership has represented and
warranted will be waived or cured, or discharged or repaid
prior to or contemporaneously with the Closing;
(B) to the knowledge of such counsel, constitute a
violation or any order, judgment or decree to which the
Grantor is a party or by which it or any of its assets or
properties are bound or affected; or
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(C) to the knowledge of such counsel, result in the
creation of any lien, charge or encumbrance upon any of the
Grantor's assets or properties, except for Permitted Pledges
(as defined in Section 3.1(a)); and
(iii) all applicable corporate, partnership, limited liability
company or trust action necessary for the Grantor to execute and deliver this
Agreement and the Closing Documents and to perform the transactions contemplated
hereby and thereby has been taken and that the same have been validly executed
and delivered and are the valid and binding obligations of the Grantor
enforceable against it in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) The Lock-up Agreements and a duly executed signature page to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, a copy of which is attached hereto as Exhibit D (the "PARTNERSHIP
AGREEMENT").
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Interests to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated
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by this Agreement, including instruments or documents deemed necessary or
desirable by the Operating Partnership to effect and evidence the purchase of
the Grantor's Interests by the Operating Partnership in accordance with the
terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity financing
of any real property owned by the Partnership (any such pledge, a "PERMITTED
PLEDGE")), voting agreement, option, charge, security interest, mortgage, deed
of trust, encumbrance, right of assignment, purchase right or other rights of
any nature whatsoever (each, an "ENCUMBRANCE"), and has full power and authority
to convey free and clear of any Encumbrances, its Interests and, upon delivery
of an Assignment by the Grantor conveying its Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Interests as
herein provided, the Operating Partnership will acquire good and valid title
thereto, free and clear of any Encumbrance, except Encumbrances created in favor
of the Operating Partnership by the transactions contemplated hereby.
(b) Each of the Grantor's Interests representing an interest in the
Partnership has been validly issued and the Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Interest represents an interest that are required to
be funded or advanced prior to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with respect
to any of the Interests except, in the case of any Interest constituting an
interest in the Partnership, as set forth in the partnership agreement of the
Partnership.
(d) The Grantor has no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto
(the "Other Partnerships and Properties") except for the Interests identified on
Exhibit A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantor may assume that the consents and waivers of
rights set forth in Section 6.9 hereof have been given by all partners of the
Partnership, partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such) in which
the Grantor's Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
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<PAGE> 7
(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Grantor or require the
Grantor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which the property of the Grantor is bound or
affected, or result in the creation of any Encumbrance on any of the
property or assets of any Partnership in which any Interest of the
Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released.
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<PAGE> 8
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of its Interests, which in any such case
would impair the Grantor's ability to enter into and perform all of its
obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in
connection with the contribution of Interests to the capital of the
Operating Partnership (which Private Placement Memorandum includes a
draft Registration Statement, the Summary of Partnership Agreement
Provisions (the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters
(the "TAX MATTERS SUMMARY"), and understands the risks of, and other
considerations relating to, an investment in OP Units.
(ii) The Grantor, by reason of its business and financial
experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with
respect to its investment in OP Units,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in OP Units,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
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(iii) (A) The Grantor is an "accredited investor" as
defined in Rule 501 of the regulations promulgated under the
Securities Act.
(B) If the Grantor has retained or retains a person
to represent or advise it with respect to its investment in OP
Units, the Grantor will advise the Operating Partnership of
such retention and, at the Operating Partnership's request,
the Grantor shall, prior to or at the Closing,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Operating Partnership
containing such representations as may be reasonably
requested by the Operating Partnership.
(b) (i) The Grantor understands that an investment in the
Operating Partnership involves substantial risks.
(ii) The Grantor has been given the opportunity to make a
thorough investigation of the proposed activities of the Operating
Partnership and has been furnished with materials relating to the
Operating Partnership and its proposed activities, including, without
limitation, the Private Placement Memorandum, the Partnership Summary
and the Tax Matters Summary.
(iii) The Grantor has been afforded the opportunity to obtain
any additional information requested by it.
(iv) The Grantor has had an opportunity to ask questions of
and receive answers from representatives of the Operating Partnership
concerning the Operating Partnership and its proposed activities and
the terms and conditions of an investment in OP Units.
(v) The Grantor has relied and is making its investment
decision based upon the Private Placement Memorandum, the Partnership
Summary, the Tax Matters Summary and other written information provided
to the Grantor by or on behalf of the Operating Partnership.
(c) (i) The OP Units to be issued to the Grantor at the Closing
will be acquired by the Grantor for its own account, for investment
only and not with a view to, or with any intention of, a distribution
or resale thereof, in whole or in part, or the grant of any
participation therein.
(ii) The Grantor was not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
(d) (i) The Grantor acknowledges that
(A) the OP Units to be issued to the Grantor at the
Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and
applicable state securities laws and, if such OP Units are
represented by certificates, such certificates will bear a
legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of the Grantor contained herein,
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(C) the OP Units to be issued to the Grantor at the
Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there is no public market for such OP Units, and
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act
or any state securities laws or to take any action that would
make available any exemption from the registration
requirements of such laws.
(ii) The Grantor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in
the Lock-up Agreements, the Grantor may have to bear the economic risk
of the investment commitment evidenced by this Agreement and any OP
Units issued hereunder for an indefinite period of time.
(e) The address set forth under the Grantor's signature on the
signature page hereto is the address of the Grantor's principal place of
business or, if a natural person, the address of the Grantor's residence, and
the Grantor has no present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which such principal
place of business or residence is situated.
3.7 Private Placement Memorandum. (a) The Grantor understands and
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of the Grantor.
(b) Without limiting the foregoing, such changes may include the
deletion (or addition) of one or more properties expected to be acquired by the
Operating Partnership and changes in the amount of the indebtedness expected to
be repaid with the proceeds of the Offerings.
(c) The Operating Partnership shall not be obligated to obtain the
Grantor's consent as a result of such changes, although such changes could
affect the nature and value of the Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
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4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing Document
to which it is a party and each other agreement, document and instrument
to be executed and delivered by or on behalf of it pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue OP Units to each Grantor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal, state,
local or other laws applicable to the Operating Partnership or require
the Operating Partnership to obtain any approval, consent or waiver of,
or make any filing with, any person or authority (governmental or
otherwise) that has not been obtained or made and which does not remain
in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 NO BROKERS. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V: POWER OF ATTORNEY
5.1 GRANT OF POWER OF ATTORNEY. (a) The Grantor goes hereby irrevocably
appoint Lawrence H. Feldman, Robert Cox and the Operating Partnership, and each
of them individually, with full power of substitution (each such person or the
Operating Partnership or any such successor of any of them acting in his, her or
its capacity as attorney-in-fact pursuant hereto, an "ATTORNEY-IN-FACT"), as the
true and lawful attorney-in-fact and agent of the Grantor, to act in the name,
place and stead of the Grantor:
(i) To take for the Grantor all steps deemed necessary or
advisable by the Operating Partnership in connection with the
Offerings, including without limitation
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(A) filing a registration statement and amendments
thereto (the "Registration Statement") under the Securities
Act which describes the benefit to be received by the Grantor
in connection with the formation of the Company and the
offering of the Company's Common Stock,
(B) distributing a preliminary prospectus and
prospectus regarding the offering of the Company's Common
Stock (respectively, the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed
necessary or desirable to lawfully effect the IPO, and
preliminary and final offering memoranda regarding the
offering of the Company's Common Stock in the concurrent
private placement, which contain such information as is deemed
necessary or desirable to effect the concurrent private
placement,
(C) to enter into the Lock-Up Agreements, and
(D) to take such other steps as the Attorney-in-Fact
may deem necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the
sale of the Grantor's Interests to the Operating Partnership, and any
consents contemplated by Section 6.9 hereof) and, in general, to do all
things and to take all actions which the Attorney-in-Fact in its sole
discretion may consider necessary or proper in connection with or to
carry out the transactions contemplated by this Agreement and the
Closing Documents as fully as could the Grantor if personally present
and acting.
(b) (i) The Power of Attorney granted by the Grantor pursuant to
this Article V and all authority conferred hereby is granted and
conferred subject to and in consideration of the interest of the
Operating Partnership and the Company and is for the purpose of
completing the transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantor granted hereby and
all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act
of the Grantor or by operation of law, whether by the death,
disability, incapacity, dissolution or liquidation of the Grantor or by
the occurrence of any other event or events (including without
limitation the termination of any trust or estate for which the Grantor
is acting as a fiduciary or fiduciaries), and if, after the execution
hereof, the Grantor shall die or become disabled or incapacitated or is
dissolved or liquidated, or if any other such event or events shall
occur before the completion of the transactions contemplated by this
Agreement, each Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such death,
disability, incapacity, dissolution, liquidation or other event or
events had not occurred and regardless of notice thereof.
(c) The Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
(d) The Grantor acknowledges that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transactions contemplated by this
Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantor hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
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<PAGE> 13
Prospectus or any Preliminary Prospectus, nor for any aspect of either Offering,
and it shall not be liable for any error of judgment or for any act done or
omitted or for any mistake of fact or law except for its own gross negligence or
bad faith.
(c) The Grantor agrees to indemnify each Attorney-in-Fact for and to
hold each Attorney-in-Fact harmless against any loss, claim, damage or liability
incurred or in part arising out of or in connection with its acting as
Attorney-in-Fact under the Power of Attorney created by the Grantor hereby, as
well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantor agrees that each Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership
and/or the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.3 Ratification; Third Party Reliance. The Grantor does hereby ratify
and confirm all that any Attorney-in-Fact shall lawfully do or cause to be done
by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement without notice to or the consent of any Grantor
for the purpose of adding additional Grantors as parties hereto or deleting
Grantors as parties hereto and conforming Exhibits A and B in connection with
such additions or deletions. No waiver of any provisions of this Agreement shall
be valid unless in writing and signed by the party against whom enforcement is
sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
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6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
14
<PAGE> 15
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which an Interest of the Grantor
represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership
interest in any property,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein of its direct
or indirect interest in such partnership to the Operating Partnership
or the Company or to another person in connection with the formation of
the Operating Partnership or the Company as described in the
Registration Statement, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the Registration Statement, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in such partnership or an
undivided tenant-in-common interest in the property
represented by such partnership interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in such
partnership, and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
15
<PAGE> 16
(v) As used herein, the term "CONSENTS" means, with respect to
any such partnership, any consent deemed by the Operating Partnership
to be necessary or desirable under the partnership agreement of such
partnership or any other agreement among all or any of the holders of
interests therein or any other agreement relating thereto or referred
to therein
(A) to permit any and all Conveyance Actions relating
to such partnership or to amend such partnership agreement
and/or other agreements so that no provision thereof prohibit,
restricts, impairs or interferes with any Conveyance Action
(such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if
interests therein are transferred for other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of such partnership upon
the Operating Partnership's acquisition of a limited or
general partner interest therein, respectively, and to adopt
such amendment as is necessary or desirable to effect such
admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of any Grantor hereunder or under the applicable
partnership agreement, and
(D) to continue such partnership following the
transfer of interests therein to the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
a partnership of which an Interest represents a direct or indirect
interest, the waiving of any and all rights that the Grantor may have
with respect to, and (to the extent possible) that any other person may
have with respect to, or that may accrue to the Grantor or other person
upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in such partnership (or the
Interests represented by such partnership interest) or to sell
the Grantor's or other person's direct or indirect interest
therein to another partner,
(D) rights to sell the Grantor's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such
Conveyance Action.
(f) The Grantor by its execution hereof
(i) with respect to each Other Partnership in which an
Interest owned by the Grantor represents a direct or indirect interest
therein, gives such consent as is necessary to cause each Partnership,
as applicable,
16
<PAGE> 17
to have authority to transfer all or substantially all of the assets of
such Partnership to the Operating Partnership on such terms and
conditions as such Other Partnership and the Operating Partnership may
agree; and
(ii) agrees that the Grantor's Acquisition Consideration may
be reduced to reflect such direct transfer of assets and the consequent
receipt of cash and other consideration directly by such Other
Partnership, provided that the total consideration to be received by
the Grantor either directly hereunder or indirectly through the receipt
of distributions from an Other Partnership shall equal Grantor's
Acquisition Consideration.
(g) (i) The Grantor by its execution hereof gives such consent as
is necessary to cause, with respect to the partnership agreement of
each partnership in which an Interest of the Grantor represents,
directly or indirectly, a limited partner or general partner interest,
an amendment thereto to enable such partnership, to the extent
permissible under applicable law,
(A) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner therein and/or a substitute general partner
therein if the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) by the exercise of the
Option acquires a limited partnership interest or a general
partnership interest in such partnership,
(B) to redeem the interest of any other partner
therein who has not agreed to become a party to this
Agreement,
(C) to distribute to all partners thereof, including
any partner who has not agreed to become a party to this
Agreement, OP Units and cash (in such proportions to each
partner therein as the general partner or general partners
thereof may determine, provided that the Grantor receives as a
result of all such distributions and the direct payment of
consideration hereunder, the amount of cash that is in
conformity with the Acquisition Consideration of the Grantor
provided for herein), and thereafter, at the Operating
Partnership's option, to dissolve, and
(D) any such other amendment as the Operating
Partnership may deem desirable,
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of any Grantor hereunder or under the applicable
partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of the Grantor
execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel or advisors to
the Grantor who agree to keep such terms confidential and any lender holding a
lien on any Interests.
(b) The Grantor shall treat all information received from the Operating
Partnership or its counsel or advisors pertaining to the Operating Partnership
or the Company confidential and shall disseminate same only to counsel to the
Grantor who agree to keep such information confidential.
17
<PAGE> 18
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Grantor set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
18
<PAGE> 19
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Robert L. Cox
------------------------------------
Name: Robert L. Cox
Title: Executive Vice President and
Chief Operating Officer
GRANTOR:
FELDMAN TOWER 45, INC.
By: /s/ Lawrence H. Feldman
------------------------------------
Name: Lawrence H. Feldman
Title: President
19
<PAGE> 20
Schedule A
Interests
Grantor's Name & Address Description of Interests
------------------------ ------------------------
Feldman Tower 45, Inc. Two percent (2%) General
120 West 45th Street Partner Interest in the Partnership.
New York, NY 10036
<PAGE> 21
Schedule B
Form of Acquisition Consideration
---------------------------------
One (1) OP Unit, with the
remaining balance paid in cash.
<PAGE> 22
Schedule C
Exceptions to Title
-------------------
None
<PAGE> 23
Schedule D
Interests in Other Partnerships and Properties
----------------------------------------------
None
<PAGE> 1
EXHIBIT 10.27
================================================================================
MAITLAND PROPERTY INVESTORS, LTD.,
as Contributor
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
as Contributee
================================================================================
CONTRIBUTION AGREEMENT
================================================================================
Dated: As of August 4, 1997
================================================================================
<PAGE> 2
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of
the 4th day of August, 1997 by and between MAITLAND PROPERTY INVESTORS, LTD., a
Florida limited partnership, having an address at 120 West 45th Street, New
York, New York 10036 ("Contributor") and TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership, having an address at 120 West 45th
Street, New York, New York 10036 (the "OP").
R E C I T A L S:
A. The subject property is located in Orange County, Florida and
is comprised of a leasehold estate, as more particularly described in Section
1.1 hereof.
B. Contributor desires to contribute to the capital of the OP and
the OP desires to acquire, as a result of this contribution to capital, all of
Contributor's right, title and interest in and to the subject property in
exchange for interests in the OP (the "Units")
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties do hereby agree as
follows:
ARTICLE I
CONTRIBUTION OF PROPERTY
1.1 Contribution and Assignment. Subject to the terms and
conditions hereinafter specified, Contributor agrees to contribute to the
capital of the OP, and the OP agrees to acquire from Contributor, as a result
of this contribution to capital, (i) Contributor's interest in the buildings
and improvements (collectively, the "Building") located on that certain plot,
piece and parcel of land (the "Land") located in Orange County, Florida and
more particularly described in Exhibit A attached hereto and made a part
hereof, (ii) Contributor's interest in that certain lease dated as of March 9,
1984 between Contributor and Maitland Associates, Ltd., as lessee, and recorded
on August 3, 1984 in Deed Book 3538, Page 2679 (as amended, the "Ground
Lease"), which Ground Lease encumbers the Land (the Building, the Land and the
Ground Lease are hereinafter sometimes collectively referred to as the
"Premises"), and (iii) all of Contributor's right, title and interest in, to
and under:
(a) all easements, rights of way, privileges,
appurtenances, strips, gores, air rights and other rights pertaining to the
Premises, if any;
(b) any land lying in the bed of any street, road, avenue,
open or proposed, public or private, in front of or adjoining the Premises or
any portion thereof, to the center line thereof, and any award to be made in
lieu thereof and in and to any unpaid award for damage to the Premises by
reason of change of grade of any street occurring after the date of execution
and delivery of this Agreement;
1
<PAGE> 3
(c) all the fixtures, furniture, furnishings, equipment
and other personal property owned by Contributor and used in connection with
the Premises (the "Personalty");
(d) all of Contributor's right, title and interest in and
to all leases and other occupancy agreements for the leasing of space at the
Premises (collectively, the "Leases"), and all security deposits under the
Leases (collectively, the "Security Deposits") which have not been applied by
Contributor to the payment of past due amounts under the Leases in accordance
with the terms of the respective Leases (and which shall continue to be held
in accordance with the terms and conditions of the respective Leases);
(e) all of Contributor's right, title and interest in and
to service, supply, security, maintenance, employment and all other agreements,
licenses or contracts (the "Contracts"), subject to any consents required
pursuant to the terms and provisions of such Contracts; and
(f) all certificates of occupancy and other documents,
permits, warranties, guarantees and approvals pertaining to the operation of
the Premises (collectively, the "Permits"; the Land, the Building, the Ground
Lease, the Personalty, the Leases, the Security Deposits, the Contracts, and
the Permits being hereinafter collectively referred to as the "Property").
1.2 Contribution Consideration. In exchange for the
contribution of the Property to the capital of the OP, the Contributor shall
receive such number of the Units equal to the quotient of (A) 600,000 and (B)
the mid-point of the proposed per share price range for shares of common stock
in Tower Realty Trust, Inc., a Maryland corporation, (the "Company") as set
forth in the final preliminary prospectus included in the Registration
Statement on Form S-11 filed by the Company with the Securities and Exchange
Commission in connection with the proposed public offering of the shares of its
common stock (the "IPO").
1.3 Adjustment to Contribution Consideration. Contributor agrees
that the consideration payable pursuant to Section 1.2 hereof may be reduced to
reflect the OP's acquisition of interests in the Contributor simultaneously
with the closing in exchange for cash, provided, however, in no event shall the
contribution consideration be reduced by an amount greater than the product of
(x) the percentage interest in the Contributor acquired by the OP and (y)
$600,000. In the event the contribution consideration is reduced pursuant to
this Section 1.3, immediately following the closing, the OP shall recontribute
to the Contributor, without additional consideration, any interests in the
Contributor previously acquired by the OP.
ARTICLE II
THE CLOSING
2.1 Time and Place. The closing of the contribution of
Contributor's rights, title and interest in and to the Property to the OP (the
"Closing") shall occur, subject to the satisfaction or waiver of the conditions
set forth in Sections 2.2 and 2.4 hereof, simultaneously with the closing of
the IPO (the "Closing Date"). Contributor shall give the OP at least five (5)
business days' advance notice of the Closing Date. The Closing shall take
place at the offices of Battle Fowler LLP, 75 East 55th Street, New York, New
York 10022.
2
<PAGE> 4
2.2 Conditions Precedent to Obligations of Contributor. The
obligation of Contributor to convey the Property to the OP on the Closing Date
is subject to the fulfillment of the following conditions to Contributor's sole
satisfaction prior to or as of the Closing Date:
(a) the OP shall have issued the Units to Contributor as
set forth in Article I evidenced by (i) an amendment to the Agreement of
Limited Partnership of the OP in the form attached hereto as Exhibit B (the
"OP Agreement") and (ii) such additional actions and execution of such
additional documentation as may be required by the OP Agreement or the
Agreement of Limited Partnership of Contributor, or otherwise, in order to
effect the transactions hereby contemplated;
(b) Contributor shall have obtained any and all consents
required in order to effect the transactions hereby contemplated;
(c) the representations and warranties of the OP set
forth in Article IV hereof shall be true and correct in all material respects
on and as of the Closing Date; and
(d) the OP shall have satisfied its obligations set forth
in Section 2.5 hereof.
2.3 Deliveries of Contributor. At the Closing, Contributor shall
deliver or cause to be delivered the following:
(a) a Lock-Up Agreement whereby the OP's transfer of the
Units shall be restricted as provided therein, which agreement shall be in the
form attached hereto as Exhibit D-1 and Exhibit D-2 and made a part hereof;
(b) a Registration Rights Agreement in the form attached
hereto as Exhibit E and made a part hereof;
(c) an Exchange Rights Agreement in the form attached
hereto as Exhibit F and made a part hereof;
(d) an Assignment and Assumption of Lease Agreement,
substantially in the form attached hereto as Exhibit G, assigning to the OP
Contributor's interest in the Ground Lease;
(e) an Omnibus Assignment and Assumption and Bill of Sale,
substantially in the form attached hereto as Exhibit H, (i) assigning all of
Contributor's interest in the Contracts (provided same are assignable), (ii)
assigning all of Contributor's interest in the Permits, (iii) assigning all of
Contributor's interest in the Leases and Security Deposits, and (iv)
evidencing the sale of the Personal Property included in the sale of the
Property;
(f) any required transfer tax returns;
(g) a "non-foreign person affidavit" as required by
Internal Revenue Code Section 1445, substantially in the form attached hereto
as Exhibit I; and
(h) a signature page to the Partnership Agreement.
2.4 Conditions Precedent to Obligations of the OP. The obligation
of the OP to receive the contribution of the Property on the Closing Date is
subject to the fulfillment of the following conditions prior to or as of the
Closing Date:
3
<PAGE> 5
(a) the representations and warranties of Contributor set
forth in Article IV shall be true and correct in all material respects on and
as of the Closing Date;
(b) Contributor shall have satisfied its obligations set
forth in Section 2.3 hereof;
(c) the IPO shall have been consummated; and
(d) the OP shall have acquired all the equity interests
in the entity that holds the Ground Lease.
2.5 Deliveries of the OP. At Closing, the OP shall deliver, or
cause to be delivered, the following:
(a) the issuance of the Units in accordance with Article
I hereof; and
(b) signed counterparts of any of the documents set forth
in Section 2.3 hereof on which a signature block for the OP appears.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF CONTRIBUTOR
3.1 Organization and Capacity. Contributor represents that it has
full power and authority and has taken all action necessary to authorize it to
enter into and perform its obligations under this Agreement and all other
documents or instruments contemplated hereby. Contributor represents that this
Agreement is a legal, valid and binding obligation of Contributor, and this
Agreement is enforceable in accordance with its terms, except (i) that such
enforceability may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, (ii) that such enforceability may be subject to
general equitable principles, including, without limitation, the principle that
the availability of equitable remedies, such as specific enforcement,
injunctive relief or reformation, is subject to the discretion of the court
before which any proceeding might be brought, and (iii) that rights to
indemnity referred to or provided in any such agreements may be limited by
federal or state securities laws or public policy underlying such laws.
3.2 No Broker. Contributor represents and warrants that
Contributor has not engaged on its own behalf or for its benefit any person or
entity as an agent, broker, dealer or otherwise who is entitled to a commission
or fee in connection with the sale of the Property to the OP. Contributor
hereby agrees to indemnify and hold the OP harmless from and against any and
all claims, demands, causes of action, losses, costs and expenses (including
attorneys' fees) and other liabilities arising from Contributor's breach of the
representations and warranties contained in this Section 3.2. Notwithstanding
anything to the contrary contained herein, the provisions of this Section 3.2
shall survive the Closing Date until the expiration of the applicable statute
of limitations therefor.
4
<PAGE> 6
3.3 Investment Representations and Warranties. 1. (i) The
Contributor has received and reviewed a copy of the Private Placement
Memorandum (the "Private Placement Memorandum") prepared in connection with the
contribution of Interests to the capital of the Operating Partnership (which
Private Placement Memorandum includes a draft Registration Statement, the
Summary of Partnership Agreement Provisions (the "Partnership Summary") and the
Summary of Tax Matters (the "Tax Matters Summary"), and understands the risks
of, and other considerations relating to, an investment in Units.
(ii) The Contributor, by reason of its business
and financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or advise
it with respect to its investment in Units,
(A) has such knowledge, sophistication
and experience in financial and business matters and in
making investment decisions of this type that it is capable
of evaluating the merits and risks of and of making an
informed investment decision with respect to an investment
in Units,
(B) is capable of protecting its own
interest or has engaged representatives or advisors to
assist it in protecting its interests, and
(C) is capable of bearing the economic
risk of such investment.
(iii) (A) The Contributor is an "accredited
investor" as defined in Rule 501 of the regulations
promulgated under the Securities Act of 1933.
(B) If the Contributor has retained or
retains a person to represent or advise it with respect to
its investment in Units, the Contributor will advise the OP
of such retention and, at the OP's request, the Contributor
shall, prior to or at the Closing,
(I) acknowledge in writing such
representation, and
(II) cause such representative or
advisor to deliver a certificate to the OP containing
such representations as may be reasonably requested
by the OP.
(b) (i) The Contributor understands that an
investment in the OP involves substantial risks.
(ii) The Contributor has been given the
opportunity to make a thorough investigation of the proposed activities of
the OP and has been furnished with materials relating to the OP and its
proposed activities, including, without limitation, the Private Placement
Memorandum, the Partnership Summary and the Tax Matters Summary.
(iii) The Contributor has been afforded the
opportunity to obtain any additional information requested by it.
(iv) The Contributor has had an opportunity
to ask questions of and receive answers from representatives of the OP
concerning
5
<PAGE> 7
the OP and its proposed activities and the terms and conditions of an
investment in Units.
(v) The Contributor has relied and is making
its investment decision based upon the Private Placement Memorandum, the
Partnership Summary, the Tax Matters Summary and other written information
provided to the Contributor by or on behalf of the OP.
(c) (i) The Units to be issued to the Contributor
at the Closing will be acquired by the Contributor for its own account, for
investment only and not with a view to, or with any intention of, a
distribution or resale thereof, in whole or in part, or the grant of any
participation therein.
(ii) The Contributor was not formed for the
specific purpose of acquiring an interest in the OP.
(d) (i) The Contributor acknowledges that
(A) the Units to be issued to the
Contributor at the Closing have not been registered under
the Securities Act of 1933 or state securities laws by
reason of a specific exemption or exemptions from
registration under the Securities Act of 1933 and
applicable state securities laws and, if such Units are
represented by certificates, such certificates will bear
a legend to such effect,
(B) the Company's and the OP's reliance
on such exemptions is predicated in part on the accuracy
and completeness of the representations and warranties of
the Contributor contained herein,
(C) the Units to be issued to the
Contributor at the Closing may not be resold or otherwise
distributed unless registered under the Securities Act of
1933 and applicable state securities laws, or unless an
exemption from registration is available,
(D) there is no public market for such
Units, and
(E) the OP has no obligation or
intention to register such Units under the Securities
Act of 1933 or any state securities laws or to take any
action that would make available any exemption from the
registration requirements of such laws, except as
provided in the Registration Rights Agreement (as defined
below).
(ii) The Contributor hereby acknowledges that
because of the restrictions on transfer or assignment of such Units to be
issued hereunder, which will be set forth in the Partnership Agreement and
in the Lock-up Agreement, the Contributor may have to bear the economic
risk of the investment commitment evidenced by this Agreement and any of
the Units issued hereunder for an indefinite period of time, although, if
applicable,
(A) under the terms of the Exchange
Rights Agreement, as it will be in effect at the time of
the IPO, Units will, subject to the limitations set forth
in the Exchange Rights Agreement, be exchangeable at the
request of the holder thereof at
6
<PAGE> 8
any time after the first anniversary of their issuance
for cash based on their fair market value or, at the
option of the Company, for shares of common stock in the
Company, and
(B) the holder of any such common stock
issued upon exchange of Units will be afforded certain
rights to have such common stock registered under the
Securities Act of 1933 and applicable state securities
laws pursuant to the Registration Rights Agreement.
3.4 Private Placement Memorandum. (a) The
Contributor understands and acknowledges that the Private Placement Memorandum,
including, but not limited to, the descriptions of the various transactions
relating to the formation and business of the Company and the OP set forth in
the Private Placement Memorandum, are in draft form only, and such transactions
are subject to change without the consent of the Contributor.
(b) Without limiting the foregoing, such changes
may include the deletion (or addition) of one or more properties expected to
be acquired by the OP and changes in the amount of the indebtedness expected
to be repaid with the proceeds of the IPO.
(c) The OP shall not be obligated to obtain the
Contributor's consent as a result of such changes, although such changes could
affect the nature and value of the Contributor's investment in the Units.
3.5 No Other Representations or Warranties.
Contributor makes no other representation or warranty to the OP of any kind or
character.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE OP
4.1 Organization and Capacity. The OP represents that
it has full power and authority and has taken all actions necessary to
authorize it to enter into and perform its obligations under this Agreement and
all other documents or instruments contemplated hereby. This Agreement is a
legal, valid and binding obligation of the OP, and this Agreement is
enforceable in accordance with its terms, except (i) that such enforceability
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally, (ii) that such enforceability may be subject to general equitable
principles, including, without limitation, the principle that the availability
of equitable remedies, such as specific enforcement, injunctive relief or
reformation, is subject to the discretion of the court before which any
proceeding might be brought, and (iii) that rights to indemnity referred to or
provided in any such agreements may be limited by federal or state securities
laws or public policy underlying such laws.
4.2 Additional Representations. (i) The OP
represents and warrants that it is a sophisticated investor and has
independently made its own analysis of the Property for the purpose of
acquiring the same, and the OP has reviewed such documents and other
information and materials as it considers appropriate to make its necessary
evaluations, and (ii) the OP acknowledges that, except as otherwise provided
herein, the transfer of the Property to the OP is "AS IS" and without any
recourse of or liability of Contributor.
7
<PAGE> 9
4.3 No Broker. The OP represents and warrants that
neither the OP nor any of its affiliates has dealt or negotiated with, or
engaged on their own behalf or for their benefit, any person or entity as an
agent, broker, dealer or otherwise who is entitled to a commission or fee in
connection with its purchase of the Property. The OP hereby agrees to
indemnify and hold Contributor harmless from and against any and all claims,
demands, causes of action, losses, costs and expenses (including attorneys'
fees) and other liabilities arising from the OP's breach of the representations
and warranties contained in this Section 4.3. Notwithstanding anything to the
contrary contained herein, the provisions of this Section 4.3 shall survive the
Closing Date until the expiration of the applicable statute of limitations
therefor.
4.4 Acknowledgments of the OP. The OP acknowledges and
agrees for the benefit of Contributor that:
(a) except as expressly set forth in Article III
hereof, neither Contributor nor any affiliate, agent, officer, employee or
representative of Contributor has made any verbal or written representations,
warranties, promises or guarantees whatsoever to the OP, expressed or implied,
and, in particular, that no such representations, warranties, guarantees or
promises have been made with respect to the Property, including, without
limitation, the condition of the improvements thereon or any other matter or
thing affecting or related to the offering or sale of Contributor's right to
purchase the Property;
(b) the OP is relying on the OP's own
investigation regarding the Property, any financial information or other
information which the OP deems relevant regarding the Property, and all other
matters related to the foregoing and not on any representations, warranties,
statements or other information provided by Contributor;
(c) (i) there may be environmental risks
associated with the Property, and Contributor makes no representation or
warranty (express or implied) regarding the existence of any hazardous
materials or hazardous substances at or on the Property, 1 Contributor makes no
representation or warranty (express or implied) regarding the content of 1. any
report or other document evidencing an environmental assessment or review of
the Property, or 2. any appraisal, title report or survey relating to the
Property, or 1.1 any financial report, statement or analysis or any other
report or analysis with respect to the Property, and 2 Contributor has advised
the OP to conduct its own independent review of the Property (including,
without limitation, an environmental review) and all other reviews and
inspections regarding the Property utilizing such third-party inspectors and
experts as the OP deems appropriate; and
(d) the OP shall assume the risk of all adverse
matters pertaining to the Property, including, without limitation, violations
of any applicable laws, construction defects and adverse physical and
environmental conditions that may not have been revealed by the OP's
investigations, and the OP acknowledges that it shall have no claim, demand or
cause of action by reason of or arising out of any and all acts, omissions,
events, circumstances or matters regarding the Property.
8
<PAGE> 10
ARTICLE V
DEFAULT AND REMEDIES
If either Contributor or the OP defaults in the
performance of any of their respective obligations hereunder, then the
non-defaulting party shall have the right either (a) to receive specific
performance of this Purchase Agreement or (b) to terminate this Agreement.
ARTICLE VI
COSTS AND EXPENSES
Except as expressly provided in this Article VI to
the contrary, Contributor and the OP shall be solely responsible for all costs
or expenses (including legal expenses) respectively incurred by each of them
with respect to the negotiation and preparation of this Agreement and the
consummation of the transaction described herein. The OP (and not Contributor)
shall be solely liable for and shall pay when due all fees and disbursements
relating to title insurance and endorsements, UCC searches, recording costs and
other expenses associated with the transfer of the Property from Contributor to
the OP.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. All notices, demands or other
communications of any type given by the parties, whether required by this
Agreement or in any way related to the contemplated transaction, shall be void
and of no effect unless given in accordance with the provisions of this Section
7.1. All notices, demands or other communications shall be in writing and
shall be sent to the party to whom the notice, demand or other communication is
directed at the following addresses.
If to Contributor, as follows:
Maitland Property Investors, Ltd.
120 West 45th Street, 24th Floor
New York, New York 10036
Attention: Lawrence H. Feldman
If to the OP, as follows:
Tower Realty Operating Partnership, L.P.
120 West 45th Street, 24th Floor
New York, New York 10036
Attention: Robert L. Cox
All notices, demands or other communications shall be sent either by 1.
personal delivery with receipt acknowledged in writing, 2. United States mail,
postage prepaid, as a registered or certified item, return receipt requested,
3. national prepaid overnight delivery service. Each notice, demand or other
communication sent by hand delivery or by national prepaid overnight delivery
service shall be effective when received or refused by the party to whom the
same is directed. Each notice, demand or other communication sent by certified
or
9
<PAGE> 11
registered mail shall be deemed given on the date of receipt or refusal as
indicated on the return receipt. Either party hereto may change the address
for notice, demand or other communication specified above by giving the other
party five (5) business days' advance written notice of such change of address.
Any notice, demand or other communication may be given either by a party hereto
or by such party's attorney.
7.2 Survival of Representations and Warranties.
Unless a different survival period is expressly provided for herein,
Contributor's and the OP's representations, warranties, covenants and
agreements contained herein shall survive for six (6) months following the
Closing Date.
7.3 No Merger. Any representation, warranty,
covenant or agreement herein of either party to this Agreement whether to be
performed before or after the time of Closing shall not be deemed to be merged
into or waived by the instruments of Closing and shall survive the Closing
except as otherwise provided in Section 7.2 above.
7.4 Modification. This Agreement may not be
modified or amended except by an agreement in writing signed by both parties.
The parties may waive any of the conditions contained herein or any of the
obligations of the other party hereunder, but any such waiver shall be
effective only if in writing and signed by both parties to this Agreement.
7.5 Headings. The descriptive headings of the
several Articles, sections and paragraphs contained in this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
7.6 Entire Agreement. This Agreement, including
the exhibits hereto, and the documents to be executed and delivered at the
Closing constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersede all prior and contemporaneous agreements
and understanding of the parties in connection therewith.
7.7 Multiple Originals. Numerous copies of this
Agreement may be executed by the parties hereto. Each such executed original
copy shall have the full force and effect of an original executed instrument.
7.8 Authorization. If any party hereto is a
legal entity or representative of an estate, guardianship, partnership,
corporation, trust and/or other legal entity, such party represents unto the
other that this Agreement, the transactions contemplated herein and the
execution and delivery hereof have been duly authorized by all necessary
proceedings and actions.
7.9 Governing Law. This Agreement shall be
controlled by and construed in accordance with the laws of the State of New
York.
7.10 Binding Effect; Limitation on Assignment.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, legal representatives and
assigns. The OP may not assign or otherwise transfer this Agreement (or any
rights hereunder or in the OP).
7.11 Waiver of Jury Trial. THE OP AND CONTRIBUTOR
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE THE RIGHT TO A JURY TRIAL IN ANY
ACTION, SUIT OR PROCEEDING ARISING FROM OR RELATED TO THIS AGREEMENT.
10
<PAGE> 12
7.12 Third-Party Beneficiary. This Agreement is
solely for the benefit of Contributor and the OP. No other person, party or
entity shall have any right hereunder nor shall any other person, party or
entity be entitled to rely upon the terms, covenants and provisions contained
herein.
7.13 Severability. In the event that any of the
provisions of this Agreement shall for any reason be held to be invalid,
illegal or unenforceable, such invalidity, illegality or unenforceability shall
not affect any other provision hereof and this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had never been contained
herein.
7.14 Business Day. As used in this Agreement, the
term "business day" shall mean every day other than Saturdays, Sundays, all
days observed by the federal or State of New York government as legal holidays
and all days on which commercial banks in State of New York are required by law
to be closed.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
Contributor:
MAITLAND PROPERTY INVESTORS, LTD.
By: Lake Success Realty Investors, Inc.
By: /s/ LAWRENCE H. FELDMAN
------------------------------------
Name: Lawrence H. Feldman
-------------------------------
Title: President
------------------------------
The OP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., general partner
By: /s/ ROBERT L. COX
-------------------------------------
Robert L. Cox
Executive Vice President and
Chief Operating Officer
11
<PAGE> 13
EXHIBIT A
Legal Description of the Land
See attached copy
<PAGE> 14
Exhibit A
Commitment No. 864-461405
Company File No. OR970820
Agent File No. 758-11
LEGAL DESCRIPTION
A portion of the Northeast 1/4 of the Southeast 1/4, Section 27, Township 21
South, Range 29 East; and Tract 10A Maitland Center Section Two as recorded in
Plat Book 10, Pages 76 and 77 of the Public Records of Orange County, Florida;
all lying in the City of Maitland, Orange County, Florida, and being more
particularly described as follows:
Begin at the Southeast corner of Tract 10A; thence S. 89 degrees 41'
55" W. along the South line of said Tract 10A, for 932.11 feet; thence continue
S. 89 degrees 41' 55" W. along the South line of the Northeast 1/4 of the
Southeast 1/4 of said Section 27 for 362.73 feet to the East right-of-way line
of Keller Road, being 30.00 feet Easterly of and parallel with the West line of
the Northeast 1/4 of the Southeast 1/4 of said Section 27; thence N. 00 degrees
10' 58" W. along said East right-of-way line for 869.86 feet to an intersection
with the Westerly prolongation of a curve concave Northeasterly and lying along
the North right-of-way line of Lake Lucien Drive, a radial line to said
intersection bearing S. 37 degrees 24' 32" W.; thence Southeasterly along the
arc of said curve, having a radius of 2034.86 feet through a central angle of
13 degrees 03' 44" for 463.91 feet to a point on the Westerly termination of
said Lake Lucien Drive; thence S. 24' 20" 48" W. along said Westerly
termination of said Lake Lucien Drive for 7.15 feet to a point on a curve
concave Easterly; thence Southwesterly along the arc of said curve, having a
radius of 50.00 feet; through a central angle of 81 degrees 04' 45", for 70.76
feet to a point on the said Westerly termination of said Lake Lucien Drive, a
radial line to said point bearing S. 73 degrees 48' 25" W.; thence S. 24
degrees 20' 48" W. for 7.85 feet to a point on a curve concave Northeasterly
and lying along the South right-of-way line of said Lake Lucien Drive, a radial
line to said point bearing S. 24 degrees 20' 48" W.; thence Southeasterly along
the arc of said curve, having a radius of 2114.86 feet, through a central angle
of 00 degrees 13' 44" for 8.45 feet to a point on a curve concave
Northeasterly, a radial line to said point bearing S. 24 degrees 07' 04" W.;
thence Southeasterly along the arc of said curve, having a radius of 50.00
feet, through a central angle of 63 degrees 43' 10", for 55.61 feet to a point
of reverse curvature of a curve concave Southwesterly; thence Southeasterly
along the arc of said curve, having a radius of 50.00 feet; through a central
angle of 25 degrees 15' 32", for 22.04 feet to a point of compound curvature of
a curve concave Northeasterly and lying along the South right-of-way of said
Lake Lucien Drive, a radial line to said point bearing N. 22 degrees 07' 08"
E.; thence Southeasterly along the arc of said curve, having a radius of
2114.86 feet, through a central angle of 17 degrees 35' 09" for 649.11 feet to
the point of reverse curvature of a curve concave Southerly and lying along
said South right-of-way line of said Lake Lucien Drive; thence Southeasterly
along the arc of said curve, having a radius of 841.47 feet and a central angle
of 15 degrees 56' 41" for 234.17 feet to the East line of said Tract 10A,
thence S. 00 degrees 07' 19" E. along said East line of Tract 10A for 320.59
feet to the Point of Beginning.
Less the following:
The West 392.70 feet of the South 869.86 feet of the NE 1/4 of the SE 1/4 of
Section 27, township 21 South, Range 29 East, Orange County, Florida, lying
East of and within 45 feet of the survey line of Keller Road, Section 750.11,
between survey Stations 6+500.00 and 5+00.00; said survey line and said
Stations being located and described as follows:
Begin on the West line of the NE 1/4 of the SE 1/4 of Section 27, Township 21
South, Range 29 East, at a point 609.12 feet South 0 degrees 10' 12" East of
the Northwest corner of said NE 1/4 of SE 1/4; at Station 6+50; thence continue
South 0 degrees 10' 12" East a distance of 150 feet to survey Station 5+00.00;
being 556.65 feet North 0 degrees 10' 12" West of the Southwest corner of the
NE 1/4 of the SE 1/4 of said
<PAGE> 15
Commitment No. 864-461405
Company File No. OR970820
Agent File No. 758-11
Section 27 for the end of this described survey line.
AND
All rights of access, ingress, egress, light, air and view between the South
869.80 feet of the NE 1/4 of the SE 1/4 of said Section 27, and Keller Road
along the following described line:
Commence on the West line of the NE 1/4 of the SE 1/4 of said Section 27, at a
point 446.20 feet South 0 degrees 10' 12" East of the Northwest corner of the
said NE 1/4 of the SE 1/4; thence run North 89 degrees 58' 48" East a distance
of 30 feet to the East right of way line of Keller Road for the Point of
Beginning, thence run South 0 degrees 10' 12" East a distance of 162.92 feet,
thence run North 89 degrees 58' 48" East a distance of 15 feet, thence run
South 0 degrees 10' 12" East a distance of 150 feet, thence run South 89
degrees 58' 48" West a distance of 15 feet to the existing East right of way
line of said Keller Road for the end of this described access line.
END OF LEGAL DESCRIPTION
<PAGE> 16
EXHIBIT B
Form of
Amendment and Restatement of
Agreement of Limited Partnership of
Tower Realty Operating Partnership, L.P.
See attached copy
<PAGE> 17
Exhibit B
AMENDMENT AND RESTATEMENT OF
AGREEMENT OF LIMITED PARTNERSHIP
OF
TOWER REALTY OPERATING PARTNERSHIP, L.P.
______ __, 1997
<PAGE> 18
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE 1 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 ORGANIZATIONAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 Registered Office and Agent; Principal Office . . . . . . . . . . . . . 14
2.4 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 3 PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Purpose and Business . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 4 CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 Capital Contributions of the Partners . . . . . . . . . . . . . . . . . 18
4.2 Additional Funds; Restrictions on the General Partner . . . . . . . . . 18
4.3 Issuance of Additional Partnership Interests; Admission
of Additional Limited Partners . . . . . . . . . . . . . . . . . . . . . 20
4.4 Contribution of Proceeds of Issuance of REIT Stock . . . . . . . . . . . 21
4.5 Repurchase of REIT Stock; Shares-In-Trust . . . . . . . . . . . . . . . 21
4.6 No Third-Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 22
4.7 No Interest; No Return . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.8 No Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 5 DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 Regular Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Qualification as a REIT . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.4 Additional Partnership Interests . . . . . . . . . . . . . . . . . . . . 24
5.5 Distributions Upon Liquidation . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 6 ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Revisions to Allocations to Reflect Issuance of Partnership Interests. . 24
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS . . . . . . . . . . . . . . . . . . . . . 25
7.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.2 Certificate of Limited Partnership . . . . . . . . . . . . . . . . . . . 29
7.3 Reimbursement of the General Partner . . . . . . . . . . . . . . . . . . 30
7.4 Outside Activities of the General Partner . . . . . . . . . . . . . . . 31
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
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----
<S> <C>
7.5 Contracts with Affiliates . . . . . . . . . . . . . . . . . . . . . . . 31
7.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Liability of the General Partner . . . . . . . . . . . . . . . . . . . . 34
7.8 Other Matters Concerning the General Partner . . . . . . . . . . . . . . 35
7.9 Title to Partnership Assets . . . . . . . . . . . . . . . . . . . . . . 36
7.10 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS . . . . . . . . . . . . . . . . . . 37
8.1 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . 37
8.2 Management of Business . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.3 Outside Activities of Limited Partners . . . . . . . . . . . . . . . . . 38
8.4 Return of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.5 Rights of Limited Partners Relating to the Partnership . . . . . . . . . 39
8.6 Exchange Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS . . . . . . . . . . . . . . . . . . . . 40
9.1 Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.2 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.3 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 10 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.1 Preparation of Tax Returns . . . . . . . . . . . . . . . . . . . . . . . 41
10.2 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3 Tax Matters Partner . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4 Organizational Expenses . . . . . . . . . . . . . . . . . . . . . . . . 44
10.5 Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 11 TRANSFERS AND WITHDRAWALS . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.1 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.2 Transfer of the General Partner's General Partner Interest . . . . . . . 46
11.3 Limited Partners' Rights to Transfer . . . . . . . . . . . . . . . . . . 48
11.4 Substituted Limited Partners . . . . . . . . . . . . . . . . . . . . . . 49
11.5 Assignees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.6 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 12 ADMISSION OF PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.1 Admission of Successor General Partner . . . . . . . . . . . . . . . . . 52
12.2 Admission of Additional Limited Partners . . . . . . . . . . . . . . . . 53
12.3 Amendment of Agreement and Certificate of Limited Partnership . . . . . 54
</TABLE>
ii
<PAGE> 20
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION . . . . . . . . . . . . . . . . . . . 54
13.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
13.3 No Obligation to Contribute Deficit . . . . . . . . . . . . . . . . . . 57
13.4 Rights of Limited Partners . . . . . . . . . . . . . . . . . . . . . . . 58
13.5 Notice of Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.6 Termination of Partnership and Cancellation of Certificate
of Limited Partnership . . . . . . . . . . . . . . . . . . . . . . . . . 58
13.7 Reasonable Time for Winding-Up . . . . . . . . . . . . . . . . . . . . . 58
13.8 Waiver of Partition . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS . . . . . . . . . . . . . . . . . 59
14.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
14.2 Meetings of the Partners . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 15 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
15.1 Addresses and Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 62
15.2 Titles and Captions . . . . . . . . . . . . . . . . . . . . . . . . . . 62
15.3 Pronouns and Plurals . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.4 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.6 Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.9 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
15.10 Invalidity of Provisions . . . . . . . . . . . . . . . . . . . . . . . . 64
15.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
15.12 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
15.13 No Rights as Stockholders . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
iii
<PAGE> 21
FOR ALL INVESTORS:
THE OP UNITS ISSUED UNDER THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR REGISTERED OR
QUALIFIED UNDER THE APPLICABLE STATE SECURITIES LAWS, IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION AND QUALIFICATION PROVIDED IN THE SECURITIES ACT
AND THE APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
QUALIFICATION OR REGISTRATION UNDER THE APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION OR
QUALIFICATION IS NOT REQUIRED.
IN ADDITION, THE OP UNITS ISSUED UNDER THIS AGREEMENT MAY BE SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH
HEREIN.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION
OF THE COMPANY AND THE TERMS OF THIS OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THE OP UNITS OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE
ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE OP UNITS OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR
AN INDEFINITE PERIOD OF TIME.
FOR NEW YORK INVESTORS:
THIS AGREEMENT HAS NOT BEEN REVIEWED BY THE ATTORNEY GENERAL PRIOR TO ITS
ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
(iv)
<PAGE> 22
THIS AGREEMENT DOES NOT CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT
TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE, IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY ARE MADE, NOT MISLEADING. STATEMENTS CONTAINED
HEREIN AS TO THE CONTENTS OF DOCUMENTS GOVERNING THIS INVESTMENT ARE SUMMARIES
AND ARE NOT COMPLETE COPIES OF THE DOCUMENTS, AND, ACCORDINGLY, REFERENCE
SHOULD BE MADE TO THE DOCUMENTS THEMSELVES FOR A MORE COMPLETE UNDERSTANDING OF
THE INVESTMENT. HOWEVER, THIS PARTNERSHIP AGREEMENT CONTAINS A FAIR SUMMARY OF
THE MATERIAL TERMS OF DOCUMENTS PURPORTED TO BE SUMMARIZED HEREIN.
FOR FLORIDA INVESTORS:
THE OP UNITS OFFERED HEREBY WILL BE SOLD TO, AND ACQUIRED BY, THE PURCHASER IN
A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF THE FLORIDA SECURITIES AND
INVESTOR PROTECTION ACT. THAT SECTION PROVIDES THAT WHEN SALES ARE MADE TO
FIVE OR MORE PERSONS, ANY SALE MADE PURSUANT TO SUCH SECTION IS VOIDABLE AT THE
OPTION OF THE PURCHASER WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF
CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN AGENT OF THE ISSUER,
OR AN ESCROW AGENT OR WITHIN THREE (3) DAYS AFTER THE AVAILABILITY OF THAT
PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.XXXX
(v)
<PAGE> 23
AMENDMENT AND RESTATEMENT
OF
AGREEMENT OF LIMITED PARTNERSHIP
OF
TOWER REALTY OPERATING PARTNERSHIP, L.P.
THIS AMENDMENT AND RESTATEMENT OF AGREEMENT OF LIMITED PARTNERSHIP OF
TOWER REALTY OPERATING PARTNERSHIP, L.P. (this "AGREEMENT"), dated as of
________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation, as general partner (the "GENERAL PARTNER"), and the
Limited Partners;
WHEREAS, the General Partner and the Limited Partners desire to amend
and restate the Agreement of Limited Partnership of Tower Realty Operating
Partnership, L.P., dated as of March 24, 1997 (the "Original Agreement") in its
entirety;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties do hereby agree that the Original
Agreement is amended and restated as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ACT" means the Delaware Revised Uniform Limited Partnership Act, as
amended from time to time, and any successor to such statute.
"ADDITIONAL LIMITED PARTNER" means a Person that has executed and
delivered an additional limited partner signature page in the form attached
hereto, has been admitted to the Partnership as a Limited Partner pursuant to
Section 4.3 hereof and that is shown as such on the books and records of the
Partnership. The Initial Limited Partner may also be an Additional Limited
Partner.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any Partner,
the negative balance, if any, in such Partner'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 Partner (i) is treated as obligated to
restore to the Partnership pursuant to the provisions of Sec tion
1.704-1(b)(2)(ii)(c) of the Regulations, or (ii) is deemed to be
<PAGE> 24
obligated to restore to the Partnership pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
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 Regulations.
"ADJUSTED CONTRIBUTION" means the Capital Contributions of any Partner
reduced by the total distributions to such Partner from Capital Events. With
respect to the General Partner, the Adjusted Contribution shall include the
difference, if any, between gross proceeds from the future issuance of REIT
Stock, if any, and the proceeds actually received by the General Partner.
"AFFILIATE" means,
(a) with respect to any individual Person, any member of the
Immediate Family of such Person or a trust established for the benefit
of such member, or
(b) with respect to any Entity, any Person which, directly or
indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, any such Entity.
"AGREEMENT" means this Agreement of Limited Partnership, as originally
executed and as amended, modified, supplemented or restated from time to time,
as the context requires.
"ARTICLES OF INCORPORATION" means the General Partner's Articles of
Incorporation, filed with the Maryland State Department of Assessments and
Taxation, as amended, modified, supplemented or restated from time to time, as
the context requires.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under this Agreement, but who has not become
a Substituted Limited Partner, and who has the rights set forth in Section
11.5.
"AVAILABLE CASH" means, with respect to the applicable period of
measurement (i.e., any period beginning on the first day of the fiscal year,
quarter or other period commencing immediately after the last day of the fiscal
year, quarter or other applicable period for purposes of the prior calculation
of Available Cash for or with respect to which a distribution has been made,
and ending on the last day of the fiscal year, quarter or other applicable
period immediately preceding the date of the calculation), the excess, if any,
as of such date, of
(a) the gross cash receipts of the Partnership for such
period from all sources whatsoever, including, without limitation, the
following:
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<PAGE> 25
(i) all rents, revenues, income and proceeds
derived by the Partnership from its operations, including,
without limitation, distributions received by the Partnership
from any Entity in which the Partnership has an interest;
(ii) all proceeds and revenues received by the
Partnership on account of any sales of office buildings,
development parcels or other property of the Partnership or as
a refinancing of or payment of principal, interest, costs,
fees, penalties or otherwise on account of any borrowings or
loans made by the Partnership or financings or refinancings of
any property of the Partnership;
(iii) the amount of any insurance proceeds and
condemnation awards received by the Partnership;
(iv) all capital contributions or loans received
by the Partnership from its Partners;
(v) all cash amounts previously reserved by the
Partnership, to the extent such amounts are no longer needed
for the specific purposes for which such amounts were
reserved; and
(vi) the proceeds of liquidation of the
Partnership's property in accordance with this Agreement;
over
(b) the sum of:
(i) all operating costs and expenses, including
taxes and other expenses of the properties directly and
indirectly held by the Partnership and capital expenditures
made during such period (without deduction, however, for any
capital expenditures, charges for Depreciation or other
expenses not paid in cash or expenditures from reserves
described in (viii) below);
(ii) all costs and expenses expended or paid
during such period in connection with the sale or other
disposition, or financing or refinancing, of the property
directly or indirectly held by the Partnership or the recovery
of insurance or condemnation proceeds;
(iii) all fees provided for under this Agreement;
(iv) all debt service, including principal and
interest, paid during such period on all indebtedness
(including under any line of credit) of the Partnership;
3
<PAGE> 26
(v) all capital contributions, advances,
reimbursements, loans or similar payments made to any Person
in which the Partnership has an interest;
(vi) all loans made by the Partnership in
accordance with the terms of this Agreement;
(vii) all reimbursements to the General Partner or
its Affiliates during such period; and
(viii) any new reserves or increases in reserves
determined by the General Partner in its sole and absolute
discretion to be necessary for working capital, capital
improvements, payments of periodic expenditures, debt service
or other purposes for the Partnership or any Person in which
the Partnership has an interest.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
"CAPITAL ACCOUNT" means with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following
provisions:
(a) to each Partner's Capital Account there shall be
credited
(i) such Partner's Capital Contributions,
(ii) such Partner's distributive share of Net
Income and any items in the nature of income or gain which are
specially allocated to such Partner pursuant to Paragraphs 1
and 2 of Exhibit B and
(iii) the amount of any Partnership liabilities
assumed by such Partner or which are secured by any asset
distributed to such Partner;
(b) to each Partner's Capital Account there shall be
debited
(i) the amount of cash and the Gross Asset Value
of any property distributed to such Partner pursuant to any
provision of this Agreement,
(ii) such Partner's distributive share of Net
Losses and any items in the nature of expenses or losses which
are specially allocated to such Partner pursuant to Paragraphs
1 and 2 of Exhibit B and
4
<PAGE> 27
(iii) the amount of any liabilities of such Partner
assumed by the Partnership or which are secured by any asset
contributed by such Partner to the Partnership; and
(c) in the event all or a portion of a Partnership
Interest is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred Partnership
Interest.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Sections
1.704-1(b) and 1.704-2 of the Regulations, and shall be interpreted and applied
in a manner consistent with such Regulations. In the event the General Partner
shall reasonably determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed assets or which are assumed by the Partnership, the
General Partner or any Limited Partner) are computed in order to comply with
such Regulations, the General Partner may make such modification; provided that
it would not cause the amounts distributable to any Partner pursuant to Article
13 hereof upon the dissolution of the Partnership to vary from the amount
contemplated as set forth in Section 2(g) of Exhibit B.
"CAPITAL CONTRIBUTION" means, with respect to any Partner, any cash,
cash equivalents or the Gross Asset Value of property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Article 4
hereof.
"CAPITAL EVENT" means any Partnership transaction not in the ordinary
course of its business including, without limitation, principal payments,
prepayments, the incurrence of prepayment penalties, sales, exchanges,
foreclosures or other dispositions of property directly or indirectly owned by
the Partnership, recoveries of damage awards and insurance proceeds not used to
rebuild (other than the receipt of contributions to the capital of the
Partnership and business or rental interruption insurance proceeds not used to
rebuild).
"CERTIFICATE" means the Certificate of Limited Partnership relating to
the Partnership to be filed in the form of Exhibit C hereto as soon as
practicable after the date hereof in the office of the Delaware Secretary of
State, as amended from time to time in accordance with the terms hereof and the
Act.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"CONSENT" means the consent or approval of a proposed action by a
Partner given in accordance with Section 14.2 hereof.
5
<PAGE> 28
"CONTRIBUTED PROPERTY" means each property, partnership interest,
contract right or other asset, in such form as may be permitted by the Act,
contributed or deemed contributed to the Partnership by any Partner (including
deemed contributions to the Partnership on termination and reconstitution
thereof pursuant to Sec tion 708 of the Code).
"DEPRECIATION" means, with respect to any asset of the Partnership for
any fiscal year or other period, the depreciation, depletion, amortization or
other cost recovery deduction, as the case may be, allowed or allowable for
federal income tax purposes in respect of such asset for such fiscal year or
other period; provided, however, that except as otherwise provided in Section
1.704-2 of the Regulations, if there is a difference between the Gross Asset
Value (including the Gross Asset Value, as increased pursuant to paragraph (d)
of the definition of Gross Asset Value) and the adjusted tax basis of such
asset at the beginning of such fiscal year or other period, Depreciation for
such asset shall be an amount that bears the same ratio to the beginning Gross
Asset Value of such asset as the federal income tax depreciation, depletion,
amortization or other cost recovery deduction for such fiscal year or other
period bears to the beginning adjusted tax basis of such asset; provided,
further, that if the federal income tax depreciation, depletion, amortization
or other cost recovery deduction for such asset for such fiscal year or other
period is zero, Depreciation of such asset shall be determined with reference
to the beginning Gross Asset Value of such asset using any reasonable method
selected by the General Partner.
"EFFECTIVE DATE" means the date of closing of the initial offering of
REIT Stock by the General Partner.
"ENTITY" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment
trust, limited liability company, limited liability partnership, cooperative or
association.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time (or any corresponding provisions of succeeding laws).
"EXCHANGE FACTOR" has the meaning set forth in the Exchange Rights
Agreement.
"EXCHANGE RIGHT" has the meaning set forth in the Exchange Rights
Agreement.
"EXCHANGE RIGHTS AGREEMENT" has the meaning set forth in Section 8.6.
"GAAP" means United States generally accepted accounting principles,
as in effect from time to time.
"GENERAL PARTNER" means Tower Realty Trust, Inc., a Maryland
corporation, and any successor as general partner of the Partnership.
6
<PAGE> 29
"GENERAL PARTNER INTEREST" means a Partnership Interest held by the
General Partner, in its capacity as general partner. A General Partner
Interest may be expressed as a number of OP Units.
"GROSS ASSET VALUE" means, with respect to any asset of the
Partnership, such asset's adjusted basis for federal income tax purposes,
except as follows:
(a) the initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross fair
market value of such asset, without reduction for liabilities, as
determined by the contributing Partner and the Partnership on the date
of contribution thereof;
(b) if the General Partner reasonably determines that an
adjustment is necessary or appropriate to reflect the relative
economic interests of the Partners, the Gross Asset Values of all
Partnership assets shall be adjusted in accordance with Sections
1.704-1(b)(2)(iv)(f) and (g) of the Regulations to equal their
respective gross fair market values, without reduction for
liabilities, as reasonably determined by the General Partner, as of
the following times:
(i) a Capital Contribution (other than a de
minimis Capital Contribution) to the Partnership by a new or
existing Partner as consideration for a Partnership Interest;
or
(ii) the distribution by the Partnership to a
Partner of more than a de minimis amount of Partnership assets
as consideration for the repurchase of a Partnership Interest;
or
(iii) the liquidation of the Partnership within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations;
(c) the Gross Asset Values of Partnership assets
distributed to any Partner 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 General
Partner as of the date of distribution; and
(d) the Gross Asset Values of Partnership 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 Regulations (as set forth in Exhibit B);
provided, however, that Gross Asset Values shall not be adjusted
pursuant to this paragraph (d) to the extent that the General Partner
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).
7
<PAGE> 30
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of computing
Net Income and Net Loss.
"IMMEDIATE FAMILY" means, with respect to any individual, such
individual's spouse, parents, parents- in-law, children, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren, sons-in-law
and daughters-in-law or any trust solely for the benefit of any of the
foregoing family members whose sole beneficiaries include the foregoing family
members.
"INCAPACITY" or "INCAPACITATED" means,
(a) as to any individual Partner, death, total physical
disability or entry by a court of competent jurisdiction adjudicating
him incompetent to manage his person or his estate;
(b) as to any corporation which is a Partner, the filing
of a certificate of dissolution, or its equivalent, for the
corporation or the revocation of its charter;
(c) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership;
(d) as to any estate which is a Partner, the distribution
by the fiduciary of the estate's entire interest in the Partnership;
(e) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee);
or
(f) as to any Partner, the bankruptcy of such Partner,
which shall be deemed to have occurred when
(i) the Partner commences a voluntary proceeding
seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter
in effect;
(ii) the Partner is adjudged as bankrupt or
insolvent, or a final and nonappealable order for relief under
any bankruptcy, insolvency or similar law now or hereafter in
effect has been entered against the Partner;
(iii) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors;
(iv) the Partner files an answer or other pleading
admitting or failing to contest the material allegations of a
petition filed against the Partner in any proceeding of the
nature described in clause (ii) above;
8
<PAGE> 31
(v) the Partner seeks, consents to or acquiesces
in the appointment of a trustee, receiver or liquidator for
the Partner or for all or any substantial part of the
Partner's properties;
(vi) any proceeding seeking liquidation,
reorganization or other relief of or against such Partner
under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred
twenty (120) days after the commencement thereof;
(vii) the appointment without the Partner's consent
or acquiescence of a trustee, receiver or liquidator has not
been vacated or stayed within ninety (90) days of such
appointment; or
(viii) an appointment referred to in clause (vii)
which has been stayed is not vacated within ninety (90) days
after the expiration of any such stay.
"INDEMNITEE" means
(a) any Person made a party to a proceeding by reason of
(i) such Person's status as
(A) the General Partner,
(B) a director, trustee or officer of
the Partnership or the General Partner, or
(C) a director, trustee, member or
officer of any other Entity, each Person serving in
such capacity at the request of the Partnership or
the General Partner, or
(ii) his or its liabilities, pursuant to a loan
guarantee or otherwise, for any indebtedness of the
Partnership or any Subsidiary of the Partnership (including,
without limitation, any indebtedness which the Partnership or
any Subsidiary of the Partnership has assumed or taken assets
subject to); and
(b) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may
designate from time to time (whether before or after the event giving
rise to potential liability), in its sole and absolute discretion.
"IRS" shall mean the Internal Revenue Service of the United States.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
9
<PAGE> 32
"LIMITED PARTNER" means, prior to the admission of the first
Additional Limited Partner to the Partnership, the Initial Limited Partner, and
thereafter any Person named as a Limited Partner in Exhibit A, as such Exhibit
may be amended from time to time, upon the execution and delivery by such
Person of an additional limited partner signature page, or any Substituted
Limited Partner or Additional Limited Partner, in such Person's capacity as a
Limited Partner of the Partnership.
"LIMITED PARTNER INTEREST" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of OP Units.
"LIQUIDATING EVENT" has the meaning set forth in Section 13.1 hereof.
"LIQUIDATOR" has the meaning set forth in Section 13.2 hereof.
"LOCK-UP AGREEMENT" means each letter issued by certain Limited
Partners to the Partnership and Merrill Lynch & Co.
"NET INCOME" or "NET LOSS" means, for each fiscal year or other
applicable period, an amount equal to the Partnership's taxable income or loss
for such year or period as determined for federal income tax purposes by the
General Partner, determined in accordance with Section 703(a) of the Code (for
this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Section 703(a) of the Code shall be included in
taxable income or loss), adjusted as follows:
(a) by including as an item of gross income any
tax-exempt income received by the Partnership and not otherwise taken
into account in computing Net Income or Net Loss;
(b) by treating as a deductible expense any expenditure
of the Partnership described in Section 705(a)(2)(B) of the Code (or
which is treated as a Section 705(a)(2)(B) expenditure pursuant to
Section 1.704-1(b)(2)(iv)(i) of the Regulations) and not otherwise
taken into account in computing Net Income or Net Loss, including
amounts paid or incurred to organize the Partnership (unless an
election is made pursuant to Section 709(b) of the Code) or to promote
the sale of interests in the Partnership and by treating deductions
for any losses incurred in connection with the sale or exchange of
Partnership property disallowed pursuant to Section 267(a)(1) or
707(b) of the Code as expenditures described in Section 705(a)(2)(B)
of the Code;
(c) by taking into account Depreciation in lieu of
depreciation, depletion, amortization and other cost recovery
deductions taken into account in computing taxable income or loss;
10
<PAGE> 33
(d) by computing gain or loss resulting from any
disposition of Partnership property with respect to which gain or loss
is recognized for federal income tax purposes by reference to the
Gross Asset Value of such property rather than its adjusted tax basis;
(e) in the event of an adjustment of the Gross Asset
Value of any Partnership asset which requires that the Capital
Accounts of the Partnership be adjusted pursuant to Sections
1.704-1(b)(2)(iv)(e), (f) and (g) of the Regulations, by taking into
account the amount of such adjustment as if such adjustment
represented additional Net Income or Net Loss pursuant to Exhibit B;
and
(f) by not taking into account in computing Net Income or
Net Loss items separately allocated to the Partners pursuant to
Paragraphs 1 and 2 of Exhibit B.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Regulations.
"NONRECOURSE LIABILITIES" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"OP UNIT" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of OP Units outstanding and the Percentage Interests in the Partnership
represented by such OP Units are set forth in Exhibit A, as such Exhibit may be
amended from time to time. The ownership of OP Units shall be evidenced by
such form of certificate for OP Units as the General Partner adopts from time
to time unless the General Partner determines that the OP Units shall be
uncertificated securities.
"PARTNER" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners collectively.
"PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"PARTNER NONRECOURSE DEBT" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"PARTNERSHIP" means the limited partnership formed under the Act and
pursuant to this Agreement, and any successor thereto.
11
<PAGE> 34
"PARTNERSHIP INTEREST" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of OP
Units.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in a Partnership Minimum Gain, for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
"PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.1
hereof, which record date shall be the same as the record date established by
the General Partner for a distribution to its stockholders of some or all of
its portion of such distribution.
"PARTNERSHIP YEAR" means the fiscal year of the Partnership, as set
forth in Section 9.2 hereof.
"PERCENTAGE INTEREST" means, as to a Partner, the fractional part of
the Partnership Interests owned by such Partner and expressed as a percentage
as specified in Exhibit A, as such Exhibit may be amended from time to time.
"PERMITTED PARTNERS" has the meaning set forth in subparagraph 1(b) of
Exhibit B.
"PERMITTED TRANSFEREE" means any person to whom OP Units are
Transferred in accordance with Sec tion 11.3 of this Agreement.
"PERSON" means an individual or Entity.
"PRECONTRIBUTION GAIN" has the meaning set forth in subparagraph 3(c)
of Exhibit B.
"QUARTER" means each of the three-month periods ending on March 31,
June 30, September 30 and December 31.
"REGISTRATION STATEMENT" means the Registration Statement on Form S-11
to be filed by the General Partner with the Securities and Exchange Commission,
and any amendments at any time made thereto.
"REGULATIONS" means the final, temporary or proposed Income Tax
Regulations promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding regulations).
"REIT" means a real estate investment trust as defined in Section 856
of the Code.
"REIT REQUIREMENTS" has the meaning set forth in Section 5.2.
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<PAGE> 35
"REIT STOCK" means a share of stock of the General Partner.
"REIT STOCK AMOUNT" has the meaning set forth in the Exchange Rights
Agreement.
"RESTRICTED PARTNER" has the meaning set forth in Section 1(b) of
Exhibit B.
"STOCK OPTION PLANS" means collectively, the General Partner's 1997
Incentive Plan and Non-Employee Directors' Incentive Plan and any other plan
adopted from time to time by the General Partner pursuant to which REIT Stock
is issued, or options to acquire REIT Stock are granted, to employees or
directors of the General Partner, employees of the Partnership or employees of
their respective Affiliates in consideration for services or future services.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, limited liability company or other entity of which a majority of
(a) the voting power of the voting equity securities; or
(b) the outstanding equity interests, is owned, directly or
indirectly, by such Person.
"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4 hereof.
"TAX ITEMS" has the meaning set forth in Exhibit B.
"TERMINATING CAPITAL TRANSACTION" means any sale or other disposition
of all or substantially all of the assets of the Partnership or a related
series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Partnership.
"TRANSFER" as a noun, means any sale, assignment, conveyance, pledge,
hypothecation, gift, encumbrance or other transfer, and as a verb, means to
sell, assign, convey, pledge, hypothecate, give, encumber or otherwise
transfer.
Certain additional terms and phrases have the meanings set forth in
Exhibit B.
ARTICLE 2
ORGANIZATIONAL MATTERS
2.1 Formation
The Partners have agreed to form the Partnership under and pursuant to
the Act. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes.
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<PAGE> 36
2.2 Name
The name of the Partnership shall be Tower Realty Operating
Partnership, L.P. The Partnership's business may be conducted under any other
name or names deemed advisable by the General Partner, including the name of
the General Partner or any Affiliate thereof. The words "Limited
Partnership,""L.P.,""Ltd." or similar words or letters shall be included in the
Partnership's name where necessary for the purposes of complying with the laws
of any jurisdiction that so requires. The General Partner in its sole and
absolute discretion may change the name of the Partnership and shall notify the
Limited Partners of such change in the next regular communication to the
Limited Partners.
2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the State
of Delaware and the name and address of the registered agent for service of
process on the Partnership in the State of Delaware is United Corporate
Services, Inc., 15 East North Street, Dover (Kent County), Delaware 19901.
The principal office of the Partnership shall be 120 West 45th Street, New
York, New York 10036-4003, or such other place as the General Partner may from
time to time designate by notice to the Limited Partners. The Partnership may
maintain offices at such other place or places within or outside the State of
Delaware as the General Partner deems advisable.
2.4 Power of Attorney
(a) Each Limited Partner and each Assignee is deemed to
irrevocably constitute and appoint the General Partner, any
Liquidator, and authorized officers and attorneys-in-fact of each, and
each of those acting singly, in each case with full power of
substitution, as its true and lawful agent and attorney-in-fact, with
full power and authority in its name, place and stead to:
(i) execute, swear to, acknowledge, deliver, file
and record in the appropriate public offices
(A) all certificates, documents and
other instruments (including, without limitation,
this Agreement and the Certificate and all amendments
or restatements thereof) that the General Partner or
the Liquidator deems appropriate or necessary to
form, qualify or continue the existence or
qualification of the Partnership as a limited
partnership (or a partnership in which the Limited
Partners have limited liability) in the State of
Delaware and in all other jurisdictions in which the
Partnership may or plans to conduct business or own
property, including, without limitation, any
documents necessary or advisable to convey any
Contributed Property to the Partnership;
(B) all instruments that the General
Partner deems appropriate or necessary to reflect any
amendment, change, modification or restatement of
this Agreement in accordance with its terms;
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(C) all conveyances and other
instruments or documents that the General Partner or
the Liquidator deems appropriate or necessary to
reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement,
including, without limitation, a certificate of
cancellation;
(D) all instruments relating to the
admission, withdrawal, removal or substitution of any
Partner pursuant to, or other events described in,
Article 11, 12 or 13 hereof or the Capital
Contribution of any Partner;
(E) all certificates, documents and
other instruments relating to the determination of
the rights, preferences and privileges of Partnership
Interest; and
(F) amendments to this Agreement as
provided in Article 14 hereof; and
(ii) execute, swear to, seal, acknowledge and file
all ballots, consents, approvals, waivers, certificates and
other instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner or any Liquidator,
to make, evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or given by
the Partners hereunder or is consistent with the terms of this
Agreement or appropriate or necessary, in the sole discretion
of the General Partner or any Liquidator, to effectuate the
terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
(b) (i) The foregoing power of attorney is hereby
declared to be irrevocable and a power coupled with an
interest, in recognition of the fact that each of the Partners
will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any
filing or other action by it on behalf of the Partnership, and
it shall survive and not be affected by the subsequent
Incapacity of any Limited Partner or Assignee and the Transfer
of all or any portion of such Limited Partner's or Assignee's
OP Units and shall extend to such Limited Partner's or
Assignee's heirs, successors, assigns and personal
representatives.
(ii) Each such Limited Partner or Assignee hereby
agrees to be bound by any representation made by the General
Partner or any Liquidator, acting in good faith pursuant to
such power of attorney, and each such Limited Partner or
Assignee hereby waives any and all defenses which may be
available to contest, negate or disaffirm the action of the
General Partner or any Liquidator, taken in good faith under
such power of attorney.
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(iii) Each Limited Partner or Assignee shall
execute and deliver to the General Partner or the Liquidator,
within fifteen (15) days after receipt of the General
Partner's or Liquidator's request therefor, such further
designation, powers of attorney and other instruments as the
General Partner or the Liquidator, as the case may be, deems
necessary to effectuate this Agreement and the purposes of the
Partnership.
2.5 Term
The term of the Partnership shall commence on the date hereof and
shall continue until December 31, 2047, unless the Partnership is dissolved
sooner pursuant to the provisions of Article 13 or as otherwise provided by
law.
ARTICLE 3
PURPOSE
3.1 Purpose and Business
(a) The purpose and nature of the business to be
conducted by the Partnership is to conduct any business that may be
lawfully conducted by a limited partnership organized pursuant to the
Act including, without limitation, to engage in the following
activities:
(i) to acquire, hold, own, develop, construct,
improve, maintain, operate, sell, lease, transfer, encumber,
convey, exchange, and otherwise dispose of or deal with the
properties described in the prospectus contained in the
Registration Statement;
(ii) to acquire, hold, own, develop, construct,
improve, maintain, operate, sell, lease, transfer, encumber,
convey, exchange, and otherwise dispose of or deal with real
and personal property of all kinds;
(iii) to enter into any partnership, joint venture
or other similar arrangement to engage in any of the
foregoing;
(iv) to undertake such other activities as may be
necessary, advisable, desirable or convenient to the business
of the Partnership; and
(v) to engage in such other ancillary activities
as shall be necessary or desirable to effectuate the foregoing
purposes;
provided, however, that such business shall be limited to and conducted in such
a manner as to permit the General Partner at all times to be classified as a
REIT, unless the General Partner ceases to qualify as a REIT for any reason not
related to the business conducted by the Partnership.
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(b) The Partnership shall have all powers necessary or
desirable to accomplish the purposes enumerated.
(c) In connection with the foregoing, but subject to all
of the terms, covenants, conditions and limitations contained in this
Agreement and any other agreement entered into by the Partnership, the
Partnership shall have full power and authority to enter into,
perform, and carry out contracts of any kind, to borrow money and to
issue evidences of indebtedness, whether or not secured by mortgage,
trust deed, pledge or other Lien, and, directly or indirectly, to
acquire and construct additional properties necessary or useful in
connection with its business.
3.2 Powers
(a) Subject to paragraph (c) below, the Partnership is
empowered to do any and all acts and things necessary, appropriate,
proper, advisable, incidental to or convenient for the furtherance and
accomplishment of the purposes and business described herein and for
the protection and benefit of the Partnership; provided, that the
Partnership shall not take, or refrain from taking, any action which,
in the judgment of the General Partner, in its sole and absolute
discretion,
(i) could adversely affect the ability of the
General Partner to continue to qualify as a REIT, unless the
General Partner otherwise ceases to qualify as a REIT;
(ii) could subject the General Partner to any
additional taxes under Section 857 or Section 4981 of the
Code; or
(iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the
General Partner or its securities.
(b) The Partnership also is empowered to do any and all
acts and things necessary, appropriate or advisable to ensure that the
Partnership will not be classified as a "publicly traded partnership"
for the purposes of Section 7704 of the Code.
(c) Prior to the effectiveness of the Registration
Statement and the issuance and sale of the shares of the General
Partner's common stock to be issued and sold thereunder, the
affirmative vote or consent of the General Partner's independent
director (as such term is used in the General Partner's Articles of
Incorporation) will be required for the approval of any of the
following actions by or with respect to the Partnership or any
Subsidiary:
(i) filing or consenting to the filing of a
bankruptcy petition;
(ii) otherwise instituting or causing the
Partnership or such Subsidiary to acquiesce in the institution
of an insolvency proceeding;
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(iii) dissolving, liquidating, consolidating,
merging or selling all or substantially all of its assets; or
(iv) amending this Agreement or the articles of
incorporation, limited liability company agreement,
partnership agreement or trust agreement of any Subsidiary.
ARTICLE 4
CAPITAL CONTRIBUTIONS
4.1 Capital Contributions of the Partners
(a) The Partners have made or shall make at the Effective
Date, if applicable, the Capital Contributions as set forth in Exhibit
A to this Agreement.
(b) To the extent the Partnership acquires any property
by the merger of any other Person into the Partnership, Persons who
receive Partnership Interests in exchange for their interests in the
Person merging into the Partnership shall become Partners and shall be
deemed to have made Capital Contributions as provided in the
applicable merger agreement and as set forth in Exhibit A, as amended
to reflect such deemed Capital Contributions.
(c) Each Partner shall own OP Units in the amounts set
forth for such Partner in Exhibit A and shall have a Percentage
Interest in the Partnership as set forth in Exhibit A, which
Percentage Interest shall be adjusted in Exhibit A from time to time
by the General Partner to the extent necessary to reflect accurately
exchanges, additional Capital Contributions, the issuance of
additional OP Units or similar events having an effect on any
Partner's Percentage Interest.
(d) The number of OP Units held by the General Partner,
in its capacity as general partner, shall be deemed to be the General
Partner Interest.
(e) Except as provided in Sections 4.2 and 10.5, the
Partners shall have no obligation to make any additional Capital
Contributions or loans to the Partnership.
4.2 Additional Funds; Restrictions on the General Partner
(a) (i) The sums of money required to finance the
business and affairs of the Partnership shall be derived from
the initial capital Contributions made to the Partnership by
the Partners as set forth in Section 4.1 and from funds
generated from the operation and business of the Partnership,
including, without limitation, rents and distributions
directly or indirectly received by the Partnership from any
Subsidiary.
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(ii) In the event additional financing is needed
from sources other than as set forth in Section 4.2(a)(i) for
any reason, the General Partner may, in its sole and absolute
discretion, in such amounts and at such times as it solely
shall determine to be necessary or appropriate,
(A) cause the Partnership to issue
additional Partnership Interests and admit additional
Limited Partners to the Partnership in accordance
with Section 4.3;
(B) make additional Capital
Contributions to the Partnership (subject to the
provisions of Section 4.2(b));
(C) cause the Partnership to borrow
money, enter into loan arrangements, issue debt
securities, obtain letters of credit or otherwise
borrow money on a secured or unsecured basis;
(D) make a loan or loans to the
Partnership (subject to Section 4.2(b)); or
(E) sell any assets or properties
directly or indirectly owned by the Partnership.
(iii) In no event shall the Limited Partners be
required to make any additional Capital Contributions or any
loan to, or otherwise provide any financial accommodation for
the benefit of, the Partnership.
(b) The General Partner shall not issue any debt
securities, any preferred stock or any common stock (including
additional REIT Stock (other than (i) as payment of the REIT Stock
Amount or (ii) in connection with the conversion or exchange of
securities of the General Partner solely in conversion or exchange for
other securities of the General Partner)) or rights, options, warrants
or convertible or exchangeable securities containing the right to
subscribe for or purchase any of the foregoing (collectively,
"SECURITIES"), other than to all holders of REIT Stock, unless the
General Partner shall
(i) in the case of debt securities, lend to the
Partnership the proceeds of or consideration received for such
Securities on the same terms and conditions, including
interest rate and repayment schedule, as shall be applicable
with respect to or incurred in connection with the issuance of
such Securities and the proceeds of, or consideration received
from, any subsequent exercise, exchange or conversion thereof
(if applicable);
(ii) in the case of equity Securities senior or
junior to the REIT Stock as to dividends and distributions on
liquidation, contribute to the Partnership the proceeds of or
consideration (including any property or other non-cash
assets) received for such Securities and the proceeds of, or
consideration received from, any subsequent exercise, exchange
or conversion thereof (if applicable), and
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receive from the Partnership, interests in the Partnership in
consideration therefor with the same terms and conditions,
including dividend, dividend priority and liquidation
preference, as are applicable to such Securities; and
(iii) in the case of REIT Stock or other equity
Securities on a parity with the REIT Stock as to dividends and
distributions on liquidation, (including, without limitation,
REIT Stock or other Securities issued as a stock award or upon
exercise of options issued under the Stock Option Plans),
contribute to the Partnership the proceeds of or consideration
(including any property or other non-cash assets, including
services) received for such Securities and the proceeds of, or
consideration received from, any subsequent exercise, exchange
or conversion thereof (if applicable), and receive from the
Partnership a number of additional OP Units in consideration
therefor equal to the product of
(A) the number of shares of REIT Stock
or other equity Securities issued by the General
Partner, multiplied by
(B) a fraction the numerator of which is
one and the denominator of which is the Exchange
Factor in effect on the date of such contribution.
4.3 Issuance of Additional Partnership Interests; Admission of
Additional Limited Partners
(a) In addition to any Partnership Interests issuable by
the Partnership pursuant to Sec tion 4.2, the General Partner is
authorized to cause the Partnership to issue additional Partnership
Interests (or options therefor) in the form of OP Units or other
Partnership Interests in one or more series or classes, or in one or
more series of any such class senior or junior to the OP Units to any
Persons at any time or from time to time, on such terms and
conditions, as the General Partner shall establish in each case in its
sole and absolute discretion subject to Delaware law, including,
without limitation, (i) the allocations of items of Partnership
income, gain, loss, deduction and credit to each class or series of
Partnership Interests, (ii) the right of each class or series of
Partnership Interests to share in Partnership distributions, and (iii)
the rights of each class or series of Partnership Interest upon
dissolution and liquidation of the Partnership; provided that, no such
Partnership Interests shall be issued to the General Partner unless
either (a) the Partnership Interests are issued in connection with the
grant, award, or issuance of REIT Stock or other equity interests in
the General Partner having designations, preferences and other rights
such that the economic interests attributable to such REIT Stock or
other equity interests are substantially similar to the designations,
preferences and other rights (except voting rights) of the Partnership
Interests issued to the General Partner in accordance with this
Section 4.3(a) or (b) the additional Partnership Interests are issued
to all Partners holding Partnership Interests in the same class in
proportion to their respective Percentage interests in such class,
without any approval being required from any Limited Partner or any
other Person; provided, however, that
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(i) such issuance does not cause the Partnership
to become, with respect to any employee benefit plan subject
to Title I of ERISA or Section 4975 of the Code, a "party in
interest" (as defined in Section 3(14) of ERISA) or a
"disqualified person" (as defined in Sec tion 4975(e) of the
Code); and
(ii) such issuance would not cause any portion of
the assets of the Partnership to constitute assets of any
employee benefit plan pursuant to Section 2510.3-101 of the
regulations of the United States Department of Labor.
(b) Subject to the limitations set forth in Section
4.3(a), the General Partner may take such steps as it, in its sole and
absolute discretion, deems necessary or appropriate to admit any
Person as a Limited Partner of the Partnership or to issue any
Partnership Interests, including, without limitation, amending the
Certificate, Exhibit A or any other provision of this Agreement.
4.4 Contribution of Proceeds of Issuance of REIT Stock
In connection with the initial offering of common stock by the General
Partner, and any other offering, grant, award, or issuance of REIT Stock or
securities, rights, options, warrants or convertible or exchangeable securities
pursuant to Section 4.2, the General Partner shall make aggregate Capital
Contributions to the Partnership of the proceeds raised in connection with such
offering, grant, award, or issuance; provided, however, that if the proceeds
actually received by the General Partner are less than the gross proceeds of
such offering, grant, award, or issuance as a result of any underwriter's
discount, commission, or fee or other expenses paid or incurred in connection
with such offering, grant, award, or issuance, then the General Partner shall
be deemed to have made a Capital Contribution to the Partnership in the amount
of the gross proceeds of such issuance and the Partnership shall be deemed
simultaneously to have paid pursuant to Section 7.3(c) for the amount of such
underwriter's discount or other expenses.
4.5 Repurchase of REIT Stock; Shares-In-Trust
(a) In the event that the General Partner shall elect to
purchase from its stockholders REIT Stock for the purpose of
delivering such REIT Stock to satisfy an obligation under any dividend
reinvestment program adopted by the General Partner, any employee
stock purchase plan adopted by the General Partner, or any other
obligation or arrangement undertaken by the General Partner in the
future, the purchase price paid by the General Partner for such REIT
Stock and any other expenses incurred by the General Partner in
connection with such purchase shall be considered expenses of the
Partnership and shall be reimbursed to the General Partner, subject to
the condition that:
(i) if such REIT Stock subsequently is to be sold
by the General Partner, the General Partner shall pay to the
Partnership any proceeds received by the General Partner from
the sale of such REIT Stock (provided that an exchange
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of REIT Stock for OP Units pursuant to the Exchange Rights
Agreement would not be considered a sale for such purposes);
and
(ii) if such REIT Stock is not re-transferred by
the General Partner within 30 days after the purchase thereof,
the General Partner shall cause the Partnership to cancel a
number of OP Units held by the General Partner (as applicable)
equal to the product of
(x) the number of shares of such REIT
Stock, multiplied by
(y) a fraction, the numerator of which
is one and the denominator of which is the Exchange
Factor in effect on the date of such cancellation.
(b) In the event the General Partner purchases
Shares-in-Trust (as from time to time defined in the Articles of
Incorporation), the Partnership will purchase from the General Partner
a number of OP Units equal to the product of
(i) the number of Shares-in-Trust purchased by
the General Partner, multiplied by
(ii) a fraction, the numerator of which is one and
the denominator of which is the Exchange Factor in effect on
the date of such purchase.
4.6 No Third-Party Beneficiary
No creditor or other third party having dealings with the Partnership
shall have the right to enforce the right or obligations of any Partner to make
Capital Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being understood and agreed that the provisions of
this Agreement shall be solely for the benefit of, and may be enforced solely
by, the parties hereto and their respective successors and assigns.
4.7 No Interest; No Return
(a) No Partner shall be entitled to interest on its
Capital Contribution or on such Partner's Capital Account.
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(b) Except as provided herein or by law, no Partner shall
have any right to demand or receive the return of its Capital
Contribution from the Partnership.
4.8 No Preemptive Rights
Subject to any preemptive rights that may be granted pursuant to
Section 4.3 hereof, no Person shall have any preemptive or other similar right
with respect to
(a) additional Capital Contributions or loans to the
Partnership; or
(b) issuance or sale of any OP Units or other Partnership
Interests.
ARTICLE 5
DISTRIBUTIONS
5.1 Regular Distributions
Except for distributions pursuant to Section 13.2 in connection with
the dissolution and liquidation of the Partnership, and subject to the
provisions of Sections 5.3, 5.4, 5.5 and 12.2(c), the General Partner shall
cause the Partnership to distribute, on a quarterly basis (or, at the election
of the General Partner, more frequently), an amount of Available Cash,
determined by the General Partner in its sole discretion to the Partners, as of
the applicable Partnership Record Date, in accordance with each Partner's
respective Percentage Interest; provided, however, that in no event may a
Partner receive a distribution of Available Cash with respect to an OP Unit if
such Partner is entitled to receive a distribution out of such Available Cash
with respect to REIT Stock for which such OP Unit has been exchanged.
5.2 Qualification as a REIT
The General Partner shall use its best efforts to cause the
Partnership to distribute sufficient amounts under this Article 5 to enable the
General Partner to pay stockholder dividends that will enable the General
Partner to
(a) satisfy the requirements for qualification as a REIT
under the Code and Regulations ("REIT Requirements"), and
(b) avoid any federal income or excise tax liability;
provided, however, the General Partner shall not be bound to comply with this
covenant to the extent such distributions would
(x) violate applicable Delaware law or
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(y) contravene the terms of any notes, mortgages or other
types of debt obligations to which the Partnership may be subject in
conjunction with borrowed funds.
5.3 Withholding
With respect to any withholding tax or other similar tax liability or
obligation to which the Partnership may be subject as a result of any act or
status of any Partner or to which the Partnership becomes subject with respect
to any OP Unit, the Partnership shall have the right to withhold amounts of
Available Cash distributable to such Partner or with respect to such OP Units,
to the extent of the amount of such withholding tax or other similar tax
liability or obligation pursuant to the provisions contained in Section 10.5.
5.4 Additional Partnership Interests
If the Partnership issues Partnership Interests in accordance with
Section 4.2 or 4.3, the distribution priorities set forth in Section 5.1 shall
be amended, as necessary, to reflect the distribution priority of such
Partnership Interests and corresponding amendments shall be made to the
provisions of Exhibit B.
5.5 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the liquidation
of the Partnership shall be distributed to the Partners in accordance with
Section 13.2.
ARTICLE 6
ALLOCATIONS
6.1 Allocations
The Net Income, Net Loss and other Partnership items shall be
allocated pursuant to the provisions of Exhibit B.
6.2 Revisions to Allocations to Reflect Issuance of Partnership
Interests
If the Partnership issues Partnership Interests to the General Partner
or any additional Limited Partner pursuant to Article IV, the General Partner
shall make such revisions to this Article 6 and Exhibit B as it deems necessary
to reflect the terms of the issuance of such Partnership Interests, including
making preferential allocations to classes of Partnership Interests that are
entitled thereto. Such revisions shall not require the consent or approval of
any other Partner.
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ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
7.1 Management
(a) (i) Except as otherwise expressly provided in
this Agreement, full, complete and exclusive discretion to
manage and control the business and affairs of the Partnership
are and shall be vested in the General Partner, and no Limited
Partner shall have any right to participate in or exercise
control or management power over the business and affairs of
the Partnership.
(ii) The General Partner may not be removed by the
Limited Partners with or without cause.
(iii) In addition to the powers now or hereafter
granted a general partner of a limited partnership under
applicable law or which are granted to the General Partner
under any other provision of this Agreement, the General
Partner shall have full power and authority to do all things
deemed necessary or desirable by it to conduct the business of
the Partnership, to exercise all powers set forth in Section
3.2 hereof and to effectuate the purposes set forth in Section
3.1 hereof, including, without limitation:
(A) (I) the making of any expenditures,
the lending or borrowing of money, including,
without limitation, making prepayments on
loans and borrowing money to permit the
Partnership to make distributions to its
Partners in such amounts as will permit the
General Partner (so long as the General
Partner qualifies as a REIT) to avoid the
payment of any federal income tax (including,
for this purpose, any excise tax pursuant to
Section 4981 of the Code) and to make
distributions to its stockholders in amounts
sufficient to permit the General Partner to
maintain REIT status,
(II) the assumption or guarantee of,
or other contracting for, indebtedness and
other liabilities,
(III) the issuance of evidence of
indebtedness (including the securing of the
same by deed, mortgage, deed of trust or
other lien or encumbrance on the
Partnership's assets) and
(IV) the incurring of any
obligations it deems necessary for the
conduct of the activities of the Partnership,
including the payment of all expenses
associated with the General Partner;
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(B) the making of tax, regulatory and
other filings, or rendering of periodic or other
reports to governmental or other agencies having
jurisdiction over the business or assets of the
Partnership or the General Partner;
(C) the acquisition, disposition,
mortgage, pledge, encumbrance, hypothecation or
exchange of any assets of the Partnership (including
the exercise or grant of any conversion, option,
privilege, or subscription right or other right
available in connection with any assets at any time
held by the Partnership) or the merger or other
combination of the Partnership with or into another
entity;
(D) the use of the assets of the
Partnership (including, without limitation, cash on
hand) for any purpose consistent with the terms of
this Agreement and on any terms it sees fit,
including, without limitation,
(I) the financing of the conduct of
the operations of the General Partner, the
Partnership or any of the Partnership's
Subsidiaries,
(II) the lending of funds to other
Persons (including, without limitation, the
Subsidiaries of the Partnership and/or the
General Partner) and the repayment of
obligations of the Partnership and its
Subsidiaries and any other Person in which it
has an equity investment, and
(III) the making of capital
contributions to its Subsidiaries;
(E) the expansion, development,
construction, leasing, repair, alteration, demolition
or improvement of any property in which the
Partnership or any Subsidiary of the Partnership owns
an interest;
(F) the negotiation, execution, and
performance of any contracts, conveyances or other
instruments that the General Partner considers useful
or necessary to the conduct of the Partnership's
operations or the implementation of the General
Partner's powers under this Agreement, including
contracting with contractors, developers,
consultants, accountants, legal counsel, other
professional advisors and other agents and the
payment of their expenses and compensation out of the
Partnership's assets;
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(G) the distribution of Partnership cash
or other Partnership assets in accordance with this
Agreement;
(H) holding, managing, investing and
reinvesting cash and other assets of the Partnership;
(I) the collection and receipt of
revenues and income of the Partnership;
(J) the establishment of one or more
divisions of the Partnership, the selection and
dismissal of employees of the Partnership (including,
without limitation, employees having titles such as
"president," "vice president," "secretary" and
"treasurer" of the Partnership), and agents, outside
attorneys, accountants, consultants and contractors
of the Partnership, and the determination of their
compensation and other terms of employment or
engagement;
(K) the maintenance of such insurance
for the benefit of the Partnership and the Partners
as it deems necessary or appropriate;
(L) the formation of, or acquisition of
an interest in, and the contribution of property to,
any further Entities or other relationships that it
deems desirable, including, without limitation, the
acquisition of interests in, and the contributions of
property to, its Subsidiaries and any other Person
from time to time;
(M) the control of any matters affecting
the rights and obligations of the Partnership,
including
(I) the settlement, compromise,
submission to arbitration or any other form
of dispute resolution, or abandonment of, any
claim, cause of action, liability, debt or
damages, due or owing to or from the
Partnership,
(II) the commencement or defense of
suits, legal proceedings, administrative
proceedings, arbitration or other forms of
dispute resolution, and
(III) the representation of the
Partnership in all suits or legal
proceedings, administrative proceedings,
arbitrations or other forms of dispute
resolution, the incurring of legal expenses,
and the indemnification of any Person against
liabilities and contingencies to the extent
permitted by law;
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(N) the undertaking of any action in
connection with the Partnership's direct or indirect
investment in its Subsidiaries or any other Person
(including, without limitation, the contribution or
loan of funds by the Partnership to such Persons);
(O) the determination of the fair market
value of any Partnership property distributed in kind
using such reasonable method of valuation as the
General Partner, in its sole discretion, may adopt;
(P) the exercise, directly or
indirectly, through any attorney-in-fact acting under
a general or limited power of attorney, of any right,
including the right to vote, appurtenant to any asset
or investment held by the Partnership;
(Q) the exercise of any of the powers of
the General Partner enumerated in this Agreement on
behalf of or in connection with any Subsidiary of the
Partnership or any other Person in which the
Partnership has a direct or indirect interest, or
jointly with any such Subsidiary or other Person;
(R) the exercise of any of the powers of
the General Partner enumerated in this Agreement on
behalf of any Person in which the Partnership does
not have an interest pursuant to contractual or other
arrangements with such Person;
(S) the making, execution and delivery
of any and all deeds, leases, notes, mortgages, deeds
of trust, security agreements, conveyances,
contracts, guarantees, warranties, indemnities,
waivers, releases or legal instruments or agreements
in writing necessary or appropriate, in the judgment
of the General Partner, for the accomplishment of any
of the foregoing;
(T) the issuance of additional OP Units
in connection with Capital Contributions by
Additional Limited Partners and additional Capital
Contributions by Partners pursuant to Article 4
hereof; and
(U) The opening of bank accounts on
behalf of, and in the name of, the Partnership and
its Subsidiaries.
(b) (i) Each of the Limited Partners agrees that the
General Partner is authorized to execute, deliver and perform
the above-mentioned agreements and transactions on behalf of
the Partnership without any further act, approval or vote
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of the Partners, notwithstanding any other provision of this
Agreement to the fullest extent permitted under the Act or
other applicable law, rule or regulation.
(ii) The execution, delivery or performance by the
General Partner or the Partnership of any agreement authorized
or permitted under this Agreement shall not constitute a
breach by the General Partner of any duty that the General
Partner may owe the Partnership or the Limited Partners or any
other Persons under this Agreement or of any duty stated or
implied by law or equity.
(c) At all times from and after the date hereof, the
General Partner at the expense of the Partnership, may or may not,
cause the Partnership to obtain and maintain
(i) casualty, liability and other insurance on
the properties of the Partnership and
(ii) liability insurance for the Indemnities
hereunder.
(d) At all times from and after the date hereof, the
General Partner may cause the Partnership to establish and maintain at
any and all times working capital accounts and other cash or similar
balances in such amount as the General Partner, in its sole and
absolute discretion, deems appropriate and reasonable from time to
time.
(e) (i) In exercising its authority under this
Agreement, the General Partner may, but shall be under no
obligation to, take into account the tax consequences to any
Partner of any action taken (or not taken) by it. The General
Partner and the Partnership shall not have liability to a
Limited Partner for monetary damages or otherwise for losses
sustained, liabilities incurred or benefits not delivered by
such Limited Partner in connection with such decisions,
provided that the General Partner has acted in good faith
pursuant to its authority under this Agreement
(ii) The General Partner and the Partnership shall
not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred
by such Limited Partner as a result of an action (or inaction)
by the General Partner taken pursuant to its authority under
and in accordance with this Agreement.
7.2 Certificate of Limited Partnership
(a) Promptly after the execution and delivery of this
Agreement by the General Partner and the Initial Limited Partner, the
General Partner will file the Certificate with the Secretary of State
of Delaware as required by the Act.
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(b) (i) The General Partner shall use all reasonable
efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate
for the formation, continuation, qualification and operation
of a limited partnership (or a partnership in which the
limited partners have limited liability) in the State of
Delaware and any other state, or the District of Columbia, in
which the Partnership may elect to do business or own
property.
(ii) To the extent that such action is determined
by the General Partner to be reasonable and necessary or
appropriate, the General Partner shall file amendments to and
restatements of the Certificate and do all of the things to
maintain the Partnership as a limited partnership (or a
partnership in which the limited partners have limited
liability) under the laws of the State of Delaware and each
other state, or the District of Columbia, in which the
Partnership may elect to do business or own property.
(iii) Subject to the terms of Section 8.5(a)(iv)
hereof, the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or
any amendment thereto to any Limited Partner.
7.3 Reimbursement of the General Partner
(a) Except as provided in this Section 7.3 and elsewhere
in this Agreement (including the provisions of Articles 5 and 6
regarding distributions, payments, and allocations to which it may be
entitled), the General Partner shall not be compensated for its
services as general partner of the Partnership.
(b) (i) The General Partner shall be reimbursed on a
monthly basis, or such other basis as it may determine in its
sole and absolute discretion, for all expenses that it incurs
on behalf of the Partnership relating to the ownership and
operation of the Partnership's assets, or for the benefit of
the Partnership, including all expenses associated with
compliance by the General Partner and the Initial Limited
Partner with laws, rules and regulations promulgated by any
regulatory body and any and all salaries, compensation and
expenses of officers and employees of the General Partner;
provided, that the amount of any such reimbursement shall be
reduced by any interest earned by the General Partner with
respect to bank accounts or other instruments or accounts held
by it in its name.
(ii) Such reimbursement shall be in addition to
any reimbursement made as a result of indemnification pursuant
to Section 7.6 hereof.
(iii) Notwithstanding any provisions to the
contrary set forth herein, the General Partner shall not be
entitled to reimbursement for the ratable portion of any
administrative costs and expenses incurred by it with respect
to, or that are
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attributable to, properties or partnership interests in a
Subsidiary of the Partnership that are owned by the General
Partner directly. If certain expenses are incurred for the
benefit of the Partnership and other entities (including the
General Partner), such expenses will be allocated to the
Partnership and such other entities in such a manner as the
General Partner, it its sole and absolute discretion, deems
fair and reasonable.
(c) (i) Expenses incurred by the General Partner
relating to the organization or reorganization of the
Partnership and the General Partner, the initial public
offering of REIT Stock by the General Partner and any other
issuance of additional Partnership Interests, REIT Stock or
rights, options, warrants, or convertible or exchangeable
securities pursuant to Section 4.2 hereof and all costs and
expenses associated with the preparation and filing of any
periodic reports by the General Partner under federal, state
or local laws or regulations (including, without limitation,
all costs, expenses, damages, and other payments resulting
from or arising in connection with litigation related to any
of the foregoing) are primarily obligations of the
Partnership.
(ii) To the extent the General Partner pays or
incurs such expenses, the General Partner shall be reimbursed
for such expenses.
7.4 Outside Activities of the General Partner
(a) Without the Consent of Limited Partners holding a
majority of the Partnership Interests not held by the General Partner,
the General Partner shall not directly or indirectly enter into or
conduct any business other than in connection with the ownership,
acquisition, and disposition of Partnership Interests and the
management of the business of the Partnership, and such activities as
are incidental thereto.
(b) The General Partner and any Affiliates of the General
Partner may acquire Limited Partner Interests and shall be entitled to
exercise all rights of a Limited Partner relating to such Limited
Partner Interests.
7.5 Contracts with Affiliates
(a) (i) The Partnership may lend or contribute funds
or other assets to its Subsidiaries or other Persons in which
it has an equity investment and such Subsidiaries and Persons
may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General
Partner.
(ii) The foregoing authority shall not create any
right or benefit in favor of any Subsidiary or any other
Person.
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(b) Except as provided in Section 7.4, the Partnership
may Transfer assets to Entities in which it is or thereby becomes a
participant upon such terms and subject to such conditions consistent
with this Agreement and applicable law as the General Partner, in its
sole and absolute discretion, may determine.
(c) Except as expressly permitted by this Agreement,
neither the General Partner nor any of its Affiliates shall sell,
Transfer or convey any property to, or purchase any property from, the
Partnership, directly or indirectly, except pursuant to transactions
that are determined by the General Partner in good faith to be fair
and reasonable.
(d) The General Partner, in its sole and absolute
discretion and without the approval of the Limited Partners, may
propose and adopt, on behalf of the Partnership, employee benefit
plans, stock option plans, and similar plans funded by the Partnership
for the benefit of employees of the Partnership, the General Partner,
any Subsidiaries of the Partnership or any Affiliate of any of them in
respect of services performed, directly or indirectly, for the benefit
of the Partnership, the General Partner, any Subsidiaries of the
Partnership or any Affiliate of any of them.
(e) The General Partner is expressly authorized to enter
into, in the name and on behalf of the Partnership, a "right of first
opportunity" or "right of first offer" arrangement, non-competition
agreements and other conflict avoidance agreements with various
Affiliates of the Partnership and the General Partner, on such terms
as the General Partner, in its sole and absolute discretion, believes
are advisable.
7.6 Indemnification
(a) (i) To the fullest extent permitted by Delaware
law, the Partnership shall indemnify each Indemnitee from and
against any and all losses, claims, damages, liabilities,
joint or several, expenses (including, without limitation,
reasonable attorneys' fees and other legal fees and expenses),
judgments, fines, settlements, and other amounts arising from
any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate
to the operations of the Partnership or the General Partner as
set forth in this Agreement, in which such Indemnitee may be
involved, or is threatened to be involved, as a party or
otherwise, except to the extent it is finally determined by a
court of competent jurisdiction, from which no further appeal
may be taken, that such Indemnitee's action constituted
intentional acts or omissions constituting willful misconduct
or fraud.
(ii) Without limitation, the foregoing indemnity
shall extend to any liability of any Indemnitee, pursuant to a
loan guaranty or otherwise for any indebtedness of the
Partnership or any Subsidiary of the Partnership (including,
without limitation, any indebtedness which the Partnership or
any Subsidiary of the
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Partnership has assumed or taken subject to), and the General
Partner is hereby authorized and empowered, on behalf of the
Partnership, to enter into one or more indemnity agreements
consistent with the provisions of this Section 7.6 in favor of
any Indemnitee having or potentially having liability for any
such indebtedness.
(iii) Any indemnification pursuant to this Section
7.6 shall be made only out of the assets of the Partnership,
and neither the General Partner nor any Limited Partner shall
have any obligation to contribute to the capital of the
Partnership, or otherwise provide funds, to enable the
Partnership to fund its obligations under this Section 7.6.
(b) Reasonable expenses incurred by an Indemnitee who is
a party to a proceeding shall be paid or reimbursed
by the Partnership in advance of the final
disposition of the proceeding.
(c) The indemnification provided by this Section 7.6
shall be in addition to any other rights to which an Indemnitee or any
other Person may be entitled under any agreement, pursuant to any vote
of the Partners, as a matter of law or otherwise, and shall continue
as to an Indemnitee who has ceased to serve in such capacity unless
otherwise provided in a written agreement pursuant to which such
Indemnities are indemnified.
(d) The Partnership may, but shall not be obligated to,
purchase and maintain insurance, on behalf of the Indemnities and such
other Persons as the General Partner shall determine, against any
liability that may be asserted against or expenses that may be
incurred by such Person in connection with the Partnership's
activities, regardless of whether the Partnership would have the power
to indemnify such Person against such liability under the provisions
of this Agreement.
(e) For purposes of this Section 7.6, the Partnership
shall be deemed to have requested an Indemnitee to serve as fiduciary
of an employee benefit plan whenever the performance by such
Indemnitee of its duties to the Partnership also imposes duties on, or
otherwise involves services by, such Indemnitee to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to
applicable law shall constitute fines within the meaning of this
Section 7.6; and actions taken or omitted by the Indemnitee with
respect to an employee benefit plan in the performance of its duties
for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the Partnership.
(f) In no event may an Indemnitee subject any of the
Partners to personal liability by reason of the indemnification
provisions set forth in this Agreement.
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(g) An Indemnitee shall not be denied indemnification in
whole or in part under this Sec tion 7.6 because the Indemnitee had an
interest in the transaction with respect to which the indemnification
applies if the transaction was otherwise permitted by the terms of
this Agreement.
(h) (i) The provisions of this Section 7.6 are for
the benefit of the Indemnities, their heirs, successors,
assigns and administrators and shall not be deemed to create
any rights for the benefit of any other Persons.
(ii) Any amendment, modification or repeal of this
Section 7.6 or any provision hereof shall be prospective only
and shall not in any way affect the Partnership's liability to
any Indemnitee under this Section 7.6, as in effect
immediately prior to such amendment, modification, or repeal
with respect to claims arising from or relating to matters
occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may
arise or be asserted.
7.7 Liability of the General Partner
(a) Notwithstanding anything to the contrary set forth in
this Agreement, the General Partner and its officers and directors
shall not be liable for monetary damages to the Partnership, any
Partners or any Assignees for losses sustained or liabilities incurred
as a result of errors in judgment or mistakes of fact or law or of any
act or omission unless the General Partner acted in bad faith and the
act or omission was material to the matter giving rise to the loss,
liability or benefit not derived.
(b) (i) The Limited Partners expressly acknowledge
that the General Partner is acting on behalf of the
Partnership and the shareholders of the General Partner
collectively, that the General Partner, subject to the
provisions of Section 7.1(e) hereof, is under no obligation to
consider the separate interest of the Limited Partners
(including, without limitation, the tax consequences to
Limited Partners or Assignees) in deciding whether to cause
the Partnership to take (or decline to take) any actions, and
that the General Partner shall not be liable for monetary
damages for losses sustained, liabilities incurred, or
benefits not derived by Limited Partners in connection with
such decisions; provided that the General Partner has acted in
good faith.
(ii) With respect to any indebtedness of the
Partnership which any Limited Partner may have guaranteed, the
General Partner shall have no duty to keep such indebtedness
outstanding.
(c) (i) Subject to its obligations and duties as
General Partner set forth in Sec tion 7.1(a) hereof, the
General Partner may exercise any of the powers granted
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to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agent.
(ii) The General Partner shall not be responsible
for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
(d) The Limited Partners expressly acknowledge that in
the event of any conflict in the fiduciary duties owed by the General
Partner to its stockholders and by the General Partner, in its
capacity as a general partner of the Partnership, to the Limited
Partners, the General Partner may act in the best interests of the
General Partner's stockholders without violating its fiduciary duties
to the Limited Partners, and that the General Partner shall not be
liable for monetary damages for losses sustained, liabilities
incurred, or benefits not derived by the Limited Partners in
connection with any such violation.
(e) Any amendment, modification or repeal of this Section
7.7 or any provision hereof shall be prospective only and shall not in
any way affect the limitations on the General Partner's and its
officers' and directors' liability to the Partnership and the Limited
Partners under this Section 7.7 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from
or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
7.8 Other Matters Concerning the General Partner
(a) The General Partner may rely and shall be protected
in acting, or refraining from acting, upon any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, bond, debenture, or other paper or document believed
by it in good faith to be genuine and to have been signed or presented
by the proper party or parties.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants
and advisers selected by it, and any act taken or omitted to be taken
in reliance upon the opinion of such Persons as to matters which such
General Partner reasonably believes to be within such Person's
professional or expert competence shall be conclusively presumed to
have been done or omitted in good faith and in accordance with such
opinion.
(c) (i) The General Partner shall have the right, in
respect of any of its powers or obligations hereunder, to act
through any of its duly authorized officers and duly appointed
attorneys-in-fact.
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(ii) Each such attorney shall, to the extent
provided by the General Partner in the power of attorney, have
full power and authority to do and perform each and every act
and duty which is permitted or required to be done by the
General Partner hereunder.
(d) Notwithstanding any other provisions of this
Agreement or the Act, any action of the General Partner on behalf of
the Partnership or any decision of the General Partner to refrain from
acting on behalf of the Partnership, undertaken in the good faith
belief that such action or omission is necessary or advisable in order
(i) to protect the ability of the General Partner
to continue to qualify as a REIT; or
(ii) to avoid the General Partner incurring any
taxes under Section 857 or Sec tion 4981 of the Code,
is expressly authorized under this Agreement and is deemed approved by
all of the Limited Partners.
7.9 Title to Partnership Assets
(a) Title to Partnership assets, whether real, personal
or mixed and whether tangible or intangible, shall be deemed to be
owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership
assets or any portion thereof.
(b) (i) Title to any or all of the Partnership assets
may be held in the name of the Partnership, the General
Partner or one or more nominees, as the General Partner may
determine, including Affiliates of the General Partner.
(ii) The General Partner hereby declares and
warrants that any Partnership asset for which legal title is
held in the name of the General Partner or any nominee or
Affiliate of the General Partner shall be held by the General
Partner for the use and benefit of the Partnership in
accordance with the provisions of this Agreement; provided,
that the General Partner shall use its best efforts to cause
beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable.
(iii) All Partnership assets shall be recorded as
the property of the Partnership in its books and records,
irrespective of the name in which legal title to such
Partnership assets is held.
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7.10 Reliance by Third Parties
(a) Notwithstanding anything to the contrary in this
Agreement, any Person dealing with the Partnership shall be entitled
to assume that the General Partner has full power and authority,
without consent or approval of any other Partner or Person, to
encumber, sell or otherwise use in any manner any and all assets of
the Partnership and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the
Partnership, and such Person shall be entitled to deal with the
General Partner as if the General Partner were the Partnership's sole
party in interest, both legally and beneficially.
(b) Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person
to contest, negate or disaffirm any action of the General Partner in
connection with any such dealing.
(c) In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the
terms of this Agreement have been complied with or to inquire into the
necessity or expediency of any act or action of the General Partner or
its representatives.
(d) Each and every certificate, document or other
instrument executed on behalf of the Partnership by the General
Partner or its representatives shall be conclusive evidence in favor
of any and every Person relying thereon or claiming thereunder that
(i) at the time of the execution and delivery of
such certificate, document or instrument, this Agreement was
in full force and effect;
(ii) the Person executing and delivering such
certificate, document or instrument was duly authorized and
empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was
duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the
Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 Limitation of Liability
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5 hereof,
or under the Act.
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8.2 Management of Business
(a) No Limited Partner or Assignee (other than the
General Partner, any of its Affiliates or any officer, director,
employee, agent or trustee of the General Partner, the Partnership or
any of their Affiliates, in their capacity as such) shall take part in
the operation, management or control (within the meaning of the Act)
of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or
otherwise bind the Partnership.
(b) The transaction of any such business by the General
Partner, any of its Affiliates or any officer, director, employee,
partner, agent or trustee of the General Partner, the Partnership or
any of their Affiliates, in their capacity as such, shall not affect,
impair or eliminate the limitations on the liability of the Limited
Partners or Assignees under this Agreement.
8.3 Outside Activities of Limited Partners
(a) Subject to any agreements entered into pursuant to
Section 7.5 hereof and any other agreements entered into by a Limited
Partner or its Affiliates with the Partnership or any of its
Subsidiaries, any Limited Partner and any officer, director, employee,
agent, trustee, Affiliate or shareholder of any Limited Partner shall
be entitled to and may have business interests and engage in business
activities in addition to those relating to the Partnership, including
business interests and activities that are in direct competition with
the Partnership or that are enhanced by the activities of the
Partnership.
(b) Neither the Partnership nor any Partners shall have
any rights by virtue of this Agreement in any business ventures of any
Limited Partner or Assignee.
(c) None of the Limited Partners nor any other Person
shall have any rights by virtue of this Agreement or the Partnership
relationship established hereby in any business ventures of any other
Person and such Person shall have no obligation pursuant to this
Agreement to offer any interest in any such business ventures to the
Partnership, any Limited Partner or any such other Person, even if
such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person, could be taken
by such Person.
8.4 Return of Capital
(a) Except pursuant to the Exchange Rights Agreement, no
Limited Partner shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as
provided herein.
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(b) Except to the extent provided by Exhibit B, or as
otherwise expressly provided in this Agreement, no Limited Partner or
Assignee shall have priority over any other Limited Partner or
Assignee, either as to the return of Capital Contributions or as to
profits, losses or distributions.
8.5 Rights of Limited Partners Relating to the Partnership
(a) In addition to the other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5(b)
hereof, each Limited Partner shall have the right, for a purpose
reasonably related to such Limited Partner's interest as a limited
partner in the Partnership, upon written demand with a statement of
the purpose of such demand and at such Limited Partner's own expense
(including such reasonable copying and administrative charges as the
General Partner may establish from time to time):
(i) to obtain a copy of the most recent annual
and quarterly reports filed with the Securities and Exchange
Commission by the General Partner pursuant to the Securities
Exchange Act of 1934;
(ii) to obtain a copy of the Partnership's
federal, state and local income tax returns for each
Partnership Year;
(iii) to obtain a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to obtain a copy of this Agreement and the
Certificate and all amendments or restatements thereto,
together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate and all
amendments and/or restatements thereto have been executed; and
(v) to obtain true and full information regarding
the amount of cash and a description and statement of any
other property or services contributed by each Partner and
which each Partner has agreed to contribute in the future, and
the date on which each became a Partner.
(b) Notwithstanding any other provision of this Section
8.5, the General Partner may keep confidential from the Limited
Partners, for such period of time as the General Partner determines in
its sole and absolute discretion to be reasonable, any information
that
(i) the General Partner reasonably believes to be
in the nature of trade secrets or other information, the
disclosure of which the General Partner in good faith believes
is not in the best interests of the Partnership or could
damage the Partnership or its business; or
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(ii) the Partnership is required by law or by
agreements with an unaffiliated third party to keep
confidential.
8.6 Exchange Rights Agreement
(a) The Limited Partners have been granted the right, but
not the obligation, to exchange all or a portion of their OP Units for
cash or, at the option of the General Partner, for shares of REIT
Stock on the terms and subject to the conditions and restrictions
contained in that certain Exchange Rights Agreement among the General
Partners and the Limited Partners (as amended from time to time, the
"Exchange Rights Agreement"), the form of which is attached hereto as
Exhibit E.
(b) The Limited Partners and all successors, assignees
and transferees (whether by operation of law, including by merger or
consolidation, dissolution or liquidation of an entity that is a
Limited Partner, or otherwise) shall be bound by the provisions of the
Exchange Rights Agreement.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 Records and Accounting
(a) The General Partner shall keep or cause to be kept at
the principal office of the Partnership those records and documents
required to be maintained by the Act and other books and records
deemed by the General Partner to be appropriate with respect to the
Partnership's business, including, without limitation, all books and
records necessary for the General Partner to comply with applicable
REIT Requirements and to provide to the Limited Partners any
information, lists and copies of documents required to be provided
pursuant to Sections 8.5(a) and 9.3 hereof.
(b) Any records maintained by or on behalf of the
Partnership in the regular course of its business may be kept on, or
be in the form of, punch cards, magnetic tape, photographs,
micrographics or any other information storage device, provided that
the records so maintained are convertible into clearly legible written
form within a reasonable period of time.
(c) The books of the Partnership shall be maintained, for
financial and tax reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles, or such
other basis as the General Partner determines to be necessary or
appropriate.
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9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
9.3 Reports
(a) As soon as practicable, but in no event later than
the date on which the General Partner mails its annual report to its
Stockholders, the General Partner shall cause to be mailed to each
Limited Partner as of the close of the Partnership Year, an annual
report containing financial statements of the Partnership, or of the
General Partner, if such statements are prepared on a consolidated
basis with the Partnership, for such Partnership Year, presented in
accordance with GAAP, such statements to be audited by a nationally
recognized firm of independent public accountants selected by the
General Partner in its sole discretion.
(b) If and to the extent that the General Partner mails
quarterly reports to its Stockholders, then as soon as practicable,
but in no event later than the date such reports are mailed, the
General Partner shall cause to be mailed to each Limited Partner a
report containing unaudited financial statements as of the last day of
the calendar quarter of the Partnership, or of the General Partner, if
such statements are prepared on a consolidated basis with the
Partnership, and such other information as may be required by
applicable law or regulation, or as the General Partner determines to
be appropriate.
ARTICLE 10
TAX MATTERS
10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and
other items required of the Partnership for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within ninety (90)
days of the close of each taxable year, the tax information reasonably required
by Limited Partners for federal and state income tax reporting purposes.
10.2 Tax Elections
(a) Except as otherwise provided herein, the General
Partner shall, in its sole and absolute discretion, determine whether
to make any available election pursuant to the Code; provided,
however, that the General Partner shall make the election under
Section 754 of the Code in accordance with applicable regulations
thereunder effective for the first calendar year following the
Effective Date.
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(b) The General Partner shall elect a permissible method
of eliminating the disparity between the book value and the tax basis
of property contributed to the Partnership or to a Subsidiary of the
Partnership pursuant to the regulations promulgated under the
provisions of Section 704(c) of the Code.
(c) The General Partner shall have the right to seek to
revoke any tax election it makes, including, without limitation, the
election under Section 754 of the Code, upon the General Partner's
determination, in its sole and absolute discretion, that such
revocation is in the best interests of the Partners.
10.3 Tax Matters Partner
(a) (i) The General Partner shall be the "tax matters
partner" of the Partnership for federal income tax purposes.
(ii) Pursuant to Section 6230(e) of the Code, upon
receipt of notice from the Internal Revenue Service of the
beginning of an administrative proceeding with respect to the
Partnership, the tax matters partner shall furnish the
Internal Revenue Service with the name, address, taxpayer
identification number, and profit interest of each of the
Limited Partners and the Assignees; provided, that such
information is provided to the Partnership by the Limited
Partners and the Assignees.
(iii) The tax matters partner is authorized, but
not required:
(A) to enter into any settlement with
the Internal Revenue Service with respect to any
administrative or judicial proceedings for the
adjustment of Partnership items required to be taken
into account by a Partner for income tax purposes
(such administrative proceedings being referred to as
a "tax audit" and such judicial proceedings being
referred to as "judicial review"), and in the
settlement agreement the tax matters partner may
expressly state that such agreement shall bind all
Partners, except that such settlement agreement shall
not bind any Partner
(I) who (within the time prescribed
pursuant to the Code and Regulations) files a
statement with the Internal Revenue Service
providing that the tax matters partner shall
not have the authority to enter into a
settlement agreement on behalf of such
Partner; or
(II) who is a "notice partner" (as
defined in Section 6231(a)(8) of the Code) or
a member of a "notice group" (as defined in
Sec tion 6223(b)(2) of the Code);
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(B) in the event that a notice of a
final administrative adjustment at the Partnership
level of any item required to be taken into account
by a Partner for tax purposes (a "final adjustment")
is mailed to the tax matters partner, to seek
judicial review of such final adjustment, including
the filing of a petition for readjustment with the
Tax Court or the filing of a complaint for refund
with the United States Claims Court or the District
Court of the United States for the district in which
the Partnership's principal place of business is
located;
(C) to intervene in any action brought
by any other Partner for judicial review of a final
adjustment;
(D) to file a request for an
administrative adjustment with the Internal Revenue
Service and, if any part of such request is not
allowed by the Internal Revenue Service, to file an
appropriate pleading (petition or complaint) for
judicial review with respect to such request;
(E) to enter into an agreement with the
Internal Revenue Service to extend the period for
assessing any tax which is attributable to any item
required to be taken account of by a Partner for tax
purposes, or an item affected by such item; and
(F) to take any other action on behalf
of the Partners or the Partnership in connection with
any tax audit or judicial review proceeding to the
extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by
the tax matters partner in connection with any such
proceeding, except to the extent required by law, is a matter
in the sole and absolute discretion of the tax matters partner
and the provisions relating to indemnification of the General
Partner set forth in Section 7.6 of this Agreement shall be
fully applicable to the tax matters partner in its capacity as
such.
(c) (i) The tax matters partner shall receive no
compensation for its services.
(ii) All third party costs and expenses incurred
by the tax matters partner in performing its duties as such
(including legal and accounting fees and expenses) shall be
borne by the Partnership.
(iii) Nothing herein shall be construed to restrict
the Partnership from engaging an accounting firm to assist the
tax matters partner in discharging its
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duties hereunder, so long as the compensation paid by the
Partnership for such services is reasonable.
10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a sixty (60) month period as
provided in Section 709 of the Code.
10.5 Withholding
(a) Each Limited Partner hereby authorizes the
Partnership to withhold from, or pay on behalf of or with respect to,
such Limited Partner any amount of federal, state, local, or foreign
taxes that the General Partner determines that the Partnership is
required to withhold or pay with respect to any amount distributable
or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446
of the Code.
(b) (i) Any amount paid on behalf of or with respect
to a Limited Partner shall constitute a loan by the
Partnership to such Limited Partner, which loan shall be
repaid by such Limited Partner within fifteen (15) days after
notice from the General Partner that such payment must be made
unless
(A) the Partnership withholds such
payment from a distribution which would otherwise be
made to the Limited Partner; or
(B) the General Partner determines, in
its sole and absolute discretion, that such payment
may be satisfied out of the available funds of the
Partnership which would, but for such payment, be
distributed to the Limited Partner.
(ii) Any amounts withheld pursuant to the
foregoing clauses (i)(A) or (B) shall be treated as having
been distributed to such Limited Partner.
(c) (i) Each Limited Partner hereby unconditionally
and irrevocably grants to the Partnership a security interest
in such Limited Partner's Partnership Interest to secure such
Limited Partner's obligation to pay to the Partnership any
amounts required to be paid pursuant to this Section 10.5.
(ii) (A) In the event that a Limited Partner
fails to pay when due any amounts owed to the
Partnership pursuant to this Section 10.5, the
General Partner may, in its sole and absolute
discretion, elect to make the payment to the
Partnership on behalf of such defaulting Limited
Partner, and in such
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event shall be deemed to have loaned such amount to
such defaulting Limited Partner and shall succeed to
all rights and remedies of the Partnership as against
such defaulting Limited Partner.
(B) Without limitation, in such event,
the General Partner shall have the right to receive
distributions that would otherwise be distributable
to such defaulting Limited Partner until such time as
such loan, together with all interest thereon, has
been paid in full, and any such distributions so
received by the General Partner shall be treated as
having been distributed to the defaulting Limited
Partner and immediately paid by the defaulting
Limited Partner to the General Partner in repayment
of such loan.
(iii) Any amount payable by a Limited Partner
hereunder shall bear interest at the highest base or prime
rate of interest published from time to time by any of
Citibank, N.A., Chemical Bank, Morgan Guaranty Trust Company
of New York and Chase Manhattan Bank, N.A., plus four (4)
percentage points, but in no event higher than the maximum
lawful rate of interest on such obligation, such interest to
accrue from the date such amount is due (i.e., fifteen (15)
days after demand) until such amount is paid in full.
(iv) Each Limited Partner shall take such actions
as the Partnership or the General Partner shall request in
order to perfect or enforce the security interest created
hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
11.1 Transfer
(a) (i) The term "Transfer," when used in this
Article 11 with respect to an OP Unit, shall be deemed to
refer to a transaction by which
(A) the General Partner purports to
assign all or any part of its General Partner
Interest to another Person or
(B) a Limited Partner purports to assign
all or any part of its Limited Partner Interest to
another Person.
(ii) The term "Transfer" when used in this Article
11 does not include any exchange of OP Units for cash or REIT
Stock pursuant to the Exchange Rights Agreement.
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(b) (i) No Partnership Interest shall be Transferred,
in whole or in part, except in accordance with the terms and
conditions set forth in this Article 11.
(ii) Any Transfer or purported Transfer of a
Partnership Interest not made in accordance with this Article
11 shall be null and void.
11.2 Transfer of the General Partner's General Partner Interest
(a) The General Partner may not Transfer any of its
General Partner Interest or withdraw as General Partner, or Transfer
any of its Limited Partner Interest, except
(i) if Limited Partners holding at least a
majority of the Percentage Interests of the Limited Partners
(other than Limited Partner Interests held by the General
Partner or any Affiliate thereof) consent to such Transfer or
withdrawal,
(ii) if such Transfer is to an entity which is
wholly owned by the General Partner and is a Qualified REIT
Subsidiary as defined in Section 856(i) of the Code or
(iii) in connection with a transaction described in
Section 11.2(c) or 11.2(d) (as applicable).
(b) In the event the General Partner withdraws as general
partner of the Partnership in accordance with Section 11.2(a), the
General Partner's General Partner Interest shall immediately be
converted into a Limited Partner Interest.
(c) Except as otherwise provided in Section 11.2(d), the
General Partner shall not engage in any merger, consolidation or other
combination with or into another Person or sale of all or
substantially all of its assets, or any reclassification, or any
recapitalization or change of outstanding REIT Stock (other than a
change in par value, or from par value to no par value, or as a result
of a subdivision or combination of REIT Stock) (a "Transaction"),
unless
(i) in connection with the Transaction all
Limited Partners will either receive, or will have the right
to elect to receive, for each OP Unit an amount of cash,
securities, or other property equal to the product of the
Exchange Factor and the greatest amount of cash, securities or
other property or value paid in the Transaction to or received
by a holder of one share of REIT Stock in consideration of one
share of REIT Stock at any time during the period from and
after the date on which the Transaction is consummated;
provided that if, in connection with the Transaction, a
purchase, tender or exchange offer ("Offer") shall have been
made to and accepted by the holders of more than 50% of the
outstanding REIT Stock, each holder of OP Units shall be given
the option to exchange its OP Units for the
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greatest amount of cash, securities, or other property which a
Limited Partner would have received had it
(A) exercised its Exchange Right and
(B) sold, tendered or exchanged pursuant
to the Offer the REIT Stock received upon exercise of
the Exchange Right immediately prior to the
expiration of the Offer; and
(ii) no more than 75% of the equity securities of
the acquiring Person in such Transaction shall be owned, after
consummation of such Transaction, by the General Partner or
Persons who were Affiliates of the Partnership or the General
Partner immediately prior to the date on which the Transaction
is consummated.
(d) (i) Notwithstanding Section 11.2(c), the General
Partner may merge into or consolidate with another entity if
immediately after such merger or consolidation
(A) substantially all of the assets of
the successor or surviving entity (the "Surviving
General Partner"), other than OP Units held by the
General Partner, are contributed to the Partnership
as a Capital Contribution in exchange for OP Units
with a fair market value equal to the value of the
assets so contributed as determined by the Surviving
General Partner in good faith and
(B) the Surviving General Partner
expressly agrees to assume all obligations of the
General Partner hereunder.
(ii) (A) Upon such contribution and
assumption, the Surviving General Partner shall have the right
and duty to amend this Agreement and the Exchange Rights
Agreement as set forth in this Section 11.2(d).
(B) (I) The Surviving General
Partner shall in good faith arrive at a new
method for the calculation of the Exchange
Factor for an OP Unit after any such merger
or consolidation so as to approximate the
existing method for such calculation as
closely as reasonably possible.
(II) Such calculation shall take
into account, among other things, the kind
and amount of securities, cash and other
property that was receivable upon such merger
or consolidation by a holder of REIT Stock or
options, warrants or other rights relating
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thereto, and which a holder of OP Units could
have acquired had such OP Units been redeemed
for REIT Stock immediately prior to such
merger or consolidation.
(C) Such amendment to this Agreement
shall provide for adjustment to such method of
calculation, which shall be as nearly equivalent as
may be practicable to the adjustments provided for
with respect to the Exchange Factor.
(iii) The above provisions of this Section 11.2(d)
shall similarly apply to successive mergers or consolidations
permitted hereunder.
11.3 Limited Partners' Rights to Transfer
(a) Subject to the provisions of Sections 11.3(c),
11.3(d), 11.3(e) and 11.4 and the restrictions included in the
applicable Lock-up Agreement, a Limited Partner may, without the
consent of the General Partner, Transfer all or any portion of its
Limited Partnership Interest.
(b) (i) If a Limited Partner is Incapacitated, the
executor, administrator, trustee, committee, guardian,
conservator or receiver of such Limited Partner's estate shall
have all of the rights of a Limited Partner, but not more
rights than those enjoyed by other Limited Partners, for the
purpose of settling or managing the estate and such power as
the Incapacitated Limited Partner possessed to Transfer all or
any part of his or its interest in the Partnership.
(ii) The Incapacity of a Limited Partner, in and
of itself, shall not dissolve or terminate the Partnership.
(c) The General Partner may prohibit any Transfer by a
Limited Partner of its OP Units if, in the opinion of legal counsel to
the Partnership, such Transfer would require filing of a registration
statement under the Securities Act of 1933, as amended, or would
otherwise violate any federal or state securities laws or regulations
applicable to the Partnership or the OP Units.
(d) No Transfer by a Limited Partner of its OP Units may
be made to any Person if
(i) in the opinion of legal counsel of the
Partnership, it would adversely affect the ability of the
General Partner to continue to qualify as a REIT or would
subject the General Partner to any additional taxes under
Section 857 or Section 4981 of the Code;
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(ii) in the opinion of legal counsel for the
Partnership, it would result in the Partnership being treated
as an association taxable as a corporation for federal income
tax purposes;
(iii) such Transfer would cause the Partnership to
become, with respect to any employee benefit plan subject to
Title I of ERISA, a "party-in-interest" (as defined in Sec
tion 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(c) of the Code);
(iv) such Transfer would, in the opinion of legal
counsel for the Partnership, cause any portion of the assets
of the Partnership to constitute assets of any employee
benefit plan pursuant to Department of Labor Regulations
Section 2510.2-101;
(v) such Transfer would subject the Partnership
to regulation under the Investment Company Act of 1940, the
Investment Advisors Act of 1940 or the Employee Retirement
Income Security Act of 1974, each as amended;
(vi) without the consent of the General Partner,
which consent may be withheld in its sole and absolute
discretion, such Transfer is a sale or exchange, and such sale
or exchange would, when aggregated with all other sales and
exchanges during the 12-month period ending on the date of the
proposed Transfer, result in 50% or more of the interests in
Partnership capital and profits being sold or exchanged during
such 12-month period; or
(vii) such Transfer is effectuated through an
"established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Section
7704 of the Code.
(e) No transfer of any OP Units may be made to a lender
to the Partnership or any Person who is related (within the meaning of
Regulations Section 1.752-4(b)) to any lender to the Partnership whose
loan constitutes a nonrecourse liability (within the meaning of
Regulations Section 1.752-1(a)(2)), without the consent of the General
Partner, which may be withheld in its sole and absolute discretion,
provided that as a condition to such consent the lender will be
required to enter into an arrangement with the Partnership and the
General Partner to exchange for the Cash Amount (as such term is
defined in the Exchange Rights Agreement) any OP Units in which a
security interest is held simultaneously with the time at which such
lender would be deemed to be a partner in the Partnership for purposes
of allocating liabilities to such lender under Section 752 of the
Code.
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(f) Any Transfer in contravention of any of the
provisions of this Section 11.3 shall be void and ineffectual and
shall not be binding upon, or recognized by, the Partnership.
11.4 Substituted Limited Partners
(a) (i) No Limited Partner shall have the right to
substitute a Permitted Transferee for a Limited Partner in his
place.
(ii) The General Partner shall, however, have the
right to consent to the admission of a Permitted Transferee of
the Partnership Interest of a Limited Partner pursuant to this
Section 11.4 as a Substitute Limited Partner, which consent
may be given or withheld by the General Partner in its sole
and absolute discretion.
(iii) The General Partner's failure or refusal to
permit such transferee to become a Substituted Limited Partner
shall not give rise to any cause of action against the
Partnership or any Partner.
(b) A transferee who has been admitted as a Substituted
Limited Partner in accordance with this Article 11 shall have all the
rights and powers and be subject to all the restrictions and
liabilities of a Limited Partner under this Agreement.
(c) (i) No Permitted Transferee will be admitted as a
Substituted Limited Partner unless such transferee has
furnished to the General Partner
(A) evidence of acceptance in form
satisfactory to the General Partner of all of the
terms and conditions of this Agreement and the
Exchange Rights Agreement, including, without
limitation, the power of attorney granted in Section
2.4 hereof, and
(B) such other documents or instruments
as may be required in the reasonable discretion of
the General Partner in order to effect such Person's
admission as a Substituted Limited Partner.
(ii) Upon the admission of a Substituted Limited
Partner, the General Partner shall amend Exhibit A to reflect
the name, address, number of OP Units, and Percentage Interest
of such Substituted Limited Partner and to eliminate or
adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
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11.5 Assignees
(a) If the General Partner, in its sole and absolute
discretion, does not consent to the admission of any transferee as a
Substituted Limited Partner, as described in Section 11.4(a), such
transferee shall be considered an Assignee for purposes of this
Agreement.
(b) An Assignee shall be deemed to have had assigned to
it, and shall be entitled to receive distributions from the
Partnership and the share of Net Income, Net Losses and any other
items, gain, loss deduction and credit of the Partnership attributable
to the OP Units assigned to such transferee, but shall not be deemed
to be a holder of OP Units for any other purpose under this Agreement,
and shall not be entitled to vote such OP Units in any matter
presented to the Limited Partners for a vote (such OP Units being
deemed to have been voted on such matter in the same proportion as all
other OP Units held by Limited Partners are voted).
(c) In the event any such transferee desires to make a
further assignment of any such OP Units, such transferee shall be
subject to all of the provisions of this Article 11 to the same extent
and in the same manner as any Limited Partner desiring to make an
assignment of OP Units.
11.6 General Provisions
(a) No Limited Partner may withdraw from the Partnership
other than as a result of a permitted Transfer of all of such Limited
Partner's OP Units in accordance with this Article 11 or pursuant to
exchange of all of its OP Units pursuant to the Exchange Rights
Agreement.
(b) (i) Any Limited Partner which shall Transfer all
of its OP Units in a Transfer permitted pursuant to this
Article 11 shall cease to be a Limited Partner upon the
admission of all Assignees of such OP Units as Substituted
Limited Partners.
(ii) Similarly, any Limited Partner which shall
Transfer all of its OP Units pursuant to an exchange of all of
its OP Units pursuant to the Exchange Rights Agreement shall
cease to be a Limited Partner.
(c) Other than pursuant to the Exchange Rights Agreement
or without the consent of the General Partner, transfers pursuant to
this Article 11 may only be made as of the first day of a fiscal
quarter of the Partnership.
(d) (i) If any Partnership Interest is transferred or
assigned during the Partnership's fiscal year in compliance
with the provisions of this Article 11 or
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exchanged pursuant to the Exchange Rights Agreement on any day
other than the first day of a Partnership Year, then Net
Income, Net Losses, each item thereof and all other items
attributable to such interest for such Partnership Year shall
be divided and allocated between the transferor Partner and
the transferee Partner by taking into account their varying
interests during the Partnership Year in accordance with
Section 706(d) of the Code, using the interim closing of the
books method.
(ii) Solely for purposes of making such
allocations, each of such items for the calendar month in
which the Transfer or assignment occurs shall be allocated to
the transferee Partner, and none of such items for the
calendar month in which an exchange occurs shall be allocated
to the exchanging Partner, provided, however, that the General
Partner may adopt such other conventions relating to
allocations in connection with transfers, assignments, or
exchanges as it determines are necessary or appropriate.
(iii) All distributions of Available Cash
attributable to OP Units, with respect to which the
Partnership Record Date is before the date of such transfer,
assignment, or exchange of such OP Units, shall be made to the
transferor Partner or the exchanging Partner, as the case may
be, and in the case of a transfer or assignment other than an
exchange, all distributions of Available Cash thereafter
attributable to such OP Units shall be made to the transferee
Partner.
ARTICLE 12
ADMISSION OF PARTNERS
12.1 Admission of Successor General Partner
(a) (i) A successor to all of the General Partner
Interest pursuant to Section 11 hereof who is proposed to be admitted
as a successor General Partner shall be admitted to the Partnership as
the General Partner, effective immediately following such transfer and
the admission of such successor General Partner as a general partner
of the Partnership upon the satisfaction of the terms and conditions
set forth in Section 12.1(b).
(ii) Any such transferee shall carry on the
business of the Partnership without dissolution.
(b) A Person shall be admitted as a substitute or
successor General Partner of the Partnership only if the following
terms and conditions are satisfied:
(i) the Person to be admitted as a substitute or
additional General Partner shall have accepted and agreed to
be bound by all the terms and provisions
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of this Agreement by executing a counterpart thereof and such
other documents or instruments as may be required or
appropriate in order to effect the admission of such Person as
a General Partner;
(ii) if the Person to be admitted as a substitute
or additional General Partner is a corporation or a
partnership it shall have provided the Partnership with
evidence satisfactory to counsel for the Partnership of such
Person's authority to become a General Partner and to be bound
by the terms and provisions of this Agreement; and
(iii) counsel for the Partnership shall have
rendered an opinion (relying on such opinions from other
counsel as may be necessary) that the admission of the person
to be admitted as a substitute or additional General Partner
is in conformity with the Act, that none of the actions taken
in connection with the admission of such Person as a
substitute or additional General Partner will cause
(A) the Partnership to be classified
other than as a partnership for federal income tax
purposes, or
(B) the loss of any Limited Partner's
limited liability.
(c) In the case of such admission on any day other than
the first day of a Partnership Year, all items attributable to the
General Partner Interest for such Partnership Year shall be allocated
between the transferring General Partner and such successor as
provided in Section 11.6(d) hereof.
12.2 Admission of Additional Limited Partners
(a) A Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to
the General Partner
(i) evidence of acceptance in form satisfactory
to the General Partner of all of the terms and conditions of
this Agreement and the Exchange Rights Agreement, including,
without limitation, the power of attorney granted in Section
2.4 hereof, and
(ii) such other documents or instruments as may be
required in the discretion of the General Partner in order to
effect such Person's admission as an Additional Limited
Partner.
(b) (i) Notwithstanding anything to the contrary in
this Section 12.2, no Person shall be admitted as an
Additional Limited Partner without the consent of
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the General Partner, which consent may be given or withheld in
the General Partner's sole and absolute discretion.
(ii) The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which
the name of such Person is recorded on the books and records
of the Partnership, following the consent of the General
Partner to such admission.
(c) (i) If any Additional Limited Partner is admitted
to the Partnership on any day other than the first day of a
Partnership Year, then Net Income, Net Losses, each item
thereof and all other items allocable among Partners and
Assignees for such Partnership Year shall be allocated among
such Additional Limited Partner and all other Partners and
Assignees by taking into account their varying interests
during the Partnership Year in accordance with Section 706(d)
of the Code, using the interim closing of the books method.
(ii) (A) Solely for purposes of making such
allocations, each of such items for the calendar
month in which an admission of any Additional Limited
Partner occurs shall be allocated among all of the
Partners and Assignees, including such Additional
Limited Partner.
(B) distributions of Available Cash with
respect to which the Partnership Record Date is
before the date of such admission shall be made
solely to Partners and Assignees, other than the
Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all of the
Partners and Assignees, including such Additional
Limited Partner.
(d) Upon the admission of the first Additional Limited
Partner to the Partnership, the Initial Limited Partner's
original interest in the Partnership shall automatically, and
without further action on the part of the Initial Limited
Partner or the Partnership, be withdrawn.
12.3 Amendment of Agreement and Certificate of Limited Partnership
For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4 hereof.
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ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
13.1 Dissolution
(a) The Partnership shall not be dissolved by the
admission of Substituted Limited Partners or Additional Limited
Partners or by the admission of a successor General Partner in
accordance with the terms of this Agreement.
(b) The Partnership shall dissolve, and its affairs shall
be wound up, only upon the first to occur of any of the following
("Liquidating Events"):
(i) the expiration of its term as provided in
Section 2.5 hereof;
(ii) an event of withdrawal of the General
Partner, as defined in the Act (other than an event of
bankruptcy), unless, within ninety (90) days after such event
of withdrawal, a majority in interest of the remaining
Partners agree in writing to continue the business of the
Partnership and to the appointment, effective as of the date
of withdrawal, of a successor General Partner;
(iii) from and after the date of this Agreement
through December 31, 2047, an election to dissolve the
Partnership made by the General Partner, with the Consent of
Limited Partners holding at least a majority of the Percentage
Interest of the Limited Partners (including Limited Partner
Interests held by the General Partner);
(iv) on or after January 1, 2048, an election to
dissolve the Partnership made by the General Partner, in its
sole and absolute discretion;
(v) entry of a decree of judicial dissolution of
the Partnership pursuant to the provisions of the Act;
(vi) the sale of all or substantially all of the
assets and properties of the Partnership;
(vii) a final and non-appealable judgment is
entered by a court of competent jurisdiction ruling that the
General Partner is bankrupt or insolvent, or a final and
non-appealable order for relief is entered by a court with
appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws
as now or hereafter in effect, unless prior to the entry of
such order or judgment all of the remaining Partners agree in
writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such
order or judgment, of a substitute General Partner.
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13.2 Winding Up
(a) (i) Upon the occurrence of a Liquidating Event,
the Partnership shall continue solely for the purposes of
winding up its affairs in an orderly manner, liquidating its
assets, and satisfying the claims of its creditors and
Partners.
(ii) No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the
winding up of the Partnership's business and affairs.
(iii) The General Partner, or, in the event there
is no remaining General Partner, any Person elected by Limited
Partners holding at least a majority of the Limited
Partnership Interests (the General Partner or such other
Person being referred to herein as the "Liquidator"), shall be
responsible for overseeing the winding up and dissolution of
the Partnership and shall take full account of the
Partnership's liabilities and property and the Partnership
property shall be liquidated as promptly as is consistent with
obtaining the fair value thereof, and the proceeds therefrom
(which may, to the extent determined by the General Partner,
include shares of common stock or other securities of the
General Partner) shall be applied and distributed in the
following order:
(A) First, to the payment and discharge
of all of the Partnership's debts and liabilities to
creditors other than the Partners;
(B) Second, to the payment and discharge
of all of the Partnership's debts and liabilities to
the General Partner;
(C) Third, to the payment and discharge
of all of the Partnership's debts and liabilities to
the other Partners; and
(D) The balance, if any, to the General
Partner and Limited Partners to the extent of and in
accordance with the positive balances in their
Capital Accounts, after giving effect to all
contributions, distributions, and allocations for all
periods.
(iv) The General Partner shall not receive any
additional compensation for any services performed pursuant to
this Article 13.
(v) Any distributions pursuant to this Section
13.2(a) shall be made by the end of the Partnership's taxable
year in which the liquidation occurs (or, if later, within 90
days after the date of the liquidation).
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(b) (i) Notwithstanding the provisions of Section
13.2(a) hereof which require liquidation of the assets of the
Partnership, but subject to the order of priorities set forth
therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or
all of the Partnership's assets would be impractical or would
cause undue loss to the Partners, the Liquidator may, in its
sole and absolute discretion, defer for a reasonable time the
liquidation of any asset except those necessary to satisfy
liabilities of the Partnership (including to those Partners as
creditors) or distribute to the Partners, in lieu of cash, as
tenants in common and in accordance with the provisions of
Section 13.2(a) hereof, undivided interests in such
Partnership assets as the Liquidator deems not suitable for
liquidation.
(ii) Any such distributions in kind shall be made
only if, in the good faith judgment of the Liquidator, such
distributions in kind are in the best interests of the
Partners, and shall be subject to such conditions relating to
the disposition and management of such properties as the
Liquidator deems reasonable and equitable and to any
agreements governing the operation of such properties at such
time.
(iii) The Liquidator shall determine the fair
market value of any property distributed in kind using such
reasonable method of valuation as it may adopt.
(c) In the discretion of the Liquidator, a pro rata
portion of the distributions that would otherwise be made to
the General Partner and Limited Partners pursuant to this
Article 13 may be:
(A) distributed to a trust established
for the benefit of the General Partner and Limited
Partners for the purposes of liquidating Partnership
assets, collecting amounts owed to the Partnership,
and paying any contingent or unforeseen liabilities
or obligations of the Partnership or the General
Partner arising out of or in connection with the
Partnership; the assets of any such trust shall be
distributed to the General Partner and Limited
Partners from time to time, in the reasonable
discretion of the Liquidator, in the same proportions
as the amount distributed to such trust by the
Partnership would otherwise have been distributed to
the General Partner and Limited Partners pursuant to
this Agreement; or
(B) withheld or escrowed to provide a
reasonable reserve for Partnership liabilities
(contingent or otherwise) and to reflect the
unrealized portion of any installment obligations
owed to the Partnership, provided that such withheld
or escrowed amounts shall be distributed to the
General
57
<PAGE> 80
Partner and Limited Partners in the manner and order
of priority set forth in Section 13.2(a) as soon as
practicable.
13.3 No Obligation to Contribute Deficit
If any Partner has a deficit balance in his Capital Account (after
giving effect to all contributions, distributions and allocations for all
taxable years, including the year during which such liquidation occurs), such
Partner shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any
purpose whatsoever.
13.4 Rights of Limited Partners
(a) Except as otherwise provided in this Agreement, each
Limited Partner shall look solely to the assets of the Partnership for
the return of its Capital Contributions and shall have no right or
power to demand or receive property other than cash from the
Partnership.
(b) Except as otherwise provided in this Agreement, no
Limited Partner shall have priority over any other Partner as to the
return of its Capital Contributions, distributions, or allocations.
13.5 Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs that would,
but for the provisions of an election or objection by one or more Partners
pursuant to Section 13.1, result in a dissolution of the Partnership, the
General Partner shall, within thirty (30) days thereafter, provide written
notice thereof to each of the Partners.
13.6 Termination of Partnership and Cancellation of Certificate of
Limited Partnership
Upon the completion of the liquidation of the Partnership's assets, as
provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
state of Delaware shall be canceled and such other actions as may be necessary
to terminate the Partnership shall be taken.
13.7 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect among the Partners during the period of liquidation.
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<PAGE> 81
13.8 Waiver of Partition
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
14.1 Amendments
(a) (i) Amendments to this Agreement may be proposed
by the General Partner or by any Limited Partners holding in
the aggregate 25 percent or more of the Partnership Interests.
(ii) (A) Following such proposal, the General
Partner shall submit any proposed amendment to the
Limited Partners.
(B) The General Partner shall seek the
written vote of the Partners on the proposed
amendment or shall call a meeting to vote thereon and
to transact any other business that it may deem
appropriate.
(C) For purposes of obtaining a written
vote, the General Partner may require a response
within a reasonable specified time, but not less than
fifteen (15) days, and failure to respond in such
time period shall constitute a vote which is
consistent with the General Partner's recommendation
with respect to the proposal.
(D) Except as provided in Section
14.1(b), 14.1(c) or 14.1(d), a proposed amendment
shall be adopted and be effective as an amendment
hereto if it is approved by the General Partner and
it receives the Consent of Limited Partners holding
at least a majority of the Percentage Interests of
the Limited Partners (including Limited Partner
Interests held by the General Partner).
(b) (i) Notwithstanding Section 14.1(a), the General
Partner shall have the power, without the consent of the
Limited Partners, to amend this Agreement as may be required
to facilitate or implement any of the following purposes:
(A) to add to the obligations of the
General Partner or surrender any right or power
granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited
Partners;
59
<PAGE> 82
(B) to reflect the admission,
substitution, termination, or withdrawal of Partners
in accordance with this Agreement (which may be
effected through the amendment or replacement of
Exhibit A);
(C) to set forth the designations,
rights, powers, duties, and preferences of the
holders of any additional Partnership Interests
issued pursuant to Section 4.3 hereof;
(D) to reflect a change that does not
adversely affect the Limited Partners in any material
respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not
inconsistent with law or with other provisions, or
make other changes with respect to matters arising
under this Agreement that will not be inconsistent
with law or with the provisions of this Agreement;
and
(E) to satisfy any requirements,
conditions, or guidelines contained in any order,
directive, opinion, ruling or regulation of a federal
or state agency or contained in federal or state law.
(ii) The General Partner shall provide notice to
the Limited Partners when any action under this Section
14.1(b) is taken in the next regular communication to the
Limited Partners.
(c) Notwithstanding Section 14.1(a) and 14.1(b) hereof,
this Agreement shall not be amended with respect to any Partner
adversely affected without the Consent of such Partner adversely
affected if such amendment would
(i) convert a Limited Partner's interest in the
Partnership into a General Partner Interest;
(ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner; or
(iii) amend this Section 14.1(c).
This Section 14.1(c) does not require unanimous consent of all Partners
adversely affected unless the amendment is to be effective against all Partners
adversely affected.
(d) Notwithstanding Section 14.1(a) or Section 14.1(b)
hereof, the General Partner shall not amend, without the Consent of
Limited Partners holding a majority of the Percentage Interests of the
Limited Partners, Section 4.3 (a), Article 5, Article 6 (except that
Articles V and VI may be amended as permitted pursuant to Sections
4.3, 5.4, 6.2 and 14.1(b)(i)(c)), Section 7.4, 7.5, 11.2, or 13.1.
60
<PAGE> 83
14.2 Meetings of the Partners
(a) (i) Meetings of the Partners may be called by
the General Partner and shall be called upon the receipt by
the General Partner of a written request by Limited Partners
holding 25 percent or more of the Partnership Interests.
(ii) The request shall state the nature of the
business to be transacted.
(iii) Notice of any such meeting shall be given to
all Partners not less than seven (7) days nor more than
thirty (30) days prior to the date of such meeting.
(iv) Partners may vote in person or by proxy at
such meeting.
(v) Whenever the vote or Consent of the Limited
Partners is permitted or required under this Agreement, such
vote or Consent may be given at a meeting of the Partners or
may be given in accordance with the procedure prescribed in
Section 14.1(a) hereof.
(vi) Except as otherwise expressly provided in this
Agreement, the Consent of holders of a majority of the
Percentage Interests held by Partners (including the General
Partner) shall control.
(b) (i) Any action required or permitted to be taken
at a meeting of the Partners may be taken without a meeting
if a written consent setting forth the action so taken is
signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required
by this Agreement).
(ii) Such consent may be in one instrument or in
several instruments, and shall have the same force and effect
as a vote of a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required
by this Agreement).
(iii) Such consent shall be filed with the General
Partner.
(iv) An action so taken shall be deemed to have
been taken at a meeting held on the effective date of the
consent as certified by the General Partner.
(c) (i) Each Limited Partner may authorize any
Person or Persons to act for him by proxy on all matters in
which a Limited Partner is entitled to participate, including
waiving notice of any meeting, or voting or participating at
a meeting.
61
<PAGE> 84
(ii) Every proxy must be signed by the Limited Partner or
his attorney-in-fact and a copy thereof delivered to the Partnership.
(iii) No proxy shall be valid after the expiration of
eleven (11) months from the date thereof unless otherwise provided in
the proxy.
(iv) Every proxy shall be revocable at the pleasure of the
Limited Partner executing it, such revocation to be effective upon the
General Partner's receipt of written notice of such revocation from
the Limited Partner executing such proxy.
(d) (i) Each meeting of the Partners shall be conducted by
the General Partner or such other Person as the General Partner may
appoint pursuant to such rules for the conduct of the meeting as the
General Partner or such other Person deems appropriate.
(ii) Meetings of Partners may be conducted in the same
manner as meetings of the stockholders of the General Partner and may
be held at the same time, and as part of, meetings of the stockholders
of the General Partner.
ARTICLE 15
GENERAL PROVISIONS
15.1 Addresses and Notice
Any notice, demand, request or report required or permitted to be
given or made to a Partner or Assignee under this Agreement shall be in writing
and shall be deemed given or made when delivered in person or when sent by
first class United States mail or by overnight delivery or via facsimile to the
Partner or Assignee at the address set forth in Exhibit A or such other address
of which the Partner shall notify the General Partner in writing.
15.2 Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only, shall not be deemed part of this Agreement and shall in no
way define, limit, extend or describe the scope or intent of any provisions
hereof. Except as specifically provided otherwise, references to "Articles"
and "Sections" are to Articles and Sections of this Agreement.
62
<PAGE> 85
15.3 Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
15.4 Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
15.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
15.6 Creditors
Other than as expressly set forth herein with respect to the
Indemnities, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor of the Partnership.
15.7 Waiver
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
15.8 Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all of the parties hereto,
notwithstanding that all such parties are not signatories to the original or
the same counterpart. Each party shall become bound by this Agreement
immediately upon affixing its signature hereto.
15.9 Applicable Law
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of laws thereof.
63
<PAGE> 86
15.10 Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
15.11 Entire Agreement
This Agreement contains the entire understanding and agreement among
the Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.
15.12 Merger
Subject to Section 4.2 herein, the Partnership may merge with, or
consolidate into, any Person or Entity in accordance with Section 17-211 of the
Act.
15.13 No Rights as Stockholders
Nothing contained in this Agreement shall be construed as conferring
upon the holders of the OP Units any rights whatsoever as stockholders of the
General Partner, including, without limitation, any right to receive dividends
or other distributions made to shareholders or to vote or to consent or receive
notice as shareholders in respect to any meeting or shareholders for the
election of directors of the General Partner or any other matter.
64
<PAGE> 87
Signature Page to Agreement of Limited Partnership of Tower
Realty Operating Partnership, L.P., by and among the undersigned and the other
parties thereto.
GENERAL PARTNER:
TOWER REALTY TRUST, INC.
By:
------------------------------
Name:
Title:
LIMITED PARTNER:
By:
------------------------------
Name:
Title:
<PAGE> 88
CORPORATE/LIMITED LIABILITY COMPANY ADDITIONAL LIMITED PARTNER SIGNATURE PAGE
TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TOWER REALTY
OPERATING PARTNERSHIP, L.P., BY AND AMONG THE UNDERSIGNED
AND THE OTHER PARTIES THERETO.
Dated: , 1997 [Name of Corporation/LLC]
---------- --
By:
-------------------------
Name:
Title:
<PAGE> 89
Exhibit A
Partners' Contributions and Partnership Interests
<TABLE>
<CAPTION>
Type of Capital Number of Percentage Security
Name and Address of Partner Interest Contribution(1) OP Units Interest Interests(2)
--------------------------- -------- ------------ -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Tower Realty Trust, Inc. General page A-2 8,154 1.00 page A-20
Tower Realty Trust, Inc. Limited page A-2 151,846 18.62 page A-20
Lawrence Feldman Limited pages A-3,4 236,870 29.05 page A-20
Tower Equities and Realty Corp. Limited page A-5 153,570 18.83
Reuben Frieberg Limited page A-6 9,910 1.22
Robert Cox Limited page A-7 9,910 1.22
Eric Reimer Limited page A-8 9,910 1.22
2800 Company, L.L.C. Limited page A-9 40,790 5.00
Hannah Properties, Inc. Limited page A-10 62,740 7.69
Robert Adams Limited page A-11 33,710 4.13
Forum Management & Realty Corp. Limited page A-12 24,000 2.94
Madison 40/41 Management Corp. Limited page A-13 24,000 2.94
CXX Mineola Management Corp. Limited page A-14 24,000 2.94
Tower Equities of Arizona, L.L.C. Limited page A-15 24,000 2.94
Corporate-Partners, L.L.C. Limited page A-16 200 2.02
Corporate-Feldman, L.L.C. Limited page A-17 800 .10
FSA Associates, L.P. Limited page A-18 889 .11
</TABLE>
A-1
<PAGE> 90
<TABLE>
<CAPTION>
Type of Capital Number of Percentage Security
Name and Address of Partner Interest Contribution(1) OP Units Interest Interests(2)
--------------------------- -------- ------------ -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Feldman Mot Portfolio Corp. Limited page A-19 111 .01
</TABLE>
1. The Capital Contribution of each Partner is set forth on the page
referenced hereunder.
2. Security Interests are set forth on page A-21.
A-2
<PAGE> 91
Exhibit B
Allocations
1. Allocation of Net Income and Net Loss.
(a) Net Income. Except as otherwise provided in this Exhibit B,
Net Income (or items thereof) (other than Net Income, or items thereof, arising
in connection with a Terminating Capital Transaction) for any fiscal year or
other applicable period shall be allocated to the Partners in accordance with
their respective Percentage Interests.
(b) Net Loss. Except as otherwise provided in this Exhibit B, Net
Loss (or items thereof) of the Partnership for each fiscal year or other
applicable period shall be allocated to the Partners in accordance with the
Partners' respective Percentage Interests. Notwithstanding the preceding
sentence, to the extent any Net Loss (or items thereof) allocated to a Partner
under this subparagraph (b) would cause such Partner (hereinafter, a
"Restricted Partner") to have an Adjusted Capital Account Deficit, or increase
the amount of an existing Adjusted Capital Account Deficit, as of the end of
the fiscal year or other applicable period to which such Net Loss relates, such
Net Loss shall not be allocated to such Restricted Partner and instead shall be
allocated to the other Partner(s) (hereinafter, the "Permitted Partners") pro
rata in accordance with each Permitted Partner's Percentage Interest.
(c) Terminating Capital Transaction; Liquidation. Allocations of
Net Income or Net Loss (or items thereof) in connection with a Terminating
Capital Transaction or liquidation of the Partnership shall first be made so
that, to the extent possible, each Partner's Capital Account balance is equal
to such Partner's Adjusted Contribution, and the remainder of such Net Income
or Net Loss (or items thereof) shall be allocated to the Partners in accordance
with their Percentage Interests. Notwithstanding the preceding sentence, to
the extent any Net Loss (or items thereof) would be allocated to a Restricted
Partner under this subparagraph (c), such Net Loss shall not be allocated to
such Restricted Partner and instead shall be allocated to the Permitted
Partners pro rata in accordance with each Permitted Partner's Percentage
Interest.
(d) Rules of Construction.
(1) Capital Account Increases. For purposes of making
allocations pursuant to subparagraph 1(c) of this Exhibit B, a Partner's
Capital Account balance shall be deemed to be increased by such Partner's share
of any Partnership Minimum Gain and Partner Minimum Gain remaining at the close
of the fiscal period in respect of which such allocations are being made.
(2) Change in Percentage Interests. In the event any
Partner's Percentage Interest changes during a fiscal year for any reason,
including without limitation, the Transfer of any interest in the Partnership,
the tax allocations contained in this Exhibit B shall be applied as necessary
to reflect the varying interests of the Partners during such year.
B-1
<PAGE> 92
2. Special Allocations. Notwithstanding any provisions of paragraph 1 of
this Exhibit B, the following special allocations shall be made.
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). Except as
otherwise provided in Sec tion 1.704-2(f) of the Regulations, if there is a net
decrease in Partnership Minimum Gain for any Partnership fiscal year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain to the extent
required by Regulations Section 1.704-2(f). The items to be so allocated shall
be determined in accordance with Sections 1.704-2(f) and (i) of the
Regulations. This subparagraph 2(a) is intended to comply with the minimum
gain chargeback requirement in said section of the Regulations and shall be
interpreted consistently therewith. Allocations pursuant to this subparagraph
2(a) shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant hereto.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided
in Section 1.704-2(i)(4) of the Regulations, if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any
fiscal year, each Partner 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 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 Partner'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 Regulations. The items to be
so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and
(j)(2) of the Regulations. This subparagraph 2(b) is intended to comply with
the minimum gain chargeback requirement with respect to Partner Nonrecourse
Debt contained in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subparagraph 2(b) shall
be made in proportion to the respective amounts required to be allocated to
each Partner pursuant hereto.
(c) Qualified Income Offset. In the event a Partner unexpectedly
receives any adjustments, allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations, and such Partner has an
Adjusted Capital Account Deficit, items of Partnership income (including gross
income) and gain shall be specially allocated to such Partner in an amount and
manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly
as possible as required by the Regulations. This subparagraph 2(c) 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.
(d) Other Chargeback of Impermissible Negative Capital Account.
To the extent any Partner has an Adjusted Capital Account Deficit at the end of
any Partnership fiscal year, each such Partner shall be specially allocated
items of Partnership income (including gross income) and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to
this paragraph 2(d) shall be made if and only to the extent that such Partner
would have an
B-2
<PAGE> 93
Adjusted Capital Account Deficit after all other allocations provided for in
this Exhibit B have been tentatively made as if this paragraph 2(d) were not in
the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal
year or other applicable period shall be allocated to the Partners in
accordance with their respective Percentage Interests.
(f) Partner 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 Partner that bears
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 Regulations).
(g) Intent of Allocations. The parties intend that the allocation
provisions of this Exhibit B shall result in final Capital Account balances of
the Partners that initially are equal to each Partner's Adjusted Contribution
and are then in proportion to the Partners' respective Percentage Interests, so
that when liquidating distributions are made in accordance with such final
Capital Account balances under Section 13.2A(4) hereof, such distributions will
be able to return to each Partner its Adjusted Contribution and then will be
made in proportion to the Partners' respective Percentage Interests. To the
extent that such final Capital Account balances do not so reflect the
provisions of this Exhibit B, income and loss of the Partnership for the
current year and future years, as computed for book purposes, shall be
allocated among the Partners so as to result in final Capital Account balances
reflecting the provisions of this Exhibit B and to the extent such allocations
of items of income (including gross income) and deduction do not result in such
final Capital Account balances, then, income and loss of the Partnership for
prior open years, as computed for book purposes (or items of gross income and
deduction of the Partnership for such years, as computed for book purposes)
shall be reallocated among the Partners consistent with the foregoing. This
subparagraph shall control notwithstanding any reallocation of income, loss, or
items thereof, as computed for book purposes, by the Internal Revenue Service
or any other taxing authority.
(h) Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any asset of the Partnership pursuant to Section 734(b)
of the Code or Section 743(b) of the Code is required, pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations, to be taken into account in
determining Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated among the Partners in a manner
consistent with the manner in which each of their respective Capital Accounts
are required to be adjusted pursuant to such section of the Regulations.
(i) Gross Income Allocation. There shall be specially allocated
to the General Partner an amount of Partnership income and gain during each
Partnership Year or portion thereof, before any other allocations are made
hereunder, which is equal to the excess, if any, of the cumulative
distributions of cash made to the General Partner under Section 7.3B hereof
over the cumulative allocations of Partnership income and gain to the General
Partner pursuant to this Section 2(i) of this Exhibit B.
B-3
<PAGE> 94
3. Tax Allocations.
(a) Items of Income or Loss. Except as is otherwise provided in
this Exhibit B, an allocation of Partnership Net Income or Net Loss to a
Partner shall be treated as an allocation to such Partner of the same share of
each item of income, gain, loss, deduction and item of tax-exempt income or
Section 705(a)(2)(B) expenditure (or item treated as such expenditure pursuant
to Regulations Section 1.704-1(b)(2)(iv)(i)) ("Tax Items") that is taken into
account in computing Net Income or Net Loss.
(b) Section 1245/1250 Recapture. If any portion of gain from the
sale of Partnership assets is treated as gain which is ordinary income by
virtue of the application of Code Sections 1245 or 1250 ("Affected Gain"), then
such Affected Gain shall be allocated among the Partners in the same proportion
that the depreciation and amortization deductions giving rise to the Affected
Gain were allocated. This subparagraph 3(b) shall not alter the amount of Net
Income (or items thereof) allocated among the Partners, but merely the
character of such Net Income (or items thereof). For purposes hereof, in order
to determine the proportionate allocations of depreciation and amortization
deductions for each fiscal year or other applicable period, such deductions
shall be deemed allocated on the same basis as Net Income and Net Loss for such
respective period.
(c) Precontribution Gain, Revaluations. With respect to any
Contributed Property, the Partnership shall use any permissible method
contained in the Regulations promulgated under Section 704(c) of the Code
selected by the General Partner, in its sole discretion, to take into account
any variation between the adjusted basis of such asset and the fair market
value of such asset as of the time of the contribution ("Precontribution
Gain"). Each Partner hereby agrees to report income, gain, loss and deduction
on such Partner's federal income tax return in a manner consistent with the
method used by the Partnership. If any asset has a Gross Asset Value which is
different from the Partnership's adjusted basis for such asset for federal
income tax purposes because the Partnership has revalued such asset pursuant to
Regulations Section 1.704-1(b)(2)(iv)(f), the allocations of Tax Items shall be
made in accordance with the principles of Section 704(c) of the Code and the
Regulations and the methods of allocation promulgated thereunder. The intent
of this subparagraph 3(c) is that each Partner who contributed to the capital
of the Partnership a Contributed Property will bear, through reduced
allocations of depreciation, increased allocations of gain or other items, the
tax detriments associated with any Precontribution Gain. This subparagraph
3(c) is to be interpreted consistently with such intent.
(d) Excess Nonrecourse Liability Safe Harbor. Pursuant to
Regulations Section 1.752-3(a)(3), solely for purposes of determining each
Partner's proportionate share of the "excess nonrecourse liabilities" of the
Partnership (as defined in Regulations Section 1.752-3(a)(3)), the Partners'
respective interests in Partnership profits shall be determined in accordance
with each Partner's Percentage Interest; provided, however, that each Partner
who has contributed an asset to the Partnership shall be allocated, to the
extent possible, a share of "excess nonrecourse liabilities" of the Partnership
which results in such Partner being allocated nonrecourse liabilities in an
amount which is at least equal to the amount of income pursuant to Section
704(c) of the Code and the Regulations promulgated thereunder (the "Liability
Shortfall"). In the event there is an insufficient amount of nonrecourse
liabilities to allocate to
B-4
<PAGE> 95
each Partner an amount of nonrecourse liabilities equal to the Liability
Shortfall, then an amount of nonrecourse liabilities in proportion to, and to
the extent of, the Liability Shortfall shall be allocated to each Partner.
(e) References to Regulations. Any reference in this Exhibit B or
the Agreement to a provision of proposed and/or temporary Regulations shall, in
the event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision.
(f) Successor Partners. For purposes of this Exhibit B, a
transferee of a Partnership Interest shall be deemed to have been allocated the
Net Income, Net Loss and other items of Partnership income, gain, loss,
deduction and credit allocable to the transferred Partnership Interest that
previously have been allocated to the transferor Partner pursuant to this
Agreement.
B-5
<PAGE> 96
EXHIBIT C
[INTENTIONALLY OMITTED]
<PAGE> 97
EXHIBIT D-1
Form of Lock-Up Agreement relating to
Tower Realty Operating Partnership, L.P.
See attached copy
<PAGE> 98
EXHIBIT D-1
FORM OF LOCK-UP AGREEMENT
, 1997
-------------
Tower Realty Operating Partnership, L.P.
120 West 46th Street, 24th Floor
New York, New York 10036
Dear Sirs,
Reference is made to the Contribution Agreement, dated _________, 1997
(the "Contribution Agreement"), by and between the undersigned and Tower
Realty Operating Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership"). Capitalized terms used but not otherwise defined in
this letter agreement will have the meaning set forth in the Contribution
Agreement.
In consideration of the execution and exercise of the Contribution
Agreement by the Operating Partnership, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
undersigned hereby irrevocably agrees that without the prior written consent of
the Operating Partnership, the undersigned will not directly or indirectly
sell, offer to sell, solicit an offer to buy, contract to sell, grant any
option to purchase, or otherwise transfer or dispose (or enter into any
transaction or device which is designed to, or could be expected to, result in
the disposition at any time in the future) of any units of limited partnership
interest (the "OP Units") in the Operating Partnership, or any securities
convertible into or exercisable or exchangeable for OP Units, beneficially
owned by the undersigned as of the date hereof, for a period of twenty-four
(24) months after the date hereof. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall
also be binding upon the successors, assigns, heirs and personal
representatives of the undersigned.
In furtherance of the foregoing, the Operating Partnership is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:
------------------------------
Name:
Title:
1
<PAGE> 99
EXHIBIT D-2
Form of Lock-Up Agreement relating to
Merrill Lynch, Pierce, Fenner & Smith, Incorporated
See attached copy
<PAGE> 100
EXHIBIT D-2
FORM OF LOCK-UP AGREEMENT
, 1997
-------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner &
Smith, Incorporated ("Merrill Lynch") and certain other firms propose to enter
into an Underwriting Agreement (the "Underwriting Agreement") providing for the
purchase by Merrill Lynch and such other firms (the Underwriters") of shares
(the "Shares") of Common Stock, par value $0.01 per share (the "Common Stock"),
of Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose
to reoffer the Shares to the public pursuant to a public offering (the
"Offering"). Capitalized terms used but not otherwise defined in this letter
agreement will have the meaning set forth in the Company's Registration
Statement on Form S-11 in connection with the registration under the Securities
Act of 1933, as amended (the "Act"), of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that without the prior written consent of Merrill Lynch, the undersigned
will not (and, except as may be disclosed in the Prospectus, will not announce
or disclose any intention to) directly or indirectly sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition at any time in
the future) of, any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, including any units of limited
partnership interest (the "OP Units") in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership"),
beneficially owned by the undersigned as of the date of the closing of the
Company's initial public offering, for a period of twenty-four (24) months
after the later of (i) date of the final Prospectus relating to the offering of
the Shares to the public by the Underwriters and (ii) the date the Offering is
consummated and closed. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall
also be binding upon the successors, assigns, heirs and personal
representatives of the undersigned.
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<PAGE> 101
In furtherance of the foregoing, the Company and
________________________, its Transfer Agent, are hereby authorized to decline
to make any transfer of securities if such transfer would constitute a
violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:
----------------------------
Name:
Title:
2
<PAGE> 102
EXHIBIT E
Registration Rights Agreement
See attached copy
<PAGE> 103
EXHIBIT E
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, limited liability companies, corporations and
other entities which are Holders or in which the Holders own direct or indirect
interests (the "PROPERTY PARTNERSHIPS") pursuant to Option or Contribution
Agreements (the "OPTION AGREEMENTS") among the Operating Partnership and the
Grantors named therein, and in connection therewith the Holders will receive
units of limited partnership interest in the Operating Partnership (such units
of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the
Company has agreed to grant to the Holders the registration rights set forth in
Section 2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
VIII Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
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"HOLDER" or "HOLDERS" shall have the meaning set forth in the
Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating
to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement
or
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without
limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating
to the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any
securities exchange or exchanges pursuant to Article III, Section
(xii) hereof; and
(v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by
or incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
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Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean
a "shelf" registration statement of the Company and any other Person required
to be a registrant with respect to such shelf registration statement pursuant
to the requirements of the Securities Act which covers the issuance or resale
of the Registrable Securities on Form S-3 or otherwise under Rule 415
promulgated under the Securities Act, or any similar rule that may be adopted
by the SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all materials incorporated by
reference therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act,
as amended from time to time, and any successor rule or regulation under the
Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended
from time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
IX Shelf Registration Under the Securities Act.
9.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period
if it voluntarily takes any action that would result in selling
Holders covered thereby not being able to sell such Registrable
Securities during that period, unless such action is required under
applicable law or the Company has filed a post-effective amendment to
the Registration Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a
transaction is pending or an event has occurred, which negotiation,
consummation or event would require additional disclosure by the
Company in the Registration Statement of material information which
the Company has a bona fide business purpose for keeping confidential
and the nondisclosure of which in the Registration Statement might
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<PAGE> 106
cause the Registration Statement to fail to comply with applicable
disclosure requirements; provided, however, that the Company may not
delay, suspend or withdraw a Registration Statement for such reason
for more than 60 days or more often than twice during any period of 12
consecutive months.
(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration Statement
covering the Registrable Securities held by more than one Holder.
9.2 Expenses.
(i) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if any,
sales commissions, the fees and disbursements of counsel representing
such Holder and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144.
9.3 Inclusion in Shelf Registration Statement. Any Holder that
does not, within 10 days after receipt of a reasonable request by the Company
for information in connection with the Shelf Registration Statement, provide
such information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
9.4 Effect of Material Breach. In the event that the Company
shall breach any of its material obligations hereunder in any material respect,
any Holder of Registrable Securities may demand that the Company file a
registration statement covering such Holder's Registrable Securities. The
Company agrees to file such registration statement within 60 days after receipt
of such demand and agrees to use its best efforts to procure the effectiveness
of such registration statement within 60 days after filing.
X Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed
pursuant to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period set
forth in Section 2 hereof, a Shelf Registration Statement, which Shelf
Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects
with the requirements of the applicable form of registration
statement and include all financial statements required by the
SEC to be filed therewith.
(ii) (A) Subject to Article III, Section (a)(ii)(B),
(I) prepare and file with the SEC such
amendments and post-effective amendments to each such
Registration Statement as may be necessary to keep
such Registration Statement effective for the
applicable period;
(II) cause each such Prospectus to be
supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule
424 or any similar rule that may be adopted under the
Securities Act;
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(III) respond as promptly as practicable to
any comments received from the SEC with respect to
the Shelf Registration Statement, or any amendment,
post-effective amendment or supplement relating
thereto; and
(IV) comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by each Registration Statement
during the applicable period in accordance with the
intended method or methods of distribution by the
selling Holders thereof.
(B) (I) Each Holder shall promptly provide to the
Company such information as the Company reasonably
requests in order to identify such Holder and the
method of distribution in a post-effective amendment
to the Registration Statement or a supplement to the
Prospectus.
(II) Such Holder also shall notify the
Company in writing upon completion of any offer or
sale or at such time as such Holder no longer intends
to make offers or sales under the Registration
Statement.
(iii) Furnish to each Holder of Registrable Securities,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder may reasonably request, in order
to facilitate the public sale or other disposition of the Registrable
Securities; the Company consents to the use of the Prospectus,
including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary
Prospectus.
(iv) Use its reasonable efforts to register or qualify the
Registrable Securities by the time the applicable Registration
Statement is declared effective by the SEC under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
Registrable Securities covered by a Registration Statement shall
reasonably request in writing, keep each such registration or
qualification effective during the period such Registration Statement
is required to be kept effective, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that
the Company shall not be required to
(A) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to
qualify but for this Article III, Section (a)(iv),
(B) subject itself to taxation in any such
jurisdiction, or
(C) submit to the general service of process in any
such jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and,
if requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become
effective and when any post-effective amendments and
supplements thereto become effective,
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(B) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose,
(C) if the Company receives any notification with
respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and
(D) of the happening of any event during the period a
Registration Statement is effective which is of a type
specified in Article II, Section 2.1(iii) hereof or as a
result of which such Registration Statement or the related
Prospectus contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the
Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment.
(vii) Furnish to each Holder of Registrable Securities,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto, unless
requested).
(viii) (A) Cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any Securities Act legend; and
(B) enable certificates for such Registrable
Securities to be issued for such numbers of shares of Common
Stock and registered in such names as the selling Holders may
reasonably request at least two business days prior to any
sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III,
Section (a)(ii)(B) hereof, upon the occurrence of any event
contemplated by Article III, Section (a)(v)(D) hereof, use its
reasonable efforts promptly to prepare and file a supplement or
prepare, file and obtain effectiveness of a post-effective amendment
to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(x) Make available for inspection by representatives of the
Holders of the Registrable Securities and any counsel or accountant
retained by such Holders, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply
all information reasonably requested by any such representative,
counsel or accountant in connection with a Registration Statement;
provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies
such representatives, counsel or accountants in writing that such
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records, documents or information are confidential shall not be
disclosed by such representatives, counsel or accountants unless
(A) the disclosure of such records, documents or
information is necessary to avoid or correct a material
misstatement or omission in a Registration Statement,
(B) the release of such records, documents or
information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, or
(C) such records, documents or information have been
generally made available to the public.
(xi) Within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a Prospectus,
provide copies of such document (not including any documents
incorporated by reference therein unless requested) to the Holders of
Registrable Securities.
(xii) Use its reasonable efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar
securities issued by the Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities,
not later than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary by virtue of the business and operations of the Company
to enable Holders to consummate the disposition of such Registrable
Securities.
(b) The Company may require each Holder of Registrable Securities to
furnish to the Company in writing such information regarding the
proposed distribution by such Holder of such Registrable Securities as
the Company may from time to time reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations
with respect to the Registration Statement required to be filed
pursuant to Section 2 hereof and this Section 3, each Holder agrees
that
(i) it will not offer or sell its Registrable Securities under
the Registration Statement until it has received copies of the
supplemental or amended Prospectus contemplated by Article III,
Section (a)(ii) hereof and receives notice that any post-effective
amendment has become effective, and
(ii) upon receipt of any notice from the Company of the
happening of any event of the kind described in Article III, Section
(a)(v)(D) hereof, such Holder will forthwith discontinue disposition
of Registrable Securities pursuant to a Registration Statement until
such Holder receives copies of the supplemented or amended Prospectus
contemplated by Article III, Section (a)(ix) hereof and receives
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notice that any post-effective amendment has become effective, and, if
so directed by the Company, such Holder will deliver to the Company
(at the expense of the Company) all copies in its possession, other
than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities current at the time of
receipt of such notice.
XI Indemnification; Contribution.
11.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder and its officers and directors and each
Person, if any, who controls any Holder (within the meaning of Section 15 of
the Securities Act) as follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading or
(C) arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, in each case whether or not a party,
or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this
Article IV, Section 4.1(c) does not apply to any Holder with respect
to any loss, liability, claim, damage or expense to the extent arising
out of
(x) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use
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in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of any such
amended or supplemental Prospectus by the Company, if such loss,
liability, claim, damage or expense would not have arisen had such
delivery occurred.
11.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto)
in reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
11.3 Conduct of Indemnification Proceedings. (i) Each indemnified
party shall give reasonably prompt notice to each indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it
may have under the indemnity agreement provided in Section
4.1(a) or 4.1(b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the
indemnified party results in the forfeiture by the
indemnifying party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than
the indemnification obligation provided under Section 4.1(a)
or 4.1(b) above.
(ii) If the indemnifying party so elects within a reasonable
time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved
by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however,
that, if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the
proviso to Section 4.1(c), such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's
defense, and
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counsel for the indemnified party or parties shall be entitled
to conduct the defense of such indemnified party or parties,
it being understood that both such counsel will cooperate with
each other to conduct the defense of such action or proceeding
as efficiently as possible.
(B) If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such
defense, after having received the notice referred to in
Section 4.1(c), the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified
party or parties as incurred.
(C) In such event, however, no indemnifying party
will be liable for any settlement effected without the written
consent of such indemnifying party, which consent may not be
unreasonably withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with
this Section 4(c), such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
11.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 4 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one hand and the
selling Holders on the other (in such proportions that the
selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations.
(B) (I) The relative benefits to the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, the total proceeds
received by the indemnifying party and indemnified
parties in connection with the offering to which such
losses, claims, damages, liabilities or expenses
relate.
(II) The relative fault of the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether the action
in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact, has been made by,
or relates to information supplied by, such
indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
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allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section
4.4, no selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities of such selling Holder were
offered to the public exceeds the amount of any damages which
such selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any,
who controls a Holder within the meaning of Section 15 of the
Securities Act and directors and officers of a Holder shall have the
same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration
Statement and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act shall have the same rights
to contribution as the Company.
XII Filing of Exchange Act Reports; Rule 144 Sales
12.1 The Company covenants that it will file the reports required
to be filed by the Company under the Securities Act and the Exchange Act so as
to enable any Holder to sell Exchange Stock pursuant to Rule 144.
12.2 In connection with any sale, transfer or other disposition by
any Holder of any Exchange Stock pursuant to Rule 144, the Company shall
cooperate with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be
for such number of shares and registered in such names as the selling Holders
may reasonably request at least two business days prior to any sale of Exchange
Stock.
XIII Miscellaneous.
13.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the outstanding
Registrable Securities; provided, however, that no amendment,
modification or supplement or waiver or consent to the departure with
respect to the provisions of Articles 2, 4 or 5 hereof shall be
effective as against any Holder unless consented to in writing by such
Holder.
(ii) Notice of any amendment, modification or supplement to
this Agreement adopted in accordance with this Section 6.1 shall be
provided by the Company to each Holder at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
13.2 Notices. (i) All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery, to the parties at their respective addresses set forth opposite their
signatures below or at such other address as a party may indicate by written
notice to the other party or parties.
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(ii) All such notices and communications shall be deemed to
have been duly given:
(A) at the time delivered by hand, if personally
delivered;
(B) three (3) business days after being deposited in
the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
13.3 Successors, Assigns and Transferees. (i) This Agreement shall
inure to the benefit of and be binding upon the successors, assigns and
transferees of each of the parties, including, without limitation and without
the need for an express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
13.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
13.5 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
13.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
13.7 Specific Performance. The parties hereto acknowledge that
there would be no adequate remedy at law if any party fails to perform any of
its obligations hereunder, and accordingly agree that each party, in addition
to any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other party
under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
13.8 Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of
the date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By:
------------------------------
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING PARTNERSHIP, L.P.
New York, New York 10036-4003
By: Tower Realty Trust, Inc., its
general partner
By:
-----------------------------
Name:
Title:
HOLDERS:
[Address:] ---------------------------------
Signature
---------------------------------
Name (Please Print or Type)
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EXHIBIT F
Exchange Rights Agreement
See attached copy
<PAGE> 117
EXHIBIT F
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "Agreement"), dated as of
__________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation (the "Company"), Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, together with certain other limited
partners, has formed the Operating Partnership
pursuant to the Agreement of Limited Partnership of
the Operating Partnership dated __________ __, 1997
(as such agreement may be amended or amended and
restated from time to time, the "Partnership
Agreement").
(b) Pursuant to the Partnership Agreement, the Limited
Partners (as defined below) directly or indirectly
hold units of limited partnership interest ("OP
Units") in the Operating Partnership.
(c) The Operating Partnership has agreed to provide the
Limited Partners with certain direct or indirect
rights to exchange their OP Units for cash or, at the
election of the Company, for shares of the Company's
common stock, par value $0.01 per share (the "REIT
Stock").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Assignee" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Cash Amount" means an amount of cash per OP Unit equal to the Value
on the Valuation Date of the REIT Stock Amount.
"Exchange Factor" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Stock in REIT
Stock or makes a distribution to all holders of its outstanding REIT Stock in
REIT Stock; (ii) subdivides its outstanding REIT Stock; or (iii) combines its
outstanding REIT Stock into a smaller number of shares of REIT Stock, the
Exchange Factor shall be adjusted by multiplying the Exchange Factor by a
fraction, the numerator of which shall be the number of shares of REIT Stock
issued and outstanding on the record date for such dividend, contribution,
subdivision or combination assuming for such purpose that such dividend,
distribution, subdivision or combination has occurred as of such
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time, and the denominator of which shall be the actual number of shares of REIT
Stock (determined without the above assumption) issued and outstanding on the
record date for such dividend, distribution, subdivision or combination. Any
adjustment to the Exchange Factor shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
"Exchanging Partner" has the meaning set forth in Section 2.1 hereof.
"Exchange Right" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT
Stock pursuant to a Registration Statement on Form S-11, filed with and
declared effective by the SEC.
"Lien" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"Limited Partner" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"Lock-up Agreement" means, collectively, the several Lock-up
Agreements executed by each of the Limited Partners other than the Company,
dated the date hereof, which prohibit the transfer of the OP Units held by such
Limited Partner without the consent of Merrill Lynch, Pierce, Fenner & Smith,
Incorporated and/or the Operating Partnership.
"Notice of Exchange" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT Stock Amount" means that number of shares of REIT Stock equal to
the product of the number of OP Units offered for exchange by an Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company or the Operating Partnership issues to all
holders of REIT Stock rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase REIT Stock,
or any other securities or property (collectively, the "rights"), then the REIT
Stock Amount shall also include such rights that a holder of that number of
shares of REIT Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"Specified Exchange Date" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"Valuation Date" means the date of receipt by the Operating
Partnership and the Company of a Notice of Exchange or, if such date is not a
Business Day, the first Business Day thereafter.
"Value" means, with respect to shares of REIT Stock, the average of
the daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
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exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading
on the NYSE, any national securities exchange or Nasdaq, the last
reported sale price on such day or, if no sale takes place on such
day, the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis
of such quotations and other information as they consider, in their reasonable
judgment, appropriate.
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "Exchange Right"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"Exchanging Partner"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less
than one thousand (1,000) OP Units or, if such Limited Partner holds less than
one thousand (1,000) OP Units, all of the OP Units held by such Limited
Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a)
Notwithstanding the provisions of Section 2.1, the Company may, on behalf of
the Operating Partnership, in its sole and absolute discretion, elect to
satisfy an Exchanging Partner's Exchange Right by exchanging REIT Stock and
rights equal to the REIT Stock Amount on the Specified Exchange Date for the OP
Units offered for exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging
REIT Stock for the OP Units offered for exchange,
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(i) the Company hereby agrees so to notify the Exchanging
Partner within five (5) Business Days after the receipt by the
Company of such Notice of Exchange,
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding
anything herein to the contrary, the Company shall not be entitled to satisfy
an Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery
of REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of
the Company,
(b) would otherwise jeopardize the REIT status of the Company,
or
(c) would cause the acquisition of the REIT Stock by the
Limited Partner to be "integrated" with any other distribution of REIT
Stock by the Company for purposes of complying with the registration
provisions of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging
Partner shall be paid on the Specified Exchange Date; provided, however, that
the Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this
Article 2, any person to whom OP Units have been pledged, in compliance with
the terms of the Lock-up Agreement, may exercise its Exchange Right prior to
the date that is one (1) year after the closing of the IPO, provided, however,
such OP Units shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire
with respect to any OP Units for which an Exchange Notice has not been
delivered to the Operating Partnership and the Company on or before December
31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to
this Article 2 shall be deemed to have occurred as of the Specified Exchange
Date for all purposes, including without limitation the payment of
distributions or dividends in respect of OP Units or REIT Stock, as applicable.
(b) Any OP Units acquired by the Company pursuant to an exercise by
any Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership,
shall amend the Partnership Agreement to reflect each such exchange and
reallocation or reissuance of OP Units and each corresponding recalculation of
the OP Units of the Limited Partners.
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ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the
pendency of the Exchange Right, the Company shall reserve for issuance such
number of shares of REIT Stock as may be necessary to enable the Company to
issue such shares in full payment of the REIT Stock Amount in regard to all OP
Units held by Limited Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of
the then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock
shall be issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable
upon exchange of OP Units (or the cash equivalent amount thereof if the Cash
Amount is paid) shall be computed on the basis of the aggregate amount of OP
Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to
the Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
(A) a copy of the prospectus contained in the
Registration Statement on Form S-11 filed by the Company in
connection with the IPO, any prospectus contained in any
Registration Statement subsequently filed by the Company, and
any supplement or amendment thereto (each, a "Prospectus"),
and
(B) copies of all reports and other filings (the "SEC
Reports"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by
the Company with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
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merits and risks of and of making an informed investment
decision with respect to an investment in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited
investor" as defined in Rule 501 of the regulations
promulgated under the Securities Act.
(B) If such Exchanging Partner has retained or
retains a person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such representation
and
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
(b) (i) Such Exchanging Partner understands that an investment in
the Company involves substantial risks.
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part,
or the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and
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completeness of the representations and warranties of such
Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws, except as provided in the Registration Rights
Agreement entered into by the Company and the Exchanging
Partner (the "Registration Rights Agreement").
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place
of business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this
Agreement shall be in writing and shall be deemed given or made when delivered
in person or when sent by first class United States mail or by other similarly
reliable means of written communication to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, (i) at the address
listed on the records of the Operating Partnership, with respect to a Limited
Partner or Assignee, and (ii) at 120 West 45th Street, New York, New York
10036-4003, Attn: President, with respect to the Operating Partnership or the
Company.
4.2 Titles and Captions. All article or section titles or captions
in this Agreement are for convenience only. They shall not be deemed part of
this Agreement and in no way define, limit, extend or describe the scope or
intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
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4.3 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes
of this Agreement.
4.5 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one agreement binding on all of the
parties hereto, notwithstanding that all such parties are not signatories to
the original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
4.10 Entire Agreement. This Agreement contains the entire
understanding and agreement among the Limited Partners, the Operating
Partnership and the Company with respect to the subject matter hereof and
supersedes any other prior written or oral understandings or agreements among
them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time
with the consent of the Company by a vote of the Limited Partners in the same
manner as the Partnership Agreement (in accordance with Section 14.1(a)
thereof) may be amended as provided therein, provided, however, that the
Company shall vote its limited partnership interests in proportion to the votes
of the other Limited Partners.
F-8
<PAGE> 125
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By:
-------------------------------
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By:
------------------------
Name:
Title:
LIMITED PARTNERS:
------------------------------------
Signature
------------------------------------
Name (Please Print or Type)
F-9
<PAGE> 126
Exhibit A
Name and Address of Limited Partners
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
- ----------------------------
F-10
<PAGE> 127
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "Exchange Rights Agreement"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free
and clear, other than any encumbrance arising pursuant to the Partnership
Agreement, of the rights or interests of any other person or entity; (b) has
the full right, power, and authority to exchange and surrender such OP Units as
provided herein; and (c) has obtained the consent or approval of all persons or
entities, if any, (other than consent or approval that may be required of the
Company or the Operating Partnership) having the right to consent or approve
such exchange and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated:
--------------------------
------------------------------------
Name of Limited Partner (Please Print)
Signature guaranteed by:
------------------------------------
(Signature of Limited Partner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
If REIT Stock is to be issued, issue to:
Name:
-----------------------------
Limited Partner's social security or
tax identification number: ___________
F-11
<PAGE> 128
EXHIBIT G
Assignment and Assumption of Lease
See attached copy
<PAGE> 129
EXHIBIT G
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE (this "Assignment") is
made as of the _____ day of May, 1997 by and between MAITLAND PROPERTY
INVESTORS, LTD., a Florida limited partnership, having an address at 120 West
45th Street, New York, New York ("Assignor"), and TOWER REALTY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership, having an address at 120
West 45th Street New York, New York ("Assignee").
FOR GOOD AND VALUABLE CONSIDERATION paid by Assignee to
Assignor, the receipt and sufficiency of which is hereby acknowledged, Assignor
hereby assigns, transfers, sets over and otherwise conveys to Assignee, its
successors and assigns, all of Assignor's right, title and interest in and to
that certain lease dated as of March 9, 1984 between Assignor and Maitland
Associates, Ltd., recorded August 3, 1984 in Official Records Book 4048, page
2422 and Official Records Book 4357, page 4877, in the Public Records of Orange
County, Florida (as amended, the "Lease"). A description of the real property
encumbered by the Lease is attached hereto as Exhibit A.
Assignee hereby accepts the foregoing assignment of the Lease
and agrees to assume, fulfill, perform and discharge all the various
commitments, obligations and liabilities of Assignor arising under and by
virtue of the Lease from and after the date hereof.
This Assignment shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
Assignee agrees to indemnify and hold Assignor harmless from
and against any and all claims, losses, suits, damages, costs and expenses
(including reasonable attorneys' fees and disbursements) incurred by Assignor
relating to the Lease arising from and after the date hereof.
Assignor agrees to indemnify and hold Assignee harmless from
and against any and all claims, losses, suits, damages, costs and expenses
(including reasonable attorneys' fees and disbursements) incurred by Assignee
relating to the Lease arising before the date hereof.
WITNESS the following signatures.
WITNESS: ASSIGNOR:
MAITLAND PROPERTY INVESTORS, LTD.
- ---------------------------------- By: Lake Success Realty Investors,
Print Name: Inc., its general partner
By:
- ---------------------------------- --------------------------------
Print Name: Lawrence H. Feldman
ASSIGNEE:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
- ----------------------------------
Print Name:
By: Tower Realty Trust, Inc., general
partner
- ---------------------------------- By:
Print Name: ---------------------------------
Lawrence H. Feldman
President
G-1
<PAGE> 130
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
I hereby certify that on this day, before me an officer duly
authorized to administer oaths and take acknowledgements, personally appeared
Lawrence H. Feldman, know to me to be the President of Tower Realty Trust,
Inc., the general partner of the partnership in whose name the foregoing
instrument was executed, and that he severally acknowledged the same for such
corporation on behalf of said partnership, freely and voluntarily under
authority duly vested in him by said corporation and said partnership, that I
relied upon the following form of identification of the above-named person:
_________________ and that an oath (was)(was not) taken.
Witnesseth my hand and official seal in the County and State
last aforesaid this _______ day of __________, A.D. 1997.
---------------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
I hereby certify that on this day, before me an officer duly
authorized to administer oaths and take acknowledgements, personally appeared
Lawrence H. Feldman, know to me to be the ___________ of Lake Success Realty
Investors, Inc., the general partner of Maitland Property Investors, Ltd., the
partnership in whose name the foregoing instrument was executed, and that he
severally acknowledged the same for such partnership, freely and voluntarily
under authority duly vested in him by said partnership, and that I relied upon
the following form of identification of the above-named person:
_________________ and that an oath (was)(was not) taken.
Witnesseth my hand and official seal in the County and State
last aforesaid this _______ day of __________, A.D. 1997.
---------------------------------------
Notary Public
G-2
<PAGE> 131
EXHIBIT A
LEGAL DESCRIPTION
See attached two (2) pages.
G-3
<PAGE> 132
Exhibit A
Commitment No. 864-461405
Company File No. OR970820
Agent File No. 758-11
LEGAL DESCRIPTION
A portion of the Northeast 1/4 of the Southeast 1/4, Section 27, Township 21
South, Range 29 East; and Tract 10A Maitland Center Section Two as recorded in
Plat Book 10, Pages 76 and 77 of the Public Records of Orange County, Florida;
all lying in the City of Maitland, Orange County, Florida, and being more
particularly described as follows:
Begin at the Southeast corner of Tract 10A; thence S. 89 degrees 41'
55" W. along the South line of said Tract 10A, for 932.11 feet; thence continue
S. 89 degrees 41' 55" W. along the South line of the Northeast 1/4 of the
Southeast 1/4 of said Section 27 for 362.73 feet to the East right-of-way line
of Keller Road, being 30.00 feet Easterly of and parallel with the West line of
the Northeast 1/4 of the Southeast 1/4 of said Section 27; thence N. 00 degrees
10' 58" W. along said East right-of-way line for 869.86 feet to an intersection
with the Westerly prolongation of a curve concave Northeasterly and lying along
the North right-of-way line of Lake Lucien Drive, a radial line to said
intersection bearing S. 37 degrees 24' 32" W.; thence Southeasterly along the
arc of said curve, having a radius of 2034.86 feet through a central angle of
13 degrees 03' 44" for 463.91 feet to a point on the Westerly termination of
said Lake Lucien Drive; thence S. 24' 20" 48" W. along said Westerly
termination of said Lake Lucien Drive for 7.15 feet to a point on a curve
concave Easterly; thence Southwesterly along the arc of said curve, having a
radius of 50.00 feet; through a central angle of 81 degrees 04' 45", for 70.76
feet to a point on the said Westerly termination of said Lake Lucien Drive, a
radial line to said point bearing S. 73 degrees 48' 25" W.; thence S. 24
degrees 20' 48" W. for 7.85 feet to a point on a curve concave Northeasterly
and lying along the South right-of-way line of said Lake Lucien Drive, a radial
line to said point bearing S. 24 degrees 20' 48" W.; thence Southeasterly along
the arc of said curve, having a radius of 2114.86 feet, through a central angle
of 00 degrees 13' 44" for 8.45 feet to a point on a curve concave
Northeasterly, a radial line to said point bearing S. 24 degrees 07' 04" W.;
thence Southeasterly along the arc of said curve, having a radius of 50.00
feet, through a central angle of 63 degrees 43' 10", for 55.61 feet to a point
of reverse curvature of a curve concave Southwesterly; thence Southeasterly
along the arc of said curve, having a radius of 50.00 feet; through a central
angle of 25 degrees 15' 32", for 22.04 feet to a point of compound curvature of
a curve concave Northeasterly and lying along the South right-of-way of
said Lake Lucien Drive, a radial line to said point bearing N. 22 degrees 07'
08" E.; thence Southeasterly along the arc of 09" for 649.11 feet to the point
of reverse curvature of a curve concave Southerly and lying along said South
right-of-way line of said Lake Lucien Drive; thence Southeasterly along the arc
of said curve, having a radius of 841.47 feet and a central angle of 15 degrees
56' 41" for 234.17 feet to the East line of said Tract 10A, thence S. 00
degrees 07' 19" E. along said East line of Tract 10A for 320.59 feet to the
Point of Beginning.
Less the following:
The West 392.70 feet of the South 869.86 feet of the NE 1/4 of the SE 1/4 of
Section 27, township 21 South, Range 29 East, Orange County, Florida, lying
East of and within 45 feet of the survey line of Keller Road, Section 750.11,
between survey Stations 6+500.00 and 5+00.00; said survey line and said
Stations being located and described as follows:
Begin on the West line of the NE 1/4 of the SE 1/4 of Section 27, Township 21
South, Range 29 East, at a point 609.12 feet South 0 degrees 10' 12" East of
the Northwest corner of said NE 1/4 of SE 1/4; at Station 6+50; thence continue
South 0 degrees 10' 12" East a distance of 150 feet to survey Station 5+00.00;
being 556.65 feet North 0 degrees 10' 12" West of the Southwest corner of the
NE 1/4 of the SE 1/4 of said
<PAGE> 133
Commitment No. 864-461405
Company File No. OR970820
Agent File No. 758-11
Section 27 for the end of this described survey line.
AND
All rights of access, ingress, egress, light, air and view between the South
869.80 feet of the NE 1/4 of the SE 1/4 of said Section 27, and Keller Road
along the following described line:
Commence on the West line of the NE 1/4 of the SE 1/4 of said Section 27, at a
point 446.20 feet South 0 degrees 10' 12" East of the Northwest corner of the
said NE 1/4 of the SE 1/4; thence run North 89 degrees 58' 48" East a distance
of 30 feet to the East right of way line of Keller Road for the Point of
Beginning, thence run South 0 degrees 10' 12" East a distance of 162.92 feet,
thence run North 89 degrees 58' 48" East a distance of 15 feet, thence run
South 0 degrees 10' 12" East a distance of 150 feet, thence run South 89
degrees 58' 48" West a distance of 15 feet to the existing East right of way
line of said Keller Road for the end of this described access line.
END OF LEGAL DESCRIPTION
<PAGE> 134
EXHIBIT H
Omnibus Assignment and Bill of Sale
See attached copy
<PAGE> 135
EXHIBIT H
OMNIBUS ASSIGNMENT AND BILL OF SALE
KNOW ALL PERSONS BY THESE PRESENTS, that for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
MAITLAND PROPERTY INVESTORS, LTD., a Florida limited partnership ("Assignor"),
does hereby convey, sell, grant, assign, transfer, set over and deliver to
TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, its
successors and assigns ("Assignee"):
all of Assignor's right, title and interest in, to and under those certain
space leases, security deposits, service, supply, security, maintenance,
employment and all other agreements, licenses and contracts, all certificates
of occupancy and other documents, permits, warranties, guarantees and approvals
and all the fixtures, furniture, furnishings, equipment and other personal
property owned by Assignor (collectively, the "Transferred Property"), if any,
used in connection with and/or relating to the real property described on
Exhibit A attached hereto and made a part hereof, effective as of the date
hereof. The aforesaid space leases are more particularly described on Exhibit
B attached hereto and made a part hereof.
TO HAVE AND TO HOLD said Transferred Property unto Assignee
forever.
The foregoing assignment is made without representation or
warranty or recourse, express or implied.
This Assignment shall be binding upon Assignor and upon
Assignor's respective successors and assigns and shall inure to the benefit of
Assignee and its successors and assigns.
Assignor further covenants and agrees to execute and deliver
to Assignee all such further and separate assignments, agreements, conveyances,
deeds and other instruments as Assignee may at any time reasonably request to
better secure to it title to the Transferred Property and the right, title and
interest of Assignor therein or thereto.
IN WITNESS WHEREOF, Assignor has duly executed this Omnibus
Assignment and Bill of Sale as of the ____ day of _______, 1997.
ASSIGNOR:
MAITLAND PROPERTY INVESTORS, LTD.
By: Lake Success Realty Investors, Inc., its
general partner
By:
------------------------------------------
Lawrence H. Feldman
H-1
<PAGE> 136
Exhibit A
(Legal Description)
See attached two (2) pages.
H-2
<PAGE> 137
Exhibit A
Commitment No. 864-461405
Company File No. OR970820
Agent File No. 758-11
LEGAL DESCRIPTION
A portion of the Northeast 1/4 of the Southeast 1/4, Section 27, Township 21
South, Range 29 East; and Tract 10A Maitland Center Section Two as recorded in
Plat Book 10, Pages 76 and 77 of the Public Records of Orange County, Florida;
all lying in the City of Maitland, Orange County, Florida, and being more
particularly described as follows:
Begin at the Southeast corner of Tract 10A; thence S. 89 degrees 41'
55" W. along the South line of said Tract 10A, for 932.11 feet; thence continue
S. 89 degrees 41' 55" W. along the South line of the Northeast 1/4 of the
Southeast 1/4 of said Section 27 for 362.73 feet to the East right-of-way line
of Keller Road, being 30.00 feet Easterly of and parallel with the West line of
the Northeast 1/4 of the Southeast 1/4 of said Section 27; thence N. 00 degrees
10' 58" W. along said East right-of-way line for 869.86 feet to an intersection
with the Westerly prolongation of a curve concave Northeasterly and lying along
the North right-of-way line of Lake Lucien Drive, a radial line to said
intersection bearing S. 37 degrees 24' 32" W.; thence Southeasterly along the
arc of said curve, having a radius of 2034.86 feet through a central angle of
13 degrees 03' 44" for 463.91 feet to a point on the Westerly termination of
said Lake Lucien Drive; thence S. 24' 20" 48" W. along said Westerly
termination of said Lake Lucien Drive for 7.15 feet to a point on a curve
concave Easterly; thence Southwesterly along the arc of said curve, having a
radius of 50.00 feet; through a central angle of 81 degrees 04' 45", for 70.76
feet to a point on the said Westerly termination of said Lake Lucien Drive, a
radial line to said point bearing S. 73 degrees 48' 25" W.; thence S. 24
degrees 20' 48" W. for 7.85 feet to a point on a curve concave Northeasterly
and lying along the South right-of-way line of said Lake Lucien Drive, a radial
line to said point bearing S. 24 degrees 20' 48" W.; thence Southeasterly along
the arc of said curve, having a radius of 2114.86 feet, through a central angle
of 00 degrees 13' 44" for 8.45 feet to a point on a curve concave
Northeasterly, a radial line to said point bearing S. 24 degrees 07' 04" W.;
thence Southeasterly along the arc of said curve, having a radius of 50.00
feet, through a central angle of 63 degrees 43' 10", for 55.61 feet to a point
of reverse curvature of a curve concave Southwesterly; thence Southeasterly
along the arc of said curve, having a radius of 50.00 feet; through a central
angle of 25 degrees 15' 32", for 22.04 feet to a point of compound curvature of
a curve concave Northeasterly and lying along the South right-of-way line of
said Lake Lucien Drive, a radial line to said point bearing N. 22 degrees 07'
08" E.; thence Southeasterly along the arc of said curve, having a radius of
2114.96 feet, through a central angle of 17 degrees 35' 09" for 649.11 feet to
the point of reverse curvature of a curve concave Southerly and lying along
said South right-of-way line of said Lake Lucien Drive; thence Southeasterly
along the arc of said curve, having a radius of 841.47 feet and a central angle
of 15 degrees 56' 41" for 234.17 feet to the East line of said Tract 10A,
thence S. 00 degrees 07' 19" E. along said East line of Tract 10A for 320.59
feet to the Point of Beginning.
Less the following:
The West 392.70 feet of the South 869.86 feet of the NE 1/4 of the SE 1/4 of
Section 27, township 21 South, Range 29 East, Orange County, Florida, lying
East of and within 45 feet of the survey line of Keller Road, Section 750.11,
between survey Stations 6+500.00 and 5+00.00; said survey line and said
Stations being located and described as follows:
Begin on the West line of the NE 1/4 of the SE 1/4 of Section 27, Township 21
South, Range 29 East, at a point 609.12 feet South 0 degrees 10' 12" East of
the Northwest corner of said NE 1/4 of SE 1/4; at Station 6+50; thence continue
South 0 degrees 10' 12" East a distance of 150 feet to survey Station 5+00.00;
being 556.65 feet North 0 degrees 10' 12" West of the Southwest corner of the
NE 1/4 of the SE 1/4 of said
<PAGE> 138
Commitment No. 864-461405
Company File No. OR970820
Agent File No. 758-11
Section 27 for the end of this described survey line.
AND
All rights of access, ingress, egress, light, air and view between the South
869.86 feet of the NE 1/4 of the SE 1/4 of said Section 27, and Keller Road
along the following described line:
Commence on the West line of the NE 1/4 of the SE 1/4 of said Section 27, at a
point 446.20 feet South 0 degrees 10' 12" East of the Northwest corner of the
said NE 1/4 of the SE 1/4; thence run North 89 degrees 58' 48" East a distance
of 30 feet to the East right of way line of Keller Road for the Point of
Beginning, thence run South 0 degrees 10' 12" East a distance of 162.92 feet,
thence run North 89 degrees 58' 48" East a distance of 15 feet, thence run
South 0 degrees 10' 12" East a distance of 150 feet, thence run South 89
degrees 58' 48" West a distance of 15 feet to the existing East right of way
line of said Keller Road for the end of this described access line.
END OF LEGAL DESCRIPTION
<PAGE> 139
Exhibit B
(List of Space Leases)
See attached ____ (_) pages.
H-5
<PAGE> 140
EXHIBIT I
FIRPTA Certificate
See attached copy
<PAGE> 141
EXHIBIT I
FIRPTA CERTIFICATE
Section 1445 of the Internal Revenue Code of 1986, as amended
(the "Code"), provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. To inform the transferee
that withholding of tax is not required upon the disposition of a U.S. real
property interest by MAITLAND PROPERTY INVESTORS, LTD., a Florida limited
partnership ("Transferor"), Transferor hereby certifies to TOWER REALTY
OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, as follows:
1. Transferor is not a foreign person, foreign corporation,
foreign partnership, foreign trust, or foreign estate (as those terms are
defined in the Code and Treasury Regulations promulgated thereunder);
2. The U.S. employer identification number of Transferor is
59-2413389; and
3. Transferor's office address is 120 West 45th Street, New
York, New York. Transferor understands that this certification may be
disclosed to the Internal Revenue Service by the transferee and that any false
statement contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct,
and complete, and I further declare that I have authority to sign this document
on behalf of Transferor.
MAITLAND PROPERTY INVESTORS, LTD.
By: Lake Success Realty Investors, Inc., its
general partner
By:
-------------------------------------------
Lawrence H. Feldman
Dated as of , 1997
I-1
<PAGE> 1
Exhibit 10.28
NON-COMPETITION AGREEMENT
Non-Competition Agreement, dated as of August 4, 1997, among Tower
Realty Operating Partnership, L.P., a Delaware limited partnership (the
"Partnership"), and Properties Atlantic, Inc., a Florida corporation
("Properties Atlantic"), Clifford Stein ("Stein") and Reid Berman ("Berman", and
together with Properties Atlantic and Stein, the "Non-Competing Persons").
RECITALS
WHEREAS, the Non-Competing Persons are contributing certain assets
to the Partnership and the Partnership is contemplating retaining the services
of the Non-Competing Persons (collectively, the "Transaction") ; and
WHEREAS, the Partnership desires to consummate the Transaction in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "Company"), which intends to qualify as a real estate
investment trust and which is (either directly or through its wholly-owned
subsidiaries) the sole general partner as well as a limited partner of the
Partnership, and (ii) the proposed initial public offering (the "IPO") and
concurrent private placement of shares of the Company's common stock, par value
$0.01 per share ("Common Stock").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each party to this Agreement, the
parties hereto agree as follows:
1. COVENANT NOT TO COMPETE. The Non-Competing Persons and all
Affiliates of the Non-Competing Persons (the "Non-Competing Group") acknowledge
and agree with respect to the Non-Competing Persons that the business of the
Non-Competing Persons is conducted throughout the United States of America, its
territories and possessions (including Puerto Rico) (together, the "Territory")
and that the Non-Competing Persons' reputation and goodwill are an integral part
of their business success throughout the Territory. If the Non-Competing Group
deprives the Partnership of any of the Non-Competing Persons' goodwill or in any
manner utilizes their reputation and goodwill in competition with the
Partnership, the Partnership will be deprived of the benefits it has bargained
for pursuant to this Agreement and the Asset Contribution Agreement, dated the
date hereof, among the Partnership and the Non-Competing Persons. Accordingly,
as an inducement for the Partnership to enter into this Agreement, the
Non-Competing Group agrees that for a period of three years after the Closing
Date (the "Non-competition Period") no member of the Non-Competing Group shall,
without the Partnership's prior written consent, directly or indirectly, own,
manage, operate, join, control or participate in the ownership, management,
operation or control of, or be connected as a director, officer, employee,
partner, consultant or otherwise with, any profit or non-profit business or
organization in the Territory, that, directly or indirectly, competes with, or
is about to compete with, the business of the Non-Competing Persons as it shall
exist immediately prior to the Closing or as contemplated to be developed by the
Partnership or the Non-Competing Persons as of the Closing Date. In addition,
during the Non-competition Period, no member of the Non-Competing Group shall
have an equity interest in any such firm or business other than as a 5% or less
shareholder of a public corporation.
During the Non-competition Period, no member of the Non-Competing
Group shall (a) solicit, raid, entice, induce or contact, or attempt to solicit,
raid, entice, induce or contact, any Person, firm or corporation that is a
customer or distributor of the Non-Competing Persons to become a customer or
distributor of any other Person, firm or corporation for services the same as,
or competitive
<PAGE> 2
with, those services sold, rented, leased, rendered or otherwise made available
to customers by the Non-Competing Persons as of the Closing Date, as well as
services in any stage of development by the Non-Competing Persons as of the
Closing Date although not yet commercialized or not generally available, or
approach any such Person, firm or corporation for such purpose or authorize the
taking of such actions by any other Person, firm or corporation or assist or
participate with any such Person, firm or corporation in taking such action, or
(b) solicit, raid, entice, induce or contact, or attempt to solicit, raid,
entice, induce or contact, any Person, firm or corporation that currently is or
at any time during the two-year period immediately following the Closing Date
(the "Non-recruit Period") shall be (or, in the case of termination is at the
time of termination), an employee, agent or consultant of or to the
Non-Competing Persons to do anything from which the Non-Competing Group is
restricted by reason of this Agreement, and no member of the Non-Competing Group
shall approach any such employee, agent or consultant for such purpose or
authorize or participate with the taking of such actions by any other Person,
firm or corporation or assist or participate with any such Person, firm or
corporation in taking such action. The term "customer" shall include: (1)
customers of the Non-Competing Persons existing immediately after the Closing;
(2) customers that have used services of the Non-Competing Persons within the
24-month period prior to the Closing Date; and (3) those entities that have
committed to using services of the Non-Competing Persons or that have been
identified by the Non-Competing Persons as potential users of services of the
Non-Competing Persons but for which the Non-Competing Persons have not yet
commenced providing such services.
During the Non-competition Period, no member of the Non-Competing
Group shall make any statement or other communication that impugns or attacks
the reputation or character of the Partnership or its Affiliates or its or their
Representatives, or damages the goodwill of the Partnership or its Affiliates or
its or their Representatives, take any action that would interfere with any
contractual or customer or distributor relationships of the Partnership or its
Affiliates or its or their Representatives, including but not limited to any
action that would result in a diminution of business, or otherwise take any
action that is detrimental to the best interests of the Partnership or its
Affiliates.
2. EARLY TERMINATION OF NON-COMPETITION PERIOD. It is contemplated that
Stein and Berman will be employees-at-will of the Partnership or its Affiliate.
In the event that the employment of Stein or Berman is terminated (i) by the
Partnership (or its Affiliate, as the case may be) for other than Just Cause (as
defined below) or (ii) by Stein or Berman for Good Reason (as defined below)
then the Non-competition Period applicable to the party no longer in the employ
of the Partnership (or its Affiliate, as the case may be) shall expire on the
earlier of (x) the date which is three (3) years after the Closing Date and (y)
the date which is thirty (30) days after the last date of such party's
employment by the Partnership.
3. CONFIDENTIALITY. The Non-Competing Group acknowledges that the
Confidential Information (as defined below) of the Non-Competing Persons is
valuable and proprietary to the business of the Non-Competing Persons being
acquired by the Partnership pursuant to this Agreement and agrees not to,
directly or indirectly, use, publish, disseminate, describe or otherwise
disclose any Confidential Information or Developments (as defined below) of the
Non-Competing Persons without the prior written consent of the Partnership
and/or its Affiliates. For purposes of this Agreement, "Confidential
Information" shall mean with respect to the Non-Competing Persons all
confidential information of the Non-Competing Persons and/or their Affiliates
existing on or prior to the Closing Date that is not otherwise publicly
disclosed or generally available (other than as a result of a disclosure by the
Non-Competing Group), including information entrusted to the Non-Competing
Persons and/or their Affiliates by others. Without limiting the generality of
the foregoing, Confidential Information
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<PAGE> 3
with respect to the Non-Competing Persons and/or their Affiliates shall include:
(a) customer lists, lists of potential customers and details of agreements with
customers of the Non-Competing Persons and/or their Affiliates; (b) acquisition,
expansion, marketing, financial and other business information, projections and
plans of the Non-Competing Persons and/or their Affiliates; (c) research and
development of the Non-Competing Persons and/or their Affiliates; (d) computer
programs and computer software of the Non-Competing Persons and/or their
Affiliates; (e) identity of specialized consultants and contractors and
Confidential Information developed by them for the Non-Competing Persons and/or
their Affiliates; (f) purchasing, operating and other cost data of the
Non-Competing Persons and/or their Affiliates; (g) special customer and
distributor needs, cost and pricing data of the Non-Competing Persons and/or
their Affiliates; (h) employee information and (i) distribution lists, lists of
potential distributors and details of agreements with distributors of the
Non-Competing Persons and/or their Affiliates. Confidential Information with
respect to the Non-Competing Persons and/or their Affiliates also includes
information recorded in manuals, memoranda, projections, minutes, plans,
drawings, designs, formula books, specifications, computer programs and records
of the Non-Competing Persons and/or their Affiliates, whether or not legended or
otherwise identified as Confidential Information, as well as information that is
the subject of meetings and discussions and not so recorded. For purposes of
this Agreement, "Developments" shall mean with respect to the Non-Competing
Persons all data, concepts, ideas, findings, discoveries, developments,
programs, designs, inventions, improvements, methods, practices and techniques,
whether or not patentable, relating to the present and planned, future
activities and the services of the Non-Competing Persons.
4. SEVERABILITY OF COVENANTS. The Non-Competing Persons acknowledge and
agree that the restrictions in this Agreement are reasonable and valid in
geographical and temporal scope and in all other respects. If any court
determines that any of the covenants set forth in this Agreement, or any part
thereof, is invalid or unenforceable, the remainder of the covenants set forth
in this Agreement, shall not thereby be affected and shall be given full effect,
without regard to the invalid portions.
5. BLUE-PENCILING. In the event this Agreement shall be determined by
any court of competent jurisdiction to be unenforceable by reason of its
extending for too great a period of time or over too great a geographical area
or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable and/or over the maximum geographical area as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action.
6. REMEDIES. The Non-Competing Group acknowledges that a breach of the
covenants contained in this Agreement will cause irreparable damage to the
Partnership, the exact amount of which will be difficult to ascertain, and that
the remedies at law for any such breach will be inadequate. Accordingly, the
Non-Competing Group agrees that if any member of the Non-Competing Group
breaches the covenant(s) contained in this Agreement, in addition to any other
remedy that may be available at law or in equity, the Partnership shall be
entitled to specific performance and injunctive relief, without posting bond or
other security.
7. SEVERABILITY. The conditions and provisions set forth in this
Agreement shall be severable, and if any condition or provision or portion
thereof shall be held invalid or unenforceable, then said condition or provision
shall not in any manner affect any other condition or provision and the
remainder of this Agreement, construed without regard to said invalid or
unenforceable condition or provision, shall continue in full force and effect.
The parties hereto agree that if any provision of this
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<PAGE> 4
Agreement is found unenforceable for any reason, this Agreement should be
reformed to contain the maximum restrictions, within the terms hereof, which are
enforceable.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (other than any New York law
respecting conflict-of-laws that would make the laws of any other jurisdiction
applicable).
9. CERTAIN DEFINITIONS.
"Affiliate" of a Person shall mean, with respect to that Person, a
Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with that Person.
"Closing" means the closing of the IPO.
"Closing Date" means the date of the Closing.
"Company" has the meaning set forth in the Recitals.
"Confidential Information" has the meaning set forth in Section 3
above.
"Good Reason" means any of the following without the express written
consent of the affected party (i.e., Stein or Berman, as the case may be): (a)
the Partnership requires him to move his executive office from the Metropolitan
Orlando (Florida) area; (b) his job title or position of responsibility or the
nature of his duties or the scope of his responsibilities is materially modified
without his written consent; or (c) the Partnership or the Company commences the
process of liquidation or dissolution.
"IPO" has the meaning set forth in the Recitals.
"Just Cause" means any of the following: (a) the willful and
continued failure by Stein or Berman substantially to perform his duties
hereunder; (b) any act of fraud, misappropriation, dishonesty, embezzlement or
similar conduct against the Partnership or any of the Affiliates; or (c) the
conviction of Stein or Berman for a felony or any crime involving moral
turpitude.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust or unincorporated organization.
"Territory" has the meaning set forth in Section 1 above.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., general partner
By: /s/ Lawrence H. Feldman
------------------------------------
Name: Lawrence H. Feldman
Title: President
NON-COMPETING PERSONS:
PROPERTIES ATLANTIC, INC.
By: /s/ Reid Berman
----------------------------------------
Name: Reid Berman
Title: President
/s/ Clifford Stein
---------------------------------------------
CLIFFORD STEIN
/s/ Reid Berman
---------------------------------------------
REID BERMAN
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<PAGE> 1
Exhibit 10.29
================================================================================
ASSET CONTRIBUTION AGREEMENT
Dated as of August 4, 1997
between
---------------
CONTRIBUTEE:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
---------------
AND
----------------
CONTRIBUTORS:
PROPERTIES ATLANTIC, INC.,
CLIFFORD STEIN, and
REID BERMAN
---------------
================================================================================
================================================================================
<PAGE> 2
ASSET CONTRIBUTION AGREEMENT
ASSET CONTRIBUTION AGREEMENT (the "Agreement"), dated as of August
4, 1997, by and among Tower Realty Operating Partnership, L.P., a Delaware
limited partnership (the "Contributee"), and Properties Atlantic, Inc., a
Florida corporation ("Properties Atlantic"), Clifford Stein ("Stein") and Reid
Berman ("Berman", and together with Properties Atlantic and Stein, the
"Contributors").
RECITALS
A. Contributee desires to acquire from Contributors, and
Contributors desire to contribute to Contributee in exchange for Units (as
defined herein), certain assets owned by Contributors and related to, used or
useful in, the business of Contributors, consisting of the Contributed Assets
(as defined herein), on the terms and conditions contained herein (the
"Acquisition").
B. In connection with the Acquisition, Contributee desires to
assume from Contributors, and Contributors desires to transfer to Contributee,
certain obligations and liabilities of Contributors relating to the business of
Contributors, on the terms and subject to the conditions contained herein.
C. The Contributee desires to consummate the Acquisition in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is (either directly or through its wholly-owned
subsidiaries) the sole general partner as well as a limited partner of the
Contributee, and (ii) the proposed initial public offering (the "IPO") and
concurrent private placement of shares of the Company's common stock, par value
$0.01 per share ("COMMON STOCK").
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
meanings set forth in this Section 1.1. Any of these terms, unless the context
otherwise requires, may be used in the singular or plural depending upon the
reference.
"Affiliate" of a Person shall mean, with respect to that Person, a
Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with that Person.
<PAGE> 3
"Assumed Liabilities" shall mean the obligations and liabilities of
Contributors listed on Schedule 2.1 and all liabilities, obligations and
commitments incurred pursuant to
(a) Contracts which are identified on Schedule 1.1A, and
(b) Contracts entered into by Contributors in the ordinary
course of the business of Contributors after the date hereof and prior to the
Closing Date and which otherwise comply with the terms of this Agreement.
"Authority" shall mean any court, arbitrator or arbitral body, or
any foreign or federal, state, municipal or other government or governmental,
quasi-governmental or other agency, authority, department or commission.
"Books and Records" shall mean with respect to Contributors all
books and records, whether on any computer software program or otherwise,
pertaining to the Contributed Assets, Assumed Liabilities, customers,
distributors or suppliers of Contributors, including Tax returns, work schedules
and other information relevant to such returns.
"Business" shall mean the real estate brokerage business of the
Contributors.
"business day" shall mean any day other than Saturday, Sunday or any
day when banks in New York are required or permitted to close.
"Claims" shall mean with respect to Contributors all claims, causes
of action, choses in action, rights of recovery and rights of set-off of
whatever kind or description against any Person or entity arising out of or
relating to the Contributed Assets of Contributors or relating to Contributors,
except to the extent primarily related to the Excluded Liabilities of
Contributors.
"Code" shall mean the Internal Revenue Code of 1986, as the same may
be amended from time to time.
"Contract" shall mean with respect to Contributors any of the
agreements, contracts, Leases, notes, loans, evidences of indebtedness, purchase
orders, letters of credit, undertakings, covenants not to compete, employment
agreements, licenses, instruments, obligations, commitments, policies,
quotations and other executory commitments, in each case, related to, used or
useful in the Business, to which any of the Contributors is a party or to which
any of its assets are subject, whether oral or written, express or implied,
expressly excluding contracts, agreements and rights excluded from the
Contributed Assets and the proceeds thereof.
"Contract Rights" shall mean with respect to Contributors all of
Contributors' rights and obligations under the Contracts.
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<PAGE> 4
"Contributed Assets" shall mean, with respect to Contributors, all
of Contributors' right, title and interest in and to all properties, assets and
rights of any kind, whether tangible or intangible, real or personal, owned by
Contributors on the Closing Date or in which any of Contributors has any
interest whatsoever on the Closing Date relating to, used or useful in the
Business, including without limitation, the following:
(a) accounts and notes receivable, refunds or deposits and prepaid
expenses (including, without limitation, any prepaid insurance
premiums);
(b) cash and cash equivalents;
(c) all Contract Rights;
(d) all Facilities;
(e) all Facility Leases;
(f) all Leases:
(g) all Real Property;
(h) all Leasehold Estates;
(i) all Leasehold Improvements;
(j) all Fixtures and Equipment;
(k) all Books and Records;
(l) all Intellectual Property Rights;
(m) all Claims;
(n) the Insurance Policies of Contributors to the extent
Contributee desires such policies to be assigned to
Contributee; and
(o) all Permits;
provided, that the term "Contributed Assets" shall not include: (1) any personal
assets of Stein or Berman that have not been used exclusively in the Business;
(2) contracts and agreements pertaining to commissions receivable of Properties
Atlantic whether presently existing or hereafter arising and all proceeds
thereof; and (3) assets that (x) are not listed in the Schedules hereto or the
Disclosure Schedule and (y) are not related to, used or useful in the Business.
"Disclosure Schedule" shall mean the schedule executed and delivered
by Contributors to Contributee within 30 days after the hereof that sets forth
the exceptions to the representations and warranties contained in Article IV
hereof and certain other information called for by Article IV hereof and other
provisions of this Agreement. Unless otherwise specified, each reference in
Article IV to any numbered schedule is a reference to that numbered schedule
that is included in the Disclosure Schedule.
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<PAGE> 5
"Encumbrances" shall mean any claim, lien, pledge, option, charge,
easement, security interest, right-of-way, encumbrance or other right of third
parties.
"Excluded Liabilities" shall mean any and all liabilities or
obligations of Contributors, whether actual or contingent, matured or unmatured,
liquidated or unliquidated, or known or unknown, whether arising out of
occurrences prior to, at or after the date hereof, which shall include, without
limitation:
(a) Except as specifically set forth in Section 6.4, any
liabilities to or in respect of any employees or former employees of
Contributors or any Affiliate thereof including, without limitation:
(i) any liability arising under or with respect to any
Employment Agreement (including termination, severance or incentive
arrangements with employees), whether or not written, between
Contributors and any employee or any Affiliate thereof,
(ii) any liability under or with respect to any Employee
Plan, program or arrangement, whether or not written, at any time
maintained, contributed to by Contributors or any Affiliate thereof
or under which Contributors or any Affiliate thereof may incur
liability, or any liability with respect to Contributors' withdrawal
or partial withdrawal by Contributors or any Affiliate thereof from
or termination of any such plan, program or arrangement and
(iii) any claim of an unfair labor practice, or any claim
under any state unemployment compensation or worker's compensation
law or regulation or under any federal or state employment
discrimination law or regulation, or any claim under any federal or
state plant closing law or regulation, that shall have been asserted
on or prior to the Closing Date or to the extent the basis for any
claim, liability, damages or penalty shall have arisen on or prior
to the Closing Date, whether or not such liabilities are described,
listed or referred to on the Disclosure Schedule;
(b) Any liabilities or obligations incurred in connection with or
arising out of or resulting from the presence, release or disposal of Hazardous
Substances at any time on or prior to the Closing Date (or in the case of any
presence, release or disposal by Contributors or any predecessor or successor in
interest of Contributors or any Representative or independent contractor
thereof, at any time prior to or after the Closing Date), whether or not such
claims or actions with respect thereto are described, listed or referred to on
the Disclosure Schedule, or any Environmental Claims relating to actions,
inactions, occurrences or conditions happening or existing on or prior to the
Closing Date (or if relating to Contributors, any predecessor or successor in
interest of Contributors or any Representative or independent contractor
thereof, at any time prior to, at or after the Closing Date), whether or not
such Environmental Claims, actions, inactions, occurrences or conditions are
described, listed or referred to on the Disclosure Schedule;
(c) Any liability or obligation of Contributors in respect of any
Tax relating to any taxable years (or portions thereof) of Contributors ending
on or prior to the Closing Date whether or not such liabilities are described,
listed or referred to on the Disclosure Schedule;
(d) Any claim or cause of action asserted against Contributors or
that adversely affects the Contributed Assets and that shall have been asserted
on or prior to the Closing Date or to the extent the basis of which shall have
arisen on or prior to the Closing Date, whether or not such claim or cause of
action is described, listed or referred to on the Disclosure Schedule;
(e) Any liabilities or obligations of Contributors directly or
indirectly resulting from or arising out of entering into, performing its
obligations pursuant to, or consummating the transactions contemplated by, this
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<PAGE> 6
Agreement (including, without limitation, all legal and other professional fees
relating to the preparation of this Agreement and the consummation of the
transactions contemplated hereby), whether or not such liabilities or
obligations as described, listed or referred to on the Disclosure Schedule; and
(f) Any Taxes or other liability or obligation of Contributors in
respect of fees or costs of recording or filing any applicable conveyancing
instruments described in Section 3.2(a), whether or not such liabilities or
obligations are described, listed or referred to on the Disclosure Schedule.
"Facilities" shall mean with respect to Contributors the offices and
all Real Property and related facilities, that are identified or listed under
Contributors' name on Exhibit A attached hereto.
"Facility Leases" shall mean all of the Leases of Facilities listed
under Contributors' name on Schedule 4.5.
"Fixtures and Equipment" shall mean with respect to Properties
Atlantic all of the furniture, fixtures, furnishings, machinery and equipment,
spare parts, supplies, Vehicles and other tangible personal property owned by
Contributors and located in, at or upon the Facilities of Properties Atlantic as
of the Closing Date.
"GAAP" shall mean generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, as in effect on the
date hereof, consistently applied.
"Insurance Policies" shall mean with respect to Properties Atlantic
the insurance policies issued by unaffiliated, third-party carriers relating to
the Contributed Assets of Contributors listed under Contributors' name on
Schedule 4.17.
"Laws" shall mean any law, statute, rule, regulation, ordinance,
standard, code, order, judgment, decision, writ, injunction, decree, award or
other governmental restriction including, without limitation, any policy or
procedure issued or enforced by any Authority.
"Leasehold Estates" shall mean with respect to Contributors all of
Contributors' rights and obligations as lessee under the Leases of Contributors
listed on the Disclosure Schedule.
"Leasehold Improvements" shall mean with respect to Contributors all
of Contributors' leasehold improvements situated in or on the property leased
under the Leases of Contributors.
"Leases" shall mean with respect to Contributors all of the leases
of Contributors listed under Contributors' name on the Disclosure Schedule and
all other leases relating to the Contributed Assets of Contributors and the
Business that are not required to be scheduled pursuant to this Agreement.
"Material Adverse Effect" shall mean with respect to Contributors a
material adverse effect on (i) the Contributed Assets, the business or the
condition (financial or otherwise), properties, liabilities, reserves, working
capital, earnings, results of operations, or business prospects, or relations
with customers, suppliers, distributors or employees of Properties Atlantic or
(ii) the right or ability of Contributors to consummate the transactions
contemplated hereby.
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<PAGE> 7
"Permits" shall mean with respect to Contributors all licenses,
permits and other governmental authorizations necessary to carry on the business
of Contributors as presently conducted and as proposed to be conducted.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust or unincorporated organization
or any Authority.
"Real Property" shall mean all real property and improvements listed
on Schedule 1.1B.
"Representative" shall mean with respect to any Person or entity any
officer, director, employee, Affiliate, principal, accountant, attorney, agent,
or other representative of such Person or entity.
"Subsidiary" shall mean with respect to Properties Atlantic (i) any
corporation in an unbroken chain of corporations beginning with Properties
Atlantic if each of the corporations other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain; (ii) any partnership in which a Contributor is a general partner; or
(iii) any partnership in which Contributors possesses a 50% or greater interest
in the total capital or total income of such partnership.
"Tax" or "Taxes" shall mean with respect to Contributors all
federal, state, local, foreign and other taxes, assessments or other government
charges, including, without limitation, income, estimated income, business,
occupation, franchise, gross income, gross receipts, property, sales, transfer,
gains, value-added, document, use, employment, commercial rent or withholding
taxes, including interest, penalties and additions in connection therewith for
which Contributors may be liable.
"Vehicles" shall mean with respect to Properties Atlantic all
automobiles and other vehicles owned or leased by Properties Atlantic as listed
under its name on Exhibit B attached hereto.
1.2 Other Defined Terms. In addition to the terms defined in the
recitals to this Agreement and in Section 1.1, the following terms shall have
the meanings provided for such terms in the Sections set forth below:
Term Section
---- -------
Actions................................................ 4.12
Closing................................................ 3.1
Closing Date........................................... 3.1
Confidential Information............................... Art. IX
Confidentiality Agreement.............................. 3.2(f)
customer............................................... Art. IX
Damages................................................ 10.3(a)
Employee Plan.......................................... 4.21(a)(i)
Environmental Claims................................... 4.20(f)(ii)
Environmental Conditions............................... 4.20(f)(iii)
Environmental Laws..................................... 4.20(f)(i)
ERISA.................................................. 4.21(a)(ii)
ERISA Affiliate........................................ 4.21(a)(iii)
ERISA Plan............................................. 4.21(a)(iv)
Exchange Act........................................... 4.14
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<PAGE> 8
Financial Statements................................... 4.8
Hazardous Substances................................... 4.20(f)(iv)
Intellectual Property Rights........................... 4.4
IPO.................................................... Recitals
Leased Property........................................ 4.5
Multiemployer Plan..................................... 4.21(a)(v)
Non-competition Period................................. Art. IX
Non-recruit Period..................................... Art. IX
PBGC................................................... 4.21(a)(vi)
Pension Plan........................................... 4.21(a)(vii)
Personnel.............................................. 4.9(b)(I)
Securities Act......................................... 4.14
Contributors Employee.................................. 4.21(a)(viii)
Contributors Group..................................... Art. IX
Territory.............................................. Art. IX
Transferred Employees.................................. 6.4(a)
Welfare Plan........................................... 4.21(a)(ix)
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Transfer of Assets; Assumption of Certain Liabilities. Upon
the terms and subject to the conditions herein set forth, on the Closing Date:
(a) Contributors shall contribute, convey, transfer, assign and
deliver to Contributee, and Contributee shall acquire from Contributors, the
Contributed Assets.
(b) Contributee shall assume from Contributors the Assumed
Liabilities listed on Schedule 2.1.
2.2 Liabilities. Notwithstanding any other provision of this
Agreement, Contributee shall not assume any Excluded Liabilities. Furthermore,
Contributee does not, and will not, assume any liabilities or obligations of
Contributors, or any liabilities or obligations related to Contributors'
business, except for the Assumed Liabilities listed on Schedule 2.1 hereof.
Contributors acknowledges that Contributee has not, and will not, assume any
liabilities or obligations of Contributors, or any liabilities or obligations
related to Contributors' business, except for the Assumed Liabilities listed on
Schedule 2.1 hereof.
2.3 Amount and Payment of Acquisition Price. In consideration of
the contribution, conveyance, transfer, assignment and delivery of all of the
Contributed Assets by Contributors to Contributee on the Closing Date, and in
reliance upon the representations, warranties, covenants and agreements made
herein by Contributors, Contributee shall, in exchange therefor, deliver to
Contributors:
(a) instruments of assumption, substantially in the forms attached
hereto as Exhibits C and D, evidencing Contributee's assumption of all of the
Assumed Liabilities; and
(b) $3,000,000 in units of limited partnership interests in the
Contributee ("UNITS"), allocated among the Contributors in accordance with the
allocation provided by the Contributors to the Contributee three (3) business
days prior to the Closing Date. For purposes of this Agreement, the value of a
Unit shall be the median of the proposed per share offering price for the shares
of Common Stock as set forth in the final
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preliminary prospectus included in the Registration Statement on Form S-11 filed
by the Company in connection with the IPO.
ARTICLE III
CLOSING
3.1 Closing. Upon the terms and subject to the conditions set
forth herein, and subject to Section 11.1, the closing of the transactions
contemplated herein (the "Closing") shall occur simultaneously with the closing
of the IPO but subject to the satisfaction or waiver of the conditions set forth
in Articles VII and VIII (the "Closing Date") at the offices of Battle Fowler
LLP, Park Avenue Tower, 75 East 55th Street, New York, New York 10022, unless
the parties hereto shall otherwise agree.
3.2 Deliveries at Closing.
(a) Instruments and Possession. To effect the transfers referred
to in Section 2.1 hereof, Contributors shall, on the Closing Date, execute and
deliver to Contributee:
(i) a bill of sale, substantially in the form attached hereto as
Exhibit E, conveying in the aggregate all personal property included in
the Contributed Assets;
(ii) an Assignment of Lease substantially in the form attached
hereto as Exhibit F with respect to each of the Leases;
(iii) subject to Section 3.2(c), assignments, in form and substance
satisfactory to Contributee, of all Contract Rights included in the
Contributed Assets;
(iv) assignments, in form and substance satisfactory to
Contributee, of all Intellectual Property Rights, in recordable form to
the extent necessary to assign such rights;
(v) all cash and cash equivalents of Properties Atlantic;
(vi) all Books and Records of Properties Atlantic;
(vii) such keys, lock and safe combinations and other similar items
as Contributee shall require to obtain full occupation, possession and
control of the Facilities of Properties Atlantic;
(viii) such changes relating to the bank accounts and safe deposit
boxes of Properties Atlantic as Contributee shall have requested by notice
to Contributors at least two (2) business days prior to the Closing Date;
and
(ix) such other instruments as shall be reasonably requested by
Contributee to vest in Contributee good and valid title in and to the
Contributed Assets in accordance with the provisions hereof.
(b) Form of Instruments. All of the foregoing instruments shall be
in form and substance, and shall be executed and delivered in a manner,
satisfactory to Contributee in its sole discretion.
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<PAGE> 10
(c) Consents to Assignment. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any Contract or Permit or any claim or right or any benefit arising
thereunder or resulting therefrom if an attempted assignment thereof, without
the consent of a third party thereto, would constitute a breach thereof or in
any way affect the respective rights of Contributee or Contributors thereunder.
If such consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights thereunder so that Contributee would not
receive all such rights, Contributors will cooperate with Contributee, in all
respects, to provide to Contributee the benefits under any such Contract or
Permit, including, without limitation, enforcement for the benefit of
Contributee of any and all rights of Contributors against a third party thereto,
arising out of the breach or cancellation by such third party or otherwise; and
any transfer or assignment to Contributee of any property or property rights or
any Contract or Permit that shall require the consent or approval of any third
party shall be made subject to such consent or approval being obtained. Nothing
contained in this Section 3.2(c) shall be deemed to diminish Contributee's right
to refuse to close under this Agreement in the event any of the conditions
precedent set forth in Article VIII are not satisfied.
(d) Assumption Documents. Upon the terms and subject to the
conditions contained herein, on the Closing Date, Contributee shall deliver to
Contributors:
(i) an Assumption of Lease substantially in the form
attached hereto as Exhibit C with respect to each of the
Leases and
(ii) such other instruments of assumption evidencing
Contributee's assumption, pursuant to Section 2.1(b) hereof,
of the liabilities and obligations of Contributors described
in Section 2.1(b), as Contributee and Contributors shall deem
necessary or desirable, substantially in the form attached
hereto as Exhibit D.
(e) Certificates; Opinions. At the Closing, Contributee and
Contributors shall deliver the certificates, opinions of counsel and other items
described in Articles VII and VIII.
(f) Other Closing Transactions. At the Closing, each of the
parties shall take such other actions required hereby to be performed by it
prior to or on the Closing Date including, without limitation, satisfying the
conditions set forth in Articles VII and VIII.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF Contributors
Contributors hereby jointly and severally represent and warrant to
Contributee that the following representations and warranties are, as of the
date hereof, and will be, as of the Closing Date, true and correct:
4.1 Organization. Properties Atlantic is duly organized, validly
existing and in good standing under the laws of the State of Florida, has full
corporate power and authority to conduct its business as it is presently being
conducted and to own and lease its properties and assets, including the
Contributed Assets by it. Properties Atlantic is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
such qualification is necessary under the applicable law as a result of the
conduct of its business or the ownership of its properties, including the
Contributed Assets by it, except where the failure to be so qualified and in
good standing would not have a Material Adverse Effect. Each jurisdiction in
which
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Properties Atlantic is qualified to do business as a foreign corporation is
listed on Schedule 4.1. Properties Atlantic does not have any Subsidiaries that
are not listed on Schedule 4.1.
4.2 Authorization. Properties Atlantic has all necessary corporate
power and authority and has taken all corporate action and received all
shareholder consents and approvals necessary to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and to perform its
obligations hereunder, and no other proceedings on the part of Properties
Atlantic are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
Contributor and is a legal, valid and binding obligation of each Contributor
enforceable against him or it in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting creditors' rights generally and
(ii) the general principles of equity, regardless of whether asserted in a
proceeding in equity or at law.
4.3 Title to Assets. (a) Schedule 4.3 identifies all Real Property
and personal property with a book value or replacement cost in excess of $1,000
owned or leased by Contributors used or useful in their business. The
Contributed Assets constitute and include all the property, assets and rights
related to, used, or useful in the conduct of the business of Contributors in
the ordinary course, consistent with past practice. Contributors own free and
clear of any Encumbrances or, as set forth on Schedule 4.3, leases or has rights
to use, the Contributed Assets set forth on Schedule 4.3, except for (i)
Encumbrances that in the aggregate are not substantial in amount, do not
materially detract from the value of the Contributed Assets subject thereto or
interfere with the present use thereof and have not arisen other than in the
ordinary course of business and (ii) Encumbrances specifically identified on
Schedule 4.3. Upon consummation of the transactions contemplated hereby,
Contributee will acquire good title to all of the Contributed Assets owned by
Contributors, free and clear of any Encumbrances, except for (i) Encumbrances
that in the aggregate are not substantial in amount, do not materially detract
from the value of the Contributed Assets subject thereto or interfere with the
present use thereof and have not arisen other than in the ordinary course of
business and (ii) Encumbrances specifically identified on Schedule 4.3.
Contributors own fee simple, marketable title to the Real Property.
(b) Except for the Real Property listed on Schedule 1.1B, there is
no real property in which Contributors have an interest or which is used or
occupied by Contributors. Local zoning ordinances, general plans and other
applicable land use regulations and all private covenants, conditions and
restrictions, if any, permit the transfer and use of each Real Property (and
reconstruction and resumption of use of the Facilities in the event of damage or
destruction thereof or cessation of use thereof) for the business presently
conducted thereon as a matter of right for an unlimited time period, and
specifically not merely as a legal non-conforming use or any other legal status
which would by its terms or by operation of law limit the duration of such use
or the right to rebuild and resume use of each Facility in the event of damage,
destruction or cessation of use of any Facility for any reason. All Permits that
are necessary to permit the use of all the Real Property as it is currently used
and in accordance with the provisions of this Agreement have been obtained and
are in full force and effect. There are no outstanding material deficiencies or
work orders of any Authority having jurisdiction over any Facility requiring
conformity to any Laws or by-law pertaining to any Facility. Contributors have
not received any notice of any claim, requirement or demand of any licensing or
certifying agency or other Authority supervising or having authority over the
Facilities or otherwise to rework or redesign any of them or to provide
additional furniture, fixtures, equipment or inventory so as to conform to or
comply with any Law which have not been fully satisfied prior to the date
hereof. All utilities, including, but not limited to water, water well, sewer,
disposal, gas and electricity and telephone, to the extent necessary for the
operation of the Facilities are connected to the Real Property and the
Facilities and are adequate for the intended use of the Real Property and the
improvements. Means of ingress and egress, streets, parking and drainage
facilities are adequate for the existing and intended use of the Real Property.
No defect or condition of the Real Property, or the soil or geology thereof,
exists that will or may impair the current or planned use of the Real Property.
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4.4 Intentionally Omitted.
4.5 Facility Leases. Schedule 4.5 lists and describes briefly all
Facility Leases. Such Facility Leases constitute all leases, subleases or other
occupancy agreements pursuant to which Contributors occupy or uses Real Property
for the Business. Contributors have in all material respects performed all the
obligations required to be performed by it through the date hereof with respect
to all leased property described in the Leases of Contributors (the "Leased
Property"). Contributors enjoy peaceful and undisturbed possession of all the
Leased Property. With respect to each such Facility Lease:
(i) Contributors will transfer to Contributee at the Closing
an unencumbered interest in the Leased Property;
(ii) All Facilities leased or subleased thereunder have
received all material approvals of Authorities (including licenses
and Permits and a certificate of occupancy or other evidence of
lawful occupancy of the Leased Property) required in connection with
the operation thereof, and have been operated and maintained in all
material respects in accordance with applicable laws, rules and
regulations;
(iii) All Facilities leased or subleased thereunder are
supplied with utilities (including water, sewage, disposal,
electricity, gas and telephone) and other services necessary for the
operation of such Facilities as currently operated;
(iv) There are no pending, or to the best of Contributors'
knowledge, threatened condemnation proceedings with respect to the
Leased Property, or pending or, or to the best of Contributors'
knowledge, threatened litigation or administrative actions relating
to the Leased Property;
(v) There are no subleases, licenses, options, rights,
concessions or other agreements or arrangements, written or oral,
granting to any Person the right to use or occupy such Leased
Property or any portion thereof or interest therein;
(vi) The improvements constructed on the Leased Property are
in good operating condition and repair without any material
structural or mechanical defects of any kind, ordinary wear and tear
excepted; and
(vii) Contributors have not received notice of any special
assessment relating to the Leased Property and has no knowledge of
any pending or threatened special assessment.
4.6 Contracts and Commitments. (a) Except for Contracts listed on
Schedule 4.6 and except for Contracts made in the ordinary and usual course of
its business since January 1, 1997 consistent with past practice or as expressly
contemplated by this Agreement and the transactions contemplated hereby,
Contributors are not a party to, or bound by, any Contract of any kind to be
performed after the Closing Date (i) pursuant to which it is obligated to expend
more than $5,000 in any twelve-month period and that is not subject to
cancellation on not more than 30 days' notice by Contributors without penalty or
increased cost or (ii) with any personnel or other Affiliates of Contributors.
(b) To the best of Contributors' knowledge, there is no default by
any party to any such Contract, which default could have a Material Adverse
Effect. Schedule 4.6 lists the following Contracts, agreements and other written
arrangements to which Contributors are a party:
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(i) any written arrangements (or group of related written
arrangements) for the lease of personal property providing for lease
payments in excess of $5,000 per annum;
(ii) any written arrangement (or group of related written
arrangements) for the purchase or sale of supplies, products or
other property or for the furnishing or receipt of services,
including, without limitation, any customer or vendor contracts;
(iii) any written arrangement (or group of related written
arrangements) concerning a partnership or joint venture with any
other Person;
(iv) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed or
guaranteed (or may create, incur, assume or guarantee) indebtedness
(including capitalized lease obligations) involving more than $5,000
in principal amount or under which it has imposed (or may impose) a
security interest or lien on any of its assets, tangible or
intangible;
(v) any written arrangement (or group of related written
arrangements) concerning confidentiality or non-competition
arrangements;
(vi) any Employee Plan of Contributors and any written
arrangement with any of its directors, officers, stockholders or
employees in the nature of a collective bargaining agreement,
employment agreement or severance agreement;
(vii) any written arrangement with any of its directors,
officers, shareholders or employees or any member of any such
Person's immediate family (x) providing for the furnishing of
material services by, (y) providing for the rental of material real
or personal property from, or (z) otherwise requiring material
payments to (other than for services as officers, directors or
employees of Contributors), any such Person or any corporation,
partnership, trust or other entity in which any such Person has a
substantial interest as a shareholder, officer, director, trustee or
partner;
(viii) any other written arrangement (or group of related
written arrangements) under which the consequences of a default or
termination could have a Material Adverse Effect;
(ix) any other written arrangement (or group of related
written arrangements) either involving aggregate payments of more
than $5,000 or not entered into in the ordinary course of business
consistent with past practice; or
(x) any oral contract, agreement or other arrangement with
respect to any of the matters referred to in the foregoing clauses
(i) through (ix) and any proposal (oral or written) to enter into
any contract, agreement or other arrangement with respect to any of
the matters referred to in the foregoing clauses (i) through (ix).
Contributors have delivered to Contributee a correct and complete copy of each
written arrangement listed under the name of Contributors in Schedule 4.6.
(c) Except as set forth on Schedule 4.6, with respect to each
written arrangement listed, (A) the written arrangement is legal, valid,
binding, enforceable (except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law) and
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in full force and effect; (B) the written arrangement will continue to be legal,
valid binding, enforceable (except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally and (ii) the general principles of equity,
regardless of whether asserted in a proceeding in equity or at law) and in full
force and effect on identical terms following the Closing Date; (C) no party is
in material breach or default, and no event has occurred which with notice or
lapse of time could constitute a material breach or default or permit
termination, modification or acceleration, under the written arrangement and (D)
no party has repudiated any term of the written arrangement.
4.7 No Conflict or Violation. Except as set forth on Schedule 4.7,
neither the execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated hereby will result in (a) a
violation of or a conflict with any provision of the Articles of Incorporation
or bylaws of Atlantic Properties, (b) a breach of, or a default under, or the
creation of any right of any party to accelerate, terminate or cancel, any
Contract, Permit, authorization or concession to which any Contributor is a
party or by which any of the Contributed Assets of Contributors are bound, (c) a
violation by Contributors of any Law or (d) an imposition of any material
Encumbrance, restriction or charge on the business of Contributors or on any of
the Contributed Assets of Contributors. Except as set forth on Schedule 4.7, no
consent, approval or authorization of, or declaration, filing or registration
with, any Authority, or any other Person or entity, is required to be made or
obtained by Contributors in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
4.8 Financial Statements. Properties Atlantic have heretofore
delivered to Contributee a true and complete copy of its most recent regularly
prepared Financial Statements (the "Financial Statements"). Except as set forth
on Schedule 4.8, the Financial Statements (i) were prepared in accordance with
GAAP consistently applied throughout the periods indicated, (ii) are in
accordance with the Books and Records of Properties Atlantic and (iii) present
fairly, as of their respective dates or the periods covered thereby, the cash
flows and results of operations of Properties Atlantic.
4.9 Absence of Certain Changes or Events. Except as set forth on
Schedule 4.9, since January 1, 1997 there has not been any:
(a) material adverse change in the assets, liabilities (contingent
or otherwise), business, condition (financial or otherwise), operations, results
of operations or prospects of Properties Atlantic;
(b) (i) except for normal periodic increases in the ordinary
course of the Business consistent with past practice, increase in the
compensation payable or to become payable by Contributors or any Affiliate to
any of its officers, employees, former employees or agents (collectively,
"Personnel"), (ii) grant, payment or accrual, contingent or otherwise, for or to
the credit of any of the Personnel with respect to any bonus, incentive
compensation, service award or other like benefit, (iii) adoption, creation or
amendment of any Employee Plan of Contributors, (iv) employment agreement
(written or verbal) made by Contributors to which Contributors or any Affiliate
is a party, or (v) other change in employment terms for any of Contributors'
Personnel;
(c) sale, lease, assignment or transfer of any of the assets,
tangible or intangible, of Properties Atlantic other than to Persons that are
not Affiliates for fair consideration and in the ordinary course consistent with
past practice;
(d) cancellation, compromise, waiver or release of any rights or
claims (or series of related rights or claims) either (i) involving an Affiliate
of Contributors, (ii) involving more than $5,000 or (iii) outside the ordinary
course of business consistent with past practice;
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(e) amendment, cancellation or termination of any Contract,
license or other instrument related to, used or useful in the Business (i)
involving an Affiliate of Contributors, (ii) involving payments in excess of
$5,000 in the aggregate or (iii) that are otherwise material to Contributors;
(f) capital expenditure or the execution of any Lease, Contract,
license, sublease or sublicense (or series of related Contracts, Leases,
subleases, licenses and sublicenses) or any incurring of liability therefor
related to the Business (i) involving an Affiliate of Contributors, (ii)
involving payments in excess of $5,000 in the aggregate, or (iii) outside the
ordinary course of business consistent with past practice;
(g) delay or failure to repay when due any material obligation of
Contributors;
(h) failure to operate the Business in the ordinary course
consistent with past practice so as to use reasonable efforts to preserve the
business intact, to keep available to Contributee the services of Personnel, and
to preserve for Contributee the goodwill of Contributors' suppliers, customers,
distributors and others having business relations with it;
(i) material change in accounting methods or practices by
Contributors;
(j) indebtedness incurred by Properties Atlantic for borrowed
money or any commitment to borrow money entered into by Properties Atlantic, or
any loans or guarantees made or agreed to be made by Properties Atlantic other
than to non-Affiliates in the ordinary course of business consistent with past
practice;
(k) liabilities involving $5,000 or more or otherwise material to
the Business except in the ordinary course of business and consistent with past
practice, or any increase or change in any assumptions underlying or methods of
calculating any bad debt, contingency or other reserves;
(l) payment, discharge or satisfaction of any liabilities relating
to the Business other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities
reflected or reserved against on the most recent regularly prepared balance
sheet (other than debt principal or interest repayment) of Properties Atlantic
or incurred in the ordinary course of business and consistent with past practice
since November 15, 1996 (other than debt principal or interest repayment);
(m) acceleration, termination, modification, cancellation or
threatened termination or cancellation of any Contract to which Contributors are
a party or by which Contributors are bound;
(n) capital investment in, any loan to, or any acquisition of the
securities or assets of any other Person (i) involving an Affiliate of
Contributors, (ii) involving more than $5,000 in the aggregate, or (iii) outside
the ordinary course of business consistent with past practice;
(o) grant of any license or sublicense of any rights under or with
respect to any Intellectual Property Rights of Contributors except in the
ordinary course of business consistent with past practice;
(p) loan to, or other agreement with any Personnel outside the
ordinary course of business consistent with past practice giving rise to any
claim or right on its part against the Person or on the part of the Person
against it;
(q) charitable or other capital contribution made or pledged by
Contributors in an aggregate amount in excess of $5,000;
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(r) agreement (either oral or written) by Contributors or any of
the Personnel to do any of the foregoing; or
(s) other event or condition of any character that in any
one case or in the aggregate has a Material Adverse Effect, or any event or
condition (other than events or conditions affecting the economy generally)
known to Contributors or that it is reasonable to expect will, in any one case
or in the aggregate, have a Material Adverse Effect in the future.
4.10 Liabilities. Except as set forth on Schedule 4.10, Properties
Atlantic has no liabilities or obligations (absolute, accrued, contingent or
otherwise) except (i) liabilities that are reflected and reserved against on its
most recent regularly prepared balance sheet, that have not been paid or
discharged since the date thereof, (ii) liabilities incurred since January 1,
1997 in the ordinary course of business consistent with past practice and in
accordance with this Agreement (none of which relates to any breach of contract,
breach of warranty, tort, infringement or violation of law or arose out of any
complaint, action, suit or proceeding and none of which individually or in the
aggregate could have a Material Adverse Effect) and (iii) liabilities that are
unrelated to the Business.
4.11 Accounts Receivable. Except as set forth on Schedule 4.11, the
accounts receivable of Contributors reflected on the Financial Statements, and
all accounts receivable arising since January 1, 1997, represent bona fide
claims against debtors for sales made, services performed or other charges
arising on or before the date hereof, and all the goods delivered and services
performed that gave rise to said accounts were delivered or performed in
accordance with the applicable orders, Contracts or customer or distributor
requirements. Except as set forth on Schedule 4.11, all accounts receivable of
Contributors reflected in the Financial Statements shall be subject to no
defenses, counterclaims or rights of set-off and shall be fully collectible
within 75 days of Closing Date without cost to Contributee in collection efforts
therefor, except to the extent of any reserve with respect thereto set forth in
the Financial Statements (excluding the notes thereto).
4.12 Litigation. Except as set forth on Schedule 4.12, there is no
charge, complaint, action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, labor dispute, arbitral
action or, to the knowledge of Contributors, investigation (collectively,
"Actions") pending or, to the knowledge of Contributors, threatened or
anticipated against, relating to or affecting (i) Contributors or the
Contributed Assets of Contributors or the operation of the Business as currently
operated and as proposed to be operated, (ii) any Employee Plan of Properties
Atlantic or any trust or other funding instrument, fiduciary or administrator
thereof or (iii) the transactions contemplated by this Agreement or before or by
any Authority, any of which would reasonably be expected to have a Material
Adverse Effect on Contributors. Contributors are not in default with respect to
any judgment, order, writ, injunction or decree of any Authority, and there are
no unsatisfied judgments against Contributors. There is not a reasonable
likelihood of an adverse determination of any pending Actions that would,
individually or in the aggregate, have a Material Adverse Effect. Each Action
pending or, to the knowledge of Contributors, threatened or that Contributors
have a reasonable basis to expect or anticipate (whether or not disclosed on
Schedule 4.12) is fully covered by insurance of reputable and solvent insurance
companies and each such applicable insurance policy is in full force and effect
and Contributors have not received any notice or, to the knowledge of
Contributors, threat of cancellation, limitation or non-coverage.
4.13 Labor Matters. Except as set forth on Schedule 4.13,
Properties Atlantic is not a party to any labor agreement with respect to its
employees with any labor organization, group or association. Except as set forth
on Schedule 4.13, Properties Atlantic has not received any inquiry (oral or
written) regarding, nor experienced any attempt by organized labor or its
Representatives to make Properties Atlantic conform to demands of organized
labor relating to its employees or to enter into a binding agreement with
organized labor
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that would cover the employees of Properties Atlantic. Properties Atlantic is in
material compliance with all applicable Laws respecting employment practices,
terms and conditions of employment and wages and hours, including all federal
and state plant closing laws and regulations (including the Federal Worker
Adjustment and Retraining Notification Act), and, to the best knowledge of
Contributors, is not and has not engaged in any unfair labor practice. There is
no unfair labor practice charge or complaint against Properties Atlantic pending
before the National Labor Relations Board or any other Authority arising out of
Contributors' activities, and Contributors have no knowledge of any facts or
information that would give rise thereto; there is no labor strike or labor
disturbance pending or threatened against Properties Atlantic nor is any
grievance currently being asserted; and Properties Atlantic have never
experienced a work stoppage or other labor difficulty.
4.14 Compliance with Law; Permits. Contributors and the conduct of
the Business are in compliance with all applicable Laws by any Authority
relating to the Contributed Assets or the Business, except where the failure to
comply would not have a Material Adverse Effect. Contributors have not received
any written notice to the effect that, or otherwise been advised that, it is not
in compliance with any of such Laws, and Contributors have no reason to
anticipate that any currently existing circumstances are likely to result in
violations of any such Laws which could, in any one case or in the aggregate,
have a Material Adverse Effect. Contributors have all Permits, authorizations
and approvals, each of which is currently valid and in full force and effect,
necessary to carry on the Business, which licenses, Permits, authorizations and
approvals are set forth on Schedule 4.14. Without limiting the generality of the
preceding representation and warranty, Contributors have not (i) made or agreed
to make any contribution, payment or gift to any government official, employee,
or agent where either the contribution, payment or gift or the purpose thereof
was illegal under the Laws of any Authority, (ii) established or maintained any
unrecorded fund or asset for any purpose or made any false entries on the Books
and Records of Contributors for any reason or (iii) made or agreed to make any
contribution, or reimbursed any political gift or contribution made by any other
Person, to any candidate for, federal, state, local or foreign public office. In
addition, Contributors (a) have complied with all applicable laws relating to
employee and civil rights and relating to the employment opportunities, except
where the failure to comply would not have a Material Adverse Effect, (b) filed
in a timely manner all reports, documents it was required to file (and the
information contained therein was correct and complete in all respects) under
all applicable Laws, (c) have possession of all records and documents it was
required to retain under all applicable Laws and (d) have not violated in any
respect or received a notice or charge asserting any violation of the Sherman
Act, the Clayton Act, the Robinson-Patman Act, the Federal Trade Commission Act,
the Securities Act of 1933 or the Securities Exchange Act of 1934 (the "Exchange
Act"), each as amended, except where such violation would not have a Material
Adverse Effect.
4.15 Tax Matters.
(a) Filing of Tax Returns. Contributors have timely filed with the
appropriate taxing or other governmental Authorities all returns in respect of
Taxes (including, without limitation, information returns and other information)
required to be filed through the date hereof. The returns and information filed
are complete, correct and accurate in all material respects. Properties Atlantic
has delivered to Contributee complete and accurate copies of its federal, state,
local and foreign tax returns for the years 1994 and 1995.
(b) Payment of Taxes. All Taxes for which any of the Contributors
are or may be liable, in respect of periods or portions thereof ending on or
before the Closing Date, shall have been paid, or an adequate reserve (in
conformity with GAAP) has been established therefor, and none of the
Contributors have material liability for Taxes in excess of the amounts so paid
or reserves so established. All Taxes that Contributors have been required to
collect or withhold have been duly collected or withheld and, to the extent
required when due, have been or will be duly paid to the proper taxing
authority.
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(c) Audit History; Tax Liens. Except as set forth on Schedule 4.15
on the Disclosure Schedule, no deficiencies for Taxes of Contributors have been
claimed, proposed or assessed by any taxing or other Authority. There are no
pending or, to the best of Contributors' knowledge, threatened audits,
investigations or claims for or relating to any liability in respect of Taxes of
Contributors, and there are no matters under discussion with any Authorities
with respect to Taxes of Contributors. Audits of federal, state and local
returns for Taxes by the relevant taxing authorities have been completed for the
periods set forth on Schedule 4.15. Contributors have not been notified that any
taxing authority intends to audit a return for any other period. No extension of
a statute of limitations relating to Taxes is in effect with respect to
Contributors. There are no liens for Taxes (other than for current Taxes not yet
due and payable) on the Contributed Assets.
(d) Tax Elections.
(i) All elections with respect to Taxes affecting the Contributed
Assets of Contributors as of the date hereof are set forth on Schedule 4.15.
(ii) Contributors have not made an election, and is not required,
to treat any Contributed Asset of Contributors as owned by another Person within
the meaning of section 168 of the Code or under any comparable state or local
income tax or other tax provision.
(e) Tax Agreements. Contributors are not a party to or bound by
any binding tax sharing, tax indemnity or tax allocation agreement or other
similar arrangement with any other party.
(f) Security for Tax-Exempt Obligations. None of the Contributed
Assets are property that directly or indirectly secures any debt the interest on
which is tax-exempt under Section 103(a) of the Code.
(g) Tax-Exempt Use Property. None of the Contributed Assets are
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(h) Foreign Person. None of the Contributors is a person other
than a United States person within the meaning of the Code.
(i) No Withholding. The transaction contemplated herein is not
subject to the tax withholding provisions of Section 3406 of the Code, or
Sections 1441 through, and including, Section 1446 of the Code.
4.16 Severance Arrangements. Except as set forth on Schedule 4.16,
neither Contributors nor any Affiliate thereof has entered into any severance or
similar arrangement in respect of any Personnel that will result in any
obligation (absolute or contingent) of Contributee, Contributors or any other
Person to make any payment to any such Personnel following termination of
employment or the transfer to Contributee of the Contributed Assets.
4.17 Insurance. Schedule 4.17 contains a complete and accurate list
of all policies or binders of fire, liability, title, worker's compensation and
other forms of insurance (showing as to each policy or binder the carrier,
policy number, coverage limits, expiration dates, annual premiums and a general
description of the type of coverage provided) maintained by Properties Atlantic
and issued by any unaffiliated third party carrier on the Business, the
Contributed Assets or Personnel. All of such policies are consistent with
industry practices and are sufficient for compliance with all requirements of
law and of all Contracts to which any Contributor is a party. None of the
Contributors is in default under any of such policies or binders, and
Contributors have not failed to give any notice or to present any claim under
any such policy or binder in a due and timely fashion. There are no facts known
to Contributors upon which an insurer might be justified in reducing
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coverage or increasing premiums on existing policies or binders. There are no
outstanding unpaid claims under any such policies or binders. Such policies and
binders provide sufficient coverage, in the reasonable opinion of Contributors,
for the risks insured against, are in full force and effect on the date hereof
and shall be kept in full force and effect by Contributors through the Closing
Date.
4.18 Customers, Distributors and Suppliers. (a) Schedule 4.18
contains a complete and accurate list of (i) all customers of Contributors
during Contributors' last fiscal year, showing the approximate total sales by
Contributors to each such customer during such fiscal year.
(b) Except as set forth on Schedule 4.18, no customer of
Contributors has cancelled, terminated, or made any written or oral threat to
Contributors or to any of its Affiliates to cancel or terminate, or to reduce
sales volumes below those presently existing, for any reason, including the
consummation of the transactions contemplated hereby, its relationship with
Contributors. Except as set forth on Schedule 4.18, Contributors have no
knowledge that any such supplier or customer intends to cancel or otherwise
terminate its relationship with any Contributor.
4.19 Bank Accounts. Schedule 4.19 contains a true and correct list
of the names of each bank,savings and loan, or other financial institution in
which Properties Atlantic has a business account, including cash contribution
accounts, or safe deposit boxes, and the names of all Persons authorized to draw
thereon or to access thereto.
4.20 Environmental Matters. Contributors are, and at all times has
been, in compliance with all Environmental Laws (as defined below), except where
the failure to comply would not have a Material Adverse Effect on Contributors.
(a) Except as set forth on Schedule 4.20, there is no existing or,
to Contributors' knowledge, potential Environmental Claim (as defined below),
nor have Contributors received any notification or knowledge of alleged, actual
or potential responsibility for, or any inquiry or investigation regarding, any
disposal, release, or threatened release at any location of any Hazardous
Substance (as defined below) generated or transported by Contributors.
(b) Except as set forth on Schedule 4.20, (i) no underground tank
or other underground storage receptacle for Hazardous Substances is currently
located on Properties Atlantic's properties and there have been no releases of
any Hazardous Substances from any underground tank or related piping at any
time; and (ii) there have been no releases (i.e., any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping) of Hazardous Substances by
Contributors on, upon, or into the properties of Properties Atlantic, except
where such circumstance or event would not have a Material Adverse Effect. In
addition, to the best knowledge of Contributors after due inquiry, there have
been no such releases by Properties Atlantic's corporate predecessors and no
such releases on, upon, or into any real property in the vicinity of any of the
properties of Properties Atlantic that, through soil or ground water
contamination, may have come to be located on the property of Properties
Atlantic.
(c) Except as set forth on Schedule 4.20, there are no PCBs or
asbestos located at or on the Leased Property of Properties Atlantic, except
where the presence of such material would not reasonably be expected to have a
Material Adverse Effect.
(d) No environmental lien has attached to any property to be
transferred to Contributee under this Agreement.
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(e) Definitions.
(i) For purposes of this Agreement, "Environmental Laws" shall
mean all federal, state, district, local, and foreign laws, all rules or
regulations promulgated thereunder, and all orders, consent orders,
judgments, notices, permits, or demand letters issued, promulgated, or
entered pursuant thereto, relating to pollution or protection of the
environment (including without limitation ambient air, surface water,
ground water, land surface, or subsurface strata), including without
limitation (i) laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, chemicals, materials,
wastes, or other substances into the environment and (ii) laws relating to
the identification, generation, manufacture, processing, distribution,
use, treatment, storage, disposal, recovery, transport, or other handling
of pollutants, contaminants, chemicals, industrial materials, wastes, or
other substances. Environmental Laws shall include without limitation the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, the Toxic Substances Control Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Clean Water Act, as
amended, the Safe Drinking Water Act, as amended, the Clean Air Act, as
amended, the Atomic Energy Act of 1954, as amended, the Occupational
Safety and Health Act, as amended, and all analogous laws promulgated or
issued by any state or other Authority.
(ii) For purposes of this Agreement, "Environmental Claims" shall
mean all accusations, allegations, notice of violations, liens, claims,
demands, suits, or causes of action for any damage, including without
limitation, Personal injury, property damage (including any depreciation
of property values), lost use of property, or consequential damages,
arising directly or indirectly out of Environmental Conditions or
Environmental Laws. By way of example only, Environmental Claims include
(i) violations of or obligations under any contract between Contributors
and any other Person, (ii) actual or threatened damages to natural
resources, (iii) claims for nuisance or its statutory equivalent, (iv)
claims for the recovery of response costs, or administrative or judicial
orders directing the performance of investigations, response or remedial
actions under any Environmental Laws, (v) a requirement to implement
"corrective action" pursuant to any order or permit issued pursuant to the
Resource Conservation and Recovery Act, as amended or similar provisions
of applicable state law, (vi) claims for restitution, contribution, or
indemnity, (vii) fines, penalties, or liens of any kind against property,
(viii) claims for injunctive relief or other orders or notices of
violation from federal, state, or local agencies or courts, and (ix) with
regard to any present or former employees, claims relating to exposure to
or injury from Environmental Conditions.
(iii) For purposes of this Agreement, "Environmental Conditions"
shall mean the state of the environment, including natural resources
(e.g., flora and fauna), soil, surface water, ground water, any present or
potential drinking water supply, subsurface strata, or ambient air,
relating to or arising out of the use, handling, storage, treatment,
recycling, generation, transportation, release, spilling, leaking,
pumping, pouring, emptying, discharging, injecting, escaping, leaching,
disposal, dumping, or threatened release of Hazardous Substances by
Contributors or any predecessors or successors in interest, agents,
representatives, employees, or independent contractors. With respect to
Environmental Claims by third parties, Environmental Conditions also
include the exposure of Persons to Hazardous Substances at the work place
or the exposure of Persons or property to Hazardous Substances migrating
from or otherwise emanating from or located on property owned or occupied
by Properties Atlantic.
(iv) For purposes of this Agreement, "Hazardous Substances" shall
mean all pollutants, contaminants, chemicals, wastes, and any other
carcinogenic, ignitable, corrosive, reactive, toxic, or otherwise
hazardous substances or materials (whether solids, liquids or gases),
including but not limited to any substances, materials, or wastes subject
to regulation, control, or remediation under Environmental
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Laws. By way of example only, the term Hazardous Substances includes
petroleum, urea formaldehyde, flammable, explosive, and radioactive
materials, PCBs, pesticides, herbicides, asbestos, sludge, slag, acids,
metals, solvents, or waste waters.
4.21 Employee Benefit Plans.
(a) Definitions. The following terms, when used in this Section
4.21 or otherwise in this Agreement, shall have the following meanings. Any of
these terms may, unless the context otherwise requires, be used in the singular
or the plural depending on the reference.
(i) Employee Plan. "Employee Plan" shall mean any employee
benefit plan, program or arrangement, whether oral or written, which
Contributors or an ERISA Affiliate maintains, participates in or
contributes to, and which covers and provides benefits for any
Contributors Employee.
(ii) ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(iii) ERISA Affiliate. "ERISA Affiliate" shall mean with
respect to Contributors any entity which is a member of a "controlled
group of corporations" with or is under "common control" with Contributors
as defined in section 414(b), (c), or (m) of the Code.
(iv) ERISA Plan. "ERISA Plan," "ERISA Pension Plan," or
"ERISA Welfare Plan" shall mean an Employee Plan, a Pension Plan, or a
Welfare Plan, respectively, which is subject to ERISA.
(v) Multiemployer Plan. "Multiemployer Plan" shall mean with
respect to Contributors any Employee Plan which is a "multiemployer plan,"
as defined in Section 4001(a)(3) of ERISA.
(vi) PBGC. "PBGC" shall mean the Pension Benefit Guaranty
Corporation.
(vii) Pension Plan. "Pension Plan" shall mean with respect to
Contributors any Employee Plan which is an "employee pension benefit plan"
as defined in Section 3(2) of ERISA (other than a Multiemployer Plan).
(viii) Contributors Employee. "Contributors Employee" shall
mean an employee currently or formerly employed by Contributors for whom
Contributors or an ERISA Affiliate may have any liability as a result of
such employment.
(ix) Welfare Plan. "Welfare Plan" shall mean with respect to
Contributors any Employee Plan which is an "employee welfare benefit
plan", as defined in Section 3(1) of ERISA.
(b) Disclosure; Delivery of Copies of Relevant Documents and Other
Information. Schedule 4.21 contains a complete list of Employee Plans of
Contributors. True and complete copies of each of the following documents have
been delivered by Contributors to the Contributee: (i) each Employee Plan (and
each related trust agreement or other funding instrument) or written description
thereof (where an Employee Plan is not in writing), (ii) the most recent
determination letter issued by the Internal Revenue Service with respect to each
Pension Plan and funded Welfare Plan, (iii) for the three most recent plan
years, Annual Reports on Form 5500 Series required to be filed with any
governmental agency, (iv) all actuarial reports prepared for the last three plan
years for each Pension Plan, (v) a description of complete age, salary, service
and related data as of the last day of the last plan year for employees and
former employees employed in the Business, (vi) a description
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setting forth the amount of any liability of Contributors as of the Closing Date
for payments more than thirty days past due with respect to each Welfare Plan,
and (vii) a summary plan description for each Employee Plan to the extent
required by ERISA. Schedule 4.21 also identifies which of the Employee Plans
covers solely Contributors Employees and which of the Employee Plans are ERISA
Plans.
(c) Representations. Except as set forth on Schedule 4.21,
Contributors represent as follows:
(i) With respect to each Pension Plan, as of the last day of the
last plan year and as of the Closing Date and as of the last day of
the current Plan Year, the "amount of unfunded benefit liabilities"
as defined in Section 4001(a)(18) of ERISA (but excluding from the
definition of "current value" of "assets" of such Pension Plan
accrued but unpaid contributions) did not and will not and is not
expected to, respectively, exceed zero. None of Contributors, or any
ERISA Affiliate of Contributors, has any liability for unpaid
contributions with respect to any Pension Plan.
(ii) There are no Multiemployer Plans with respect to Contributors
Employees.
(iii) Except as specifically identified in Schedule 4.21, (A) each
ERISA Pension Plan and each related trust agreement, annuity
contract or other funding instrument is qualified and tax-exempt
under the provisions of Code Sections 401(a) (or 403(a) as
appropriate) and 501(a) and has been so qualified during the period
from its adoption to date; and (B) each trust or other separately
funded entity related to an ERISA Welfare Plan is tax-exempt under
Section 501(c)(9) of the Code and has been so exempt during the
period from its adoption to date; and (C) no tax is due or will be
incurred by any Welfare Plan which is a Welfare Benefit Fund (as
defined in Section 419(e) of the Code) for any activities on or
before the Closing Date; and (D) no funded Employee Plan has
unfunded liabilities that as of the Closing Date were not fully
reflected on the Financial Statements.
(iv) There has been no, and this Closing shall not result in any,
"reportable event" (as defined in Section 4043(b) of ERISA and the
PBGC regulations under such Section) with respect to any ERISA
Pension Plan. No filing has been made with the PBGC, and no
proceeding has been commenced by any Person (including the PBGC), to
terminate any ERISA Pension Plan. No condition exists and no event
has occurred that could constitute grounds for termination of any
ERISA Pension Plan. No Person has, at any time, incurred any
liability, contingent or otherwise, pursuant to any provision of
Title IV of ERISA or the regulations thereunder, other than for
premiums due the PBGC with respect to any ERISA Pension Plan.
(v) Each Employee Plan and each related trust agreement, annuity
contract or other funding instrument presently complies and has been
maintained in material compliance with its terms and, both as to
form and operation, with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such
Employee Plan, including but not limited to ERISA, the Code and
foreign law.
(vi) None of Contributors, any ERISA Affiliate or any Welfare Plan,
has any present or future obligation to make any payment to or with
respect to any Contributors Employee pursuant to any retiree medical
benefit plan or other Welfare Plan, and no condition exists which
would prevent Contributors from amending or terminating any such
Welfare Plan.
(vii) Except as provided by law and as set forth in Schedule 4.21,
the employment of all current Contributors Employees is terminable
at will.
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(viii) There is no Employee Plan that could give rise to the payment
of any amount that would not be deductible pursuant to the terms of
Sections 162(a)(1), 404 or 280G of the Code.
(ix) No plan fiduciary of any ERISA Employee Plan has engaged in any
transaction in violation of Sections 404 or 406 of ERISA or any
"prohibited transaction," as defined in Section 4975(c)(1) of the
Code, for which no exemption exists under Section 408 of ERISA or
Section 4975(c)(2) or (d) of the Code.
(x) Each Employee Plan and related trust agreement, annuity contract
or other funding instrument is legally valid and binding and in full
force and effect.
(xi) None of Contributors, any ERISA Affiliate or any Employee Plan
is a party to any litigation relating to or seeking benefits under
any Employee Plan.
(xii) None of Contributors, or any ERISA Affiliate has any announced
plan or legally binding commitment to create any additional Employee
Plans or to amend or modify any existing Employee Plan.
(xiii) No event has occurred in connection with an Employee Plan
which Contributors, any ERISA Affiliate or any Employee Plan
directly or indirectly, could be subject to any material liability
under ERISA, the Code or any other law, regulation or governmental
order or under any agreement, instrument, statute, rule of law or
regulation pursuant to or under which Contributors or an ERISA
Affiliate has agreed to indemnify or is required to indemnify any
Person against liability incurred under, or for a violation or
failure to satisfy the requirements of, any such statute, regulation
or order.
(xiv) There are no pending or anticipated lawsuits with respect to
any Employee Plan and there has been no claim for benefits with
respect thereto (except initial claims in the ordinary course) for
which payment has not been made.
(xv) Each and every ERISA Employee Plan which is a group health plan
(as such term is defined in Section 4980B of the Code) complies and
in each and every case has complied with the applicable requirement
of Code Section 4980B(f) and Part 6 of Subtitle 1B of ERISA.
4.22 No Brokers. Contributors do not have nor will have any
obligation to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4.23 Material Misstatements or Omissions. No representations or
warranties by Contributors in this Agreement, nor any document, exhibit,
statement, certificate or schedule furnished or to be furnished to Contributee
pursuant hereto (including, without limitation, the Disclosure Schedule), or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact necessary to make the statements or facts contained therein not
misleading. Contributors have disclosed all events, conditions and facts
materially affecting (i) the Contributed Assets of Contributors, the business or
the condition (financial or otherwise), properties, liabilities, reserves,
working capital, earnings, technology, prospects or relations with customers,
suppliers, distributors or employees of Contributors and (ii) the right or
ability of Contributors to consummate the transactions contemplated hereby.
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4.24 Investment Representations and Warranties.
(a) (i) The Contributors have received and reviewed a copy of the
Private Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") (which Private
Placement Memorandum includes a draft Registration Statement, the Summary of
Partnership Agreement Provisions (the "PARTNERSHIP SUMMARY") and the Summary of
Tax Matters (the "TAX MATTERS SUMMARY")), and understand the risks of, and other
considerations relating to, an investment in Units.
(ii) Each of the Contributors, by reason of his or its business and
financial experience, together with the business and financial experience
of those persons, if any, retained by a Contributor to represent or advise
him or it with respect to its investment in Units,
(A) has such knowledge, sophistication and experience in
financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in Units,
(B) is capable of protecting its own interests or has
engaged representatives or advisors to assist it in protecting
its interests, and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Each of the Contributors is an "accredited investor"
as defined in Rule 501 of the regulations promulgated under
the Securities Act.
(B) If the Contributors have retained or will retain a
person to represent or advise them with respect to their
investment in Units, the Contributors will advise the
Contributee of such retention and, at the Contributee's
request, the Contributors shall, prior to or at the Closing,
(I) acknowledge in writing such representation and
(II) cause such representative or advisor to
deliver a certificate to the Contributee containing such
representations as may be reasonably requested by the
Contributee.
(b) (i) Each of the Contributors understands that an investment in the
Contributee involves substantial risks.
(ii) The Contributors have been given the opportunity to make a
thorough investigation of the proposed activities of the Contributee and
has been furnished with materials relating to the Contributee and its
proposed activities, including, without limitation, the Private Placement
Memorandum, the Partnership Summary and the Tax Matters Summary.
(iii) The Contributors have been afforded the opportunity to obtain
any additional information requested by them.
(iv) The Contributors have had an opportunity to ask questions of
and receive answers from representatives of the Contributee concerning the
Contributee and its proposed activities and the terms and conditions of an
investment in Units.
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(v) Each of the Contributors has relied upon and is making his or
its investment decision based upon the Private Placement Memorandum, the
Partnership Summary, the Tax Matters Summary and other written information
provided to the Contributors by or on behalf of the Contributee.
(c) (i) The Units to be issued to the Contributors at the Closing will
be acquired by the Contributors for their own accounts, for investment only and
not with a view to, or with any intention of, a distribution or resale thereof,
in whole or in part, or the grant of any participation therein.
(ii) None of the Contributors was formed for the specific purpose of
acquiring an interest in the Contributee.
(d) (i) The Contributors acknowledge that
(A) the Units to be issued to the Contributors at the Closing
have not been registered under the Securities Act or state
securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state
securities laws and, if such Units are represented by certificates,
such certificates will bear a legend to such effect,
(B) the Company's and the Contributee's reliance on such
exemptions is predicated in part on the accuracy and completeness of
the representations and warranties of the Contributors contained
herein,
(C) the Units to be issued to the Contributors at the Closing
may not be resold or otherwise distributed unless registered under
the Securities Act and applicable state securities laws, or unless
an exemption from registration is available,
(D) there is no public market for such Units, and
(E) the Contributee has no obligation or intention to register
such Units under the Securities Act or any state securities laws or
to take any action that would make available any exemption from the
registration requirements of such laws, except as provided in the
Registration Rights Agreement.
(ii) The Contributors hereby acknowledge that because of the
restrictions on transfer or assignment of such Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in the
Lock-Up Agreement, the Contributors may have to bear the economic risk of
the investment commitment evidenced by this Agreement and any Units issued
hereunder for an indefinite period of time, although, if applicable,
(A) under the terms of the Exchange Rights Agreement, as it
will be in effect at the time of the IPO, Units will, subject to the
limitations set forth in the Exchange Rights Agreement, be
exchangeable at the request of the holder thereof at any time after
the first anniversary of their issuance for cash based on their fair
market value or, at the option of the Company, for Common Stock and
(B) the holder of any such Common Stock issued upon exchange
of Units will be afforded certain rights to have such Common Stock
registered under the Securities Act and applicable state securities
laws pursuant to the Registration Rights Agreement.
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(e) The address set forth in Section 11.3 is the Contributors'
principal place of business and none of the Contributors has a present intention
of becoming a resident of any country, state or jurisdiction other than the
country and state in which such principal place of business is situated.
4.25 Private Placement Memorandum. (a) The Contributors understand and
acknowledge that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Contributee set forth in the Private Placement
Memorandum, is in draft form only, and such transactions are subject to change
without the consent of the Contributors, so long as any such change does not
result in the Contributors receiving less than $3,000,000 worth of Units
pursuant to Section 2.3(b) of this Agreement.
(b) Without limiting the foregoing, such changes may include the
deletion (or addition) of one or more properties expected to be acquired by the
Contributee and changes in the amount of the indebtedness expected to be repaid
with the proceeds of the IPO.
(c) The Contributee shall not be obligated to obtain the Contributors'
consent as a result of such changes, although such changes could affect the
nature and value of the Contributors' investment in Units.
4.26 Covenant to Remedy Breaches. The Contributors covenant to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Contributors hereunder,
(b) to satisfy all covenants of the Contributors hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Contributors hereunder upon learning of same.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CONTRIBUTEE
Contributee hereby represents and warrants to Contributors as
follows:
5.1 Organization of Contributee. Contributee is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
5.2 Authorization. Contributee has all necessary corporate power
and authority and has taken all Partnership action necessary to enter into this
Agreement, to consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Contributee and is a legal, valid and binding obligation of Contributee,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting creditors' rights generally and
(ii) the general principles of equity, regardless of whether asserted in a
proceeding in equity or at law.
5.3 No Conflict or Violation. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will result in (a) a violation of or a conflict with any provision of the
Partnership Agreement of Contributee, (b) a breach of, or a default under, any
term or
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provision of any contract, agreement, indebtedness, lease, commitment, license,
franchise, permit, authorization or concession to which Contributee is a party,
which breach or default would have a material adverse effect on the business or
financial condition of Contributee, taken as a whole, or its ability to
consummate the transactions contemplated hereby or (c) a violation by
Contributee of any statute, rule, regulation, ordinance, code, order, judgment,
writ, injunction, decree or award, which violation would have a material adverse
effect on the business or financial condition of Contributee, taken as a whole,
or its ability to consummate the transactions contemplated hereby.
5.4 Consents and Approvals. Except as set forth on Schedule 5.4,
no consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority, or any other Person or entity,
is required to be made or obtained by Contributee in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF CONTRIBUTORS AND CONTRIBUTEE
Each of the Contributors and Contributee covenant and agree with
each other as follows:
6.1 Maintenance of Business Prior to Closing. Prior to the
Closing, Contributors shall use their best efforts to continue to carry on the
Business in the ordinary course and consistent with past practice and will not
take any action inconsistent therewith or with the consummation of the
transactions contemplated hereby. Without limiting the generality of the
foregoing, Contributors shall (i) maintain the Contributed Assets in their
current state of repair, excepting normal wear and tear; (ii) maintain insurance
covering the Contributed Assets similar to that in effect on the date hereof;
(iii) use its best efforts to preserve the current business organization of
Contributors intact; (iv) use its best efforts to keep available the services of
its current Personnel; and (v) use its best efforts to preserve the current
business relationships with customers, suppliers, distributors and others having
business dealings with Contributors. Contributors will not engage in any
practice, take any action, embark on any course of inaction or enter into any
transaction that would cause or result in any of its representations and
warranties set forth in Article IV being untrue as of the Closing Date.
6.2 Investigation by Contributee. Between the date of this
Agreement and the Closing, Contributee intends to conduct a review of the
Business and financial condition of Contributors. In connection with such review
by Contributee, Contributors shall allow Contributee and its Representatives,
during regular business hours to make such inspection of the Contributed Assets
of Contributors and to inspect and make copies of Contracts, Books and Records
or other information requested by Contributee and related to the operation of
the Business, including historical financial information concerning the
Business. Contributors shall furnish to Contributee promptly upon request (i)
all such additional documents and information with respect to the affairs of
Contributors relating to the Business or (ii) access to Personnel of
Contributors and to Contributors' Accountant and its Representatives as
Contributee or its Representatives may from time to time reasonably request and
shall instruct such Personnel and Representatives to cooperate with Contributee,
and to provide such information as Contributee and such Representatives may
request.
6.3 Consents and Best Efforts. As soon as practicable,
Contributors will commence all reasonable action to obtain all applicable
Permits, consents, approvals and agreements of, and to give all notices and make
all filings with, any third parties or Authorities as may be necessary to
authorize, approve or permit the consummation of the transactions provided for
hereby on or prior to the Closing Date.
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6.4 Employee Matters. (a) During the period between the date
hereof and the Closing Date, Contributors shall use its best efforts to keep
available current Contributors Employees for employment by Contributee.
Contributors shall encourage each of Contributors' current employees that are
being offered employment with Contributee or its Affiliates following the
Acquisition ("Transferred Employees") to accept any such offer of employment.
(b) With respect to any funded Employee Plan covering solely
Contributors Employees, at Contributee's request, Contributee and Contributors
shall at the Closing take such action and execute such documents as shall be
necessary and proper to transfer the sponsorship of such Plans, together with
the assets relating thereto, from Contributors or an ERISA Affiliate to
Contributee. With respect to any funded Employee Plan that does not cover solely
Contributors Employees, at Contributee's request, Contributors shall take such
action and execute such documents at Closing as shall be necessary and proper to
transfer the portion of the funds, accounts, or policies of those Plans that are
allocable to Contributors Employees to funds established by or on behalf of
Contributee for such employees.
(c) For a period of not more than 60 days following Closing,
Contributors shall continue to maintain and administer the Welfare Plans on
behalf of the Transferred Employees until Contributee shall have established its
own plans for such employees and has commenced administering them. Contributee
shall reimburse Contributors for Contributors' reasonable cost of maintaining
and administering such Plans during such period.
(d) Contributors shall make available to Contributee on and after
the Closing such records regarding the Transferred Employees and the Employee
Plans as Contributee shall reasonably request.
6.5 Notification of Certain Matters. Between the date of this
Agreement and the Closing, Contributors shall give prompt notice to Contributee
of (i) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect any time from
the date hereof to the Closing Date, (ii) any Material Adverse Effect and (iii)
any material failure of Contributors or any Representative of Contributors to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that such disclosure shall not
be deemed to cure any breach of a representation, warranty, covenant or
agreement or to satisfy any condition.
6.6 No Mergers, Consolidations, Sale of Stock or Assets, Etc.
Prior to December 31, 1997, and thereafter provided Contributee and Contributors
are engaged in discussions with respect to the consummation of the transactions
contemplated by this Agreement, each of Contributors and its Affiliates will
not, directly or indirectly, solicit or encourage any inquiries or proposals or
enter into or continue any discussions, negotiations or agreements relating to
the sale or exchange of its capital stock or the merger of Properties Atlantic
with, or any direct or indirect disposition of a significant amount of the
Contributed Assets or the Business to, any Person other than Contributee or its
Affiliates or provide any assistance or any information to or otherwise
cooperate with any Person in connection with any such inquiry, proposal or
transaction. In the event that Contributors or any of its Affiliates receives an
unsolicited offer or proposal for such a transaction or obtains information that
such an offer or proposal is likely to be made, Contributors will (i)
immediately inform the party making such proposal or inquiry of the existence of
Contributors' agreements herein (but without disclosing the name of Contributee
hereunder) and will decline to cooperate with any such proposal or inquiry and
(ii) provide Contributee with notice thereof as soon as practical after receipt,
including the identity of the prospective purchaser or soliciting party and the
terms of any such offer or proposal. Contributors will instruct its
Representatives and Affiliates to refrain from engaging in any of the activities
or discussions described above.
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6.7 Confidentiality. Any information concerning Contributors or
its Affiliates disclosed to Contributee, its Affiliates or their respective
Representatives or concerning Contributee or its Affiliates or their respective
Representatives, which has not been publicly disclosed shall be kept strictly
confidential by them and shall not be disclosed or used by the recipients
whether or not the Closing occurs and until publicly disclosed by Contributors
or Contributee, as the case may be. No press releases shall be issued, nor shall
the terms of this Agreement be disclosed to third parties except as agreed to in
Section 11.10 hereof.
6.8 Disclosure Schedule. Contributors shall deliver to Contributee
the Disclosure Schedules contemplated by this Agreement within 30 days after the
execution and delivery of this Agreement.
ARTICLE VII
CONDITIONS TO CONTRIBUTORS' OBLIGATIONS
The obligations of Contributors to consummate the transactions
provided for hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may be waived by
Contributors:
7.1 Representations, Warranties and Covenants. All representations
and warranties of Contributee contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date as though made on the Closing Date, and Contributee
shall have performed all agreements and covenants required hereby to be
performed by it prior to or at the Closing Date.
7.2 No Governmental Proceedings or Litigation. No Actions by any
Authority shall have been instituted or threatened for the purpose of enjoining
or preventing the transactions contemplated by this Agreement or that questions
the validity or legality of the transactions contemplated hereby.
7.3 Certificates. Contributee will furnish Contributors with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VII as may be reasonably requested by
Contributors which shall include, but not be limited to:
(a) A certificate executed by the Chief Financial Officer of
Contributee certifying as of the Closing Date (i) a true and complete copy of
the Certificate of Limited Partnership of Contributee; (ii) a true and complete
copy of the Partnership Agreement of Contributee that reflects the issuance to
Contributors the number of Units that Contributors are entitled to receive
pursuant to Section 2.3; (iii) a true and complete copy of the resolutions of
the general partner of Contributee authorizing the execution, delivery and
performance of this Agreement by Contributee and the consummation of the
transactions contemplated hereby; and (iv) incumbency matters;
(b) A certificate executed by the President or any Vice President
of Contributee certifying that, as of the Closing Date, the conditions set forth
in Article VII have been satisfied; and
(c) A copy of the Certificate of Limited Partnership of
Contributee and all amendments thereto, certified as of a recent date by the
Secretary of State of Delaware.
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ARTICLE VIII
CONDITIONS TO CONTRIBUTEE'S OBLIGATIONS
The obligations of Contributee to consummate any of the transactions
provided for hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions each of which may be waived by
Contributee in accordance with Section 11.5:
8.1 Representations, Warranties and Covenants. All representations
and warranties of Contributors contained in this Agreement shall be true and
correct in all material respects at and as of the date of this Agreement and at
and as of the Closing Date as though made on the Closing Date, and Contributors
shall have performed all agreements and covenants required hereby to be
performed by Contributors prior to or at the Closing Date.
8.2 Consents. All consents, approvals and waivers from third
parties and Authorities and other parties necessary to permit the consummation
of the transactions contemplated hereby shall have been obtained.
8.3 No Governmental Proceedings or Litigation. No Action by any
Authority shall have been instituted or threatened for the purpose of enjoining
or preventing the transactions contemplated by this Agreement, that questions
the validity or legality of the transactions contemplated hereby, or that could
reasonably be expected to affect materially the right or ability of Contributee
to own, operate or possess any of the Contributed Assets after the Closing.
8.4 No Material Adverse Effect. No event which could have a
Material Adverse Effect on Contributors shall have occurred.
8.5 Certificates. Contributors will furnish Contributee with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VIII as may be reasonably requested by
Contributee, which shall include, but not be limited to:
(a) A certificate executed by the Secretary or an Assistant
Secretary of Properties Atlantic certifying as of the Closing Date (a) a true
and complete copy of the Certificate of Incorporation of Properties Atlantic;
(b) a true and complete copy of the bylaws of Properties Atlantic; (c) a true
and correct copy of the resolutions and/or minutes of meetings of the board of
directors and of the shareholders of Properties Atlantic authorizing the
execution, delivery and performance of this Agreement by Properties Atlantic and
the consummation of the transactions contemplated hereby and (d) incumbency
matters;.
(b) A certificate executed by the President and the Chief
Financial Officer of Properties Atlantic certifying that, as of the Closing
Date, the conditions set forth in Article VII with respect to Properties
Atlantic have been satisfied;
(c) A copy of the Certificate of Incorporation of Properties
Atlantic and all amendments thereto, certified as of a recent date by the
Secretary of State of Florida;
(d) A certificate of good standing of Properties Atlantic,
certified by the appropriate Secretary of State in each state where Properties
Atlantic is qualified to do business;
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(e) A certificate of the Secretary of State of Florida certifying
the good standing of Properties Atlantic in its state of incorporation;
(f) Any and all forms, certificates and/or other instruments
required to pay the transfer and recording taxes and charges arising from the
transactions contemplated by this Agreement, together with evidence reasonably
satisfactory to Contributee that such transfer taxes and charges have been paid;
(g) A certificate of non-foreign status with respect to each
Contributor that the Contributors are in compliance with Section 1445 of the
Code;
(h) An assignment, in a form reasonably satisfactory to
Contributee's counsel, of all of Contributors' right to any lock box and/or bank
account into which payments are made by Contributors' customers, distributors or
any other Person in respect of Contributors' accounts receivable or any other
Contributed Asset; and
(i) Such other separate instruments of sale, assignment or
transfer and such other documents executed by Contributors and/or any third
party, if necessary, that Contributee may reasonably deem necessary or
appropriate in order to perfect, confirm or evidence title to all or any part of
the Contributed Assets as required by this Agreement or to otherwise consummate
the transactions contemplated hereby.
8.6 Due Diligence Review. Contributee shall be satisfied, to its
sole satisfaction, with the content of the Disclosure Schedules.
8.7 Consents. Subject to Schedule 1.1B, all of the Contracts shall
have been assigned to Contributee and any consents required as a consequence of
the transactions contemplated by this Agreement with respect to all of the
Permits and all of the Contracts shall have been obtained or granted, including
without limitation, consents by any third party to the assignment of the
Contracts set forth on Schedule 1.1A and 4.6 and the Facility Leases set forth
on Schedule 4.5, which consents shall not in any manner restrict the ability of
Contributee and its Affiliates to conduct the business of Contributors as
previously conducted.
8.8 Bank Account Signatories. All Personnel of Properties Atlantic
shall have been removed as authorized signatories for any bank accounts of
Properties Atlantic and, to the extent requested by Contributee, replaced with
Persons designated by Contributee.
8.9 Closing of IPO. The IPO shall have been consummated and the
net proceeds from the IPO which is to be contributed to the Contributee by the
Company is sufficient, as determined by the Contributee in its reasonable
discretion, to enable Contributee to apply such portion of the net proceeds to
acquire such other properties or interests, to repay principal interest and
other amounts due with respect to indebtedness and to meet such other
obligations as may be described in the Registration Statement on Form S-11
prepared and filed in connection with the IPO, as the same may be in effect on
the day the IPO closes.
8.10 Lock-Up Letter. The Contributors shall have entered into a
Lock-Up Agreement with the Contributee, substantially in the form as Exhibit G
attached hereto, whereby Contributors will not be permitted to transfer Units
for up to two years after the Closing, except as otherwise permitted under such
Lock-Up Agreement.
8.11 Exchange Rights Agreement. The Contributors shall have entered
into an Exchange Rights Agreement with the Contributee and the Company,
substantially in the form of Exhibit H hereto.
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8.12 Registration Rights Agreement. The Contributors shall have
entered into a Registration Rights Agreement with the Company substantially in
the form as Exhibit I hereto.
ARTICLE IX
ACTIONS BY CONTRIBUTORS AND CONTRIBUTEE
9.1 Books and Records. Contributors and Contributee agree that
each will cooperate with and make available to the other party, during normal
business hours, all Books and Records, information and Personnel (without
substantial disruption of employment) retained and remaining in existence after
the Closing Date that are necessary or useful in connection with any tax return,
inquiry, audit, investigation or dispute, any litigation or investigation or any
other matter requiring any such Books and Records, information or employees for
any reasonable business purpose. Without limiting the foregoing, Contributee and
Contributors shall retain, until the applicable statutes of limitations
(including any extensions thereof) have expired, copies of Books and Records
related to Taxes for all tax periods or portions thereof ending before or
including the Closing Date and shall not destroy or otherwise dispose of any
such records without first providing the other party with a reasonable
opportunity to review and copy the same. The party requesting any such Books and
Records, information or employees shall bear all of the out-of-pocket costs and
expenses (including without limitation, attorneys' fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such Books and Records, information or employees.
9.2 Survival of Representations, Etc. All statements contained in
the Disclosure Schedule or in any exhibit, schedule, certificate or instrument
of conveyance delivered by or on behalf of the parties pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the parties delivering the same
hereunder. The representations, warranties, covenants and agreements of
Contributors and Contributee contained herein and as provided in the preceding
sentence shall survive the Closing Date until the first anniversary of the
Closing Date, without regard to any investigation made by any of the parties
hereto; provided, however, that (i) the representations and warranties contained
in Sections 4.15 and 4.21 shall survive until the expiration of the applicable
statute of limitations (giving effect to any waiver or extension thereof), (ii)
the covenants contained in Article IX shall survive until the end of the
applicable Non-competition Period and (iii) the representations and warranties
contained in Sections 4.3 and 4.20 and the covenants and agreements contained in
Article XI shall survive without limitation indefinitely.
9.3 Indemnifications.
(a) By Contributors. (1) Contributors shall indemnify, save and
hold harmless Contributee and its Affiliates, and its and their respective
Representatives, from and against any and all costs, losses (including, without
limitation, diminution in value), liabilities, damages, lawsuits, deficiencies,
claims and expenses (whether or not arising out of third-party claims),
including, without limitation, interest, penalties, additions, travel expenses,
wages allocable to loss of employee time, attorneys' fees and all amounts paid
in investigation, defense or settlement of any of the foregoing (herein, the
"Damages"), incurred in connection with or arising out of or resulting from (i)
any breach of any representation, warranty, covenant or agreement, or the
inaccuracy of any representation or warranty, made by Contributors in or
pursuant to this Agreement (whether or not such claims or causes of action with
respect thereto are described, listed or reflected on the Disclosure Schedule);
(ii) any liabilities under any Pension Plan, ERISA Plan or Welfare Plan or for
workers compensation, severance or other employment related liabilities of
Contributors (whether or not such liabilities are described, listed or reflected
on the Disclosure Schedule); (iii) any liabilities of Contributors in respect of
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any Taxes relating to any taxable period prior to the Closing Date or imposed as
a result of the transactions contemplated by this Agreement (whether or not such
liabilities are described, listed or reflected on the Disclosure Schedule); (iv)
any liabilities arising out of the presence, release or disposal of any
Hazardous Substances, Environmental Claims or the violation of any Environmental
Laws prior to the Closing Date (whether or not such liabilities are described,
listed or reflected on the Disclosure Schedule); and (v) any Excluded Liability
of Contributors being imposed or threatened to be imposed upon Contributee, its
Affiliates or Subsidiaries or any of its or their respective Representatives by
reason of Contributee's status as transferee of the Business or the Contributed
Assets of Contributors or otherwise. The term "Damages" as used in this Section
9.3 is not limited to matters asserted by third parties against Contributors or
Contributee, but includes Damages incurred or sustained by Contributors or
Contributee in the absence of third party claims.
(2) At the Closing, Contributors shall enter into a pledge and
security Agreement (the "Pledge Agreement"), pursuant to which Contributors
shall pledge the Units to Contributee to secure Contributors' obligations under
Section 9.3(a)(1). The Pledge Agreement shall be in terms reasonably
satisfactory to the parties but shall provide for a release of the pledge in the
event no claim made by Contributee against Contributors remains unsatisfied on
the first anniversary of the Closing Date. Upon full satisfaction of all claims
that were unsatisfied on the first anniversary of the Closing Date, the pledge
shall be released.
(b) By Contributee. Contributee shall indemnify and save and hold
harmless Contributors and its Affiliates, and its and their respective
Representatives, from and against any and all Damages incurred in connection
with or arising out of or resulting from (i) any breach of any covenant or
warranty, or the inaccuracy of any representation or warranty, made by
Contributee in or pursuant to this Agreement; and (ii) any Assumed Liability
being imposed upon Contributors or any of its Representatives or Affiliates of
Contributors.
(c) Defense of Claims. If any action or proceeding (including any
governmental investigation or inquiry by any Authority) shall be brought or
asserted or threatened to be brought or asserted against an indemnified party in
respect of which indemnity may be sought from an indemnifying party, such
indemnified party shall promptly notify the indemnifying party in writing, and
the indemnifying party may, in its sole discretion, promptly upon receipt of
such notice, assume the defense thereof, including the employment of counsel
satisfactory to such indemnified party and the payment of all expenses. The
indemnifying party shall not, except with the written consent of the indemnified
party, consent to the entry of a judgment or settlement which does not include
as an unconditional term thereof the giving by the claimant or plaintiff to the
indemnified party of an unconditional release from all liability in respect of
such third party claim or demand. If the indemnifying party elects to assume the
defense of any such action of proceeding, the indemnified party shall have the
right, in its sole discretion, to employ separate counsel in any such action and
to participate in the defense thereof, but the fees and expenses of such counsel
shall be the expense of such indemnified party unless (a) the indemnifying party
has agreed to pay such fees and expenses or (b) the indemnifying party shall
have elected not to assume the defense of such action or proceeding or shall
have failed to promptly assume the defense of such action or proceeding or shall
have failed to employ counsel satisfactory to such indemnified party in any such
action or proceeding or (c) the named parties to any such action or proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to such
indemnified party that are different from or additional to those available to
the indemnifying party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action or proceeding on behalf of such
indemnified party, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or
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proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for such indemnified party and any
other indemnified parties, which firm shall be designated in writing by such
indemnified parties). The indemnifying party shall not be liable for any
settlement of any such action or proceeding effected without its written
consent, but if settled with its written consent (which shall not be
unreasonably withheld), or if there be a final judgment for the plaintiff in any
such action or proceeding, the indemnifying party agrees to indemnify and hold
harmless such indemnified parties from and against any loss or liability by
reason of such settlement or judgment. If either party shall claim
indemnification for Damages hereunder for any claim other than a third party
claim, the indemnified party shall promptly notify the indemnifying party of the
nature of the claim and the amount of the Damages and payment therefor shall be
made by the indemnifying party forthwith upon receipt of such notice.
(d) Limitation on Indemnity. The indemnification obligations of
the parties hereto with respect to any breach of any representation, warranty,
covenant or agreement pursuant to the Section 9.3 shall be limited to claims for
Damages made prior to the last date of survival thereof referred to in Section
9.2, provided that any claims for Damages made prior to such date of survival
shall survive until such claim is finally resolved, whether pursuant to (i) an
agreement between Contributee and Contributors, (ii) a final, non-applicable
order of a court of competent jurisdiction or arbitrator or (iii) a written
settlement or compromise of a third party claim.
9.4 Further Assurances. Each of Contributee and Contributors shall
use all commercially reasonable efforts to take all action and to do all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement (including, without limitation, satisfying the
closing conditions set forth in Articles VII and VIII hereof). Following the
Closing (and subject to the parties' confidentiality obligations under this
Agreement), the parties hereto shall furnish to each other and their respective
Representatives such necessary and available information as may reasonably be
requested in connection with tax, accounting and similar matters relating to the
Contributed Assets or the business of Contributors prior to or after the
Closing.
ARTICLE X
MISCELLANEOUS
10.1 Termination. (a) This Agreement may be terminated at any time prior
to the Closing:
(i) by mutual consent of Contributors and Contributee or by
either party, if the Closing has not occurred on or prior to
December 31, 1997;
(ii) by Contributee, if Contributee is prepared to close and
all conditions to Contributors' obligation to close have been
satisfied and Contributors fails to close on or prior to December
31, 1997; and
(iii) by Contributors, if Contributors are prepared to close
and all conditions to Contributee's obligation to close have been
satisfied and Contributee fails to close on or prior to December 31,
1997.
(b) In the event of the termination of this Agreement:
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(i) each party will redeliver all documents, records, work
papers, notes, analyses, data, and other material of any other
party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to
the party furnishing the same;
(ii) if this Agreement is terminated pursuant to paragraph
(a)(ii) above, Contributors shall reimburse Contributee for
all of its out-of-pocket expenses incurred in connection with
or relating to the negotiation, preparation, execution and
delivery of this Agreement including, without limitation, due
diligence expenses, fees and disbursements of counsel and
other consultants (including environmental), accountants and
advisors and Contributee shall not be liable to Contributors
for any fees or expenses incurred by Contributors or its
Representatives; and
(iii) if this Agreement is terminated pursuant to paragraph
(a)(iii) above, Contributee shall reimburse Contributors for
all of its out-of-pocket expenses incurred in connection with
or relating to the negotiation, preparation, execution and
delivery of this Agreement including, without limitation, fees
and disbursements of counsel and other consultants,
accountants and advisors and Contributors shall not be liable
to Contributee for any fees or expenses incurred by
Contributee or its Representatives.
10.2 Assignment. The parties to this Agreement may assign
their rights under this Agreement, but not their obligations hereunder, without
the prior written consent of all other parties to this Agreement. Without
limiting the generality of the foregoing, Contributors agrees to the assignment
by Contributee of its rights pursuant to this Agreement, including its rights to
indemnification, to any Affiliate or subsidiary of Contributee and agrees to
execute any appropriate agreement or instrument that Contributee may reasonably
request in order to effect or evidence such assignment or consent.
10.3 Notices; Transfer of Funds. All notices, requests,
demands and other communications which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if Personally delivered; when transmitted if transmitted by telecopy,
electronic or digital transmission method; the day after it is sent, if sent for
next day delivery to a domestic address by recognized overnight delivery service
(e.g., Federal Express); and upon receipt, if sent by certified or registered
mail, return receipt requested. In each case notice shall be sent:
If to Contributors, to:
Properties Atlantic, Inc.
399 Caroline Avenue, Suite 200
Winter Park, Florida 32789
Telecopy: 407-740-8838
Attention: Clifford Stein
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If to Contributee, addressed to:
Tower Realty Operating Partnership, L.P.
120 West 45th Street, 24th Floor
New York, New York 10036
Telecopy: (212) 768-9010
Attention: Lawrence H. Feldman
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
10.4 Choice of Law; Service of Process. (a) This Agreement
shall be construed, interpreted and the rights of the parties determined in
accordance with the laws of the State of New York without reference to its
choice of law provisions.
(b) The parties hereto hereby irrevocably submit to the
jurisdiction of the United States District Court for the Southern District of
New York (or, if subject matter jurisdiction in that court is not available, in
any state court located within the City of New York) over any dispute arising
out of or relating to this Agreement or any of the transactions contemplated
hereby and each party hereby irrevocably agrees that all claims in respect of
such dispute or proceeding shall be heard and determined in such court. The
parties hereby irrevocably waive, to the fullest extent permitted by applicable
law, any objection which they may now or hereafter have to the laying of venue
of any such dispute brought in such court or any defense of inconvenient forum.
10.5 Entire Agreement; Amendments and Waivers. This
Agreement, together with all exhibits and schedules hereto (including, without
limitation, the Disclosure Schedule), constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
10.6 Multiple Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.7 Expenses. Except as set forth above or as otherwise
specified herein, each party hereto shall pay its own legal, accounting,
out-of-pocket and other expenses incident to this Agreement and to any action
taken by such party in preparation for carrying this Agreement into effect.
10.8 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
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10.9 Titles. The titles, captions or headings of the Articles
and Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
10.10 Publicity. Any press release or public statement by
Contributors or Contributee or any of their respective Affiliates regarding the
transactions contemplated hereby shall be reviewed by Contributors and
Contributee prior to its release. The parties hereto shall issue a mutually
acceptable press release as soon as practicable after the execution and delivery
of this Agreement; provided, however, that nothing herein shall be deemed to
prohibit any party from making any disclosure which its counsel deems necessary
in order to fulfill such party's disclosure obligations imposed by law.
10.11 Burden and Benefit. This Agreement shall be binding upon
and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. There are no third party beneficiaries of this
Agreement; provided, however, that any Person that is not a party to this
Agreement but, by the terms of Section 9.3, is entitled to indemnification,
shall be considered a third party beneficiary of this Agreement, with full
rights of enforcement as though such Person was a signatory to this Agreement.
10.12 Cumulative Remedies. All rights and remedies of either
party hereto are cumulative of each other and of every other right or remedy
such party may otherwise have at law or in equity, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise of other rights or remedies.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
CONTRIBUTEE:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., general partner
By: /s/ Lawrence H. Feldman
-----------------------------------
Name: Lawrence H. Feldman
Title: President
CONTRIBUTORS:
PROPERTIES ATLANTIC, INC.
By: /s/ Reid Berman
----------------------------------------
Name: Reid Berman
Title: President
/s/ Clifford Stein
---------------------------------------------
CLIFFORD STEIN
/s/ Reid Berman
---------------------------------------------
REID BERMAN
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<PAGE> 1
EXHIBIT 10.30
TOWER 45
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 28th day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and STELLAR
ASSOCIATES (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns a limited partner interest in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to purchase for cash and through
a contribution to capital from the Grantor, and the Grantor desires to grant to
the Operating Partnership, an option to acquire, on the terms and conditions
set forth herein, all interests owned by the Grantor in the Partnership as set
forth on Schedule A attached hereto and any other direct or indirect interests
the Grantor may have, whether now owned or hereinafter acquired, in the
Partnership, or in the properties owned by the Partnership (collectively, the
"INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares
of the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to purchase for cash
and through a contribution to the capital of the Operating Partnership all the
Grantor's right, title and interest in the Interests, including but not limited
to, the Interest set forth on Schedule A attached hereto, on the terms and
conditions set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership
during the 10 business day period commencing on the first business day
following the removal of each such prohibition, stay, order, injunction,
action, proceeding or similar limitation in effect at that time. Subject to the
foregoing, if the Operating Partnership does not exercise the Option by the
Option Termination Date, such Option shall be deemed terminated and shall be of
no further force or effect and the Grantor shall have no further obligations
hereunder.
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1.3 Acquisition Consideration. (a) The consideration (the "ACQUISITION
CONSIDERATION") to be received by each Grantor in respect of the contribution
of the Grantor's Interests to the Operating Partnership shall be an amount
equal to $200.00 (two hundred dollars). The Acquisition Consideration shall be
paid in the form of a combination of (i) cash and/or (ii) units of limited
partnership interest in the Operating Partnership ("OP UNITS"), in the
percentages and allocations set forth on Schedule B attached hereto. To the
extent a percentage of the Acquisition Consideration includes one or more OP
Units, as set forth on Schedule B, the number of OP Units the Grantor shall be
entitled to receive upon the exercise of the Option with respect to such
percentage shall equal the quotient of
(A) the amount of Acquisition Consideration to be paid in OP
Units, divided by
(B) the midpoint of the proposed per share offering price for the
shares of Common Stock as set forth in the final preliminary prospectus
included in the Company's Registration Statement on Form S-11 prepared and
filed with the Securities and Exchange Commission in connection with the IPO.
1.4 Lock-Up Agreements. The OP Units to be issued to the Grantor
hereunder shall be subject to Lock-Up Agreements to be executed at the Closing
(as hereinafter defined) by the Operating Partnership and the Grantor,
substantially in the forms attached as Exhibits A and B attached hereto,
whereby the Grantor will not be permitted to transfer OP Units for two years
after the Closing, except as otherwise permitted under such agreement.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise
of the Option, the Grantor shall, in accordance with Section 2.2 hereof,
transfer, assign, and convey to the Operating Partnership and the Operating
Partnership shall accept as a contribution to its capital from the Grantor, all
right, title and interest in and to the Interests, free and clear of all
Encumbrances (as defined in Section 3.1(a)), in exchange for the Acquisition
Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a notice
(the "OPTION NOTICE"), which notice shall state the date (the "CLOSING DATE")
of the closing of the transactions contemplated by Section 2.1 (the "CLOSING"),
which date shall be no less than 10 days and no more than 30 days following the
date of such Option Notice.
(i) The Closing shall be held within the period specified in the
Option Notice at the offices of Battle Fowler LLP, 75 East 55th Street, New
York, New York, or at the offices of the attorneys for the lead underwriter of
the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute and deliver
all closing documents (the "CLOSING DOCUMENTS") required by the Operating
Partnership pursuant to Section 2.3 and, pending the Closing, deposit such
Closing Documents in escrow with Battle Fowler, LLP as escrow agent of the
Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the
Company is sufficient, as determined by the Operating Partnership in its
reasonable discretion, to enable the Operating Partnership (i) to acquire all
the Interests, and (ii) to apply such portion of the net proceeds to acquire
such other properties or interests, to repay principal, interest and other
amounts due with respect to indebtedness and to meet such other obligations as
may be described in the Registration Statement on Form S-11 prepared and filed
in connection with the IPO (the "REGISTRATION STATEMENT"), as the same shall be
in effect on the day of the Offerings Closing.
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(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to the
Escrow Agent or its designee
(A) the Acquisition Consideration (any cash portion of which
shall be delivered in immediately available funds by check or
wire transfer),
(B) a certificate of the general partner of the Operating
Partnership (the "GENERAL PARTNER") certifying that the Grantor
has been or will be, effective as of the Closing, admitted as a
limited partner of the Operating Partnership and that the
Operating Partnership's books and records indicate or will
indicate that the Grantor is the holder of the number of OP Units
that Grantor is entitled to receive pursuant to Section 1.3, and
(C) if such OP Units are to be represented by certificates,
a certificate or certificates in the name of the Grantor
representing the number of OP Units to which the Grantor is
entitled; and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or approvals
of any governmental or administrative agency or authority or any third
party necessary in order to consummate the contribution of the
Interests, or there exists an order or judgment enjoining, restraining
or prohibiting, or assessing substantial damages in respect of such
consummation, or there shall be any action or proceeding instituted or
threatened in writing to enjoin, restrain, prohibit or assess
substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the contribution
of all of the Interests, notify the Escrow Agent of such election and
direct the Escrow Agent to return the Grantor's Closing Documents to
the Grantor, or
(y) in all other cases, equitably adjust the delivery with
respect to the Grantor pursuant to clause (c)(i) above to reflect the
portion of the Grantor's Interests with respect to which the purchase
is actually being made(provided, that, in no event shall the
Acquisition Consideration, as adjusted hereunder, consist of less than
one OP Unit), which adjustment shall be determined in the Operating
Partnership's reasonable discretion, and shall in all events be
binding upon the Grantor.
(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and
void ab initio and the Operating Partnership will direct the Escrow Agent to
destroy the Closing Documents it holds. This Agreement shall thereafter
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remain in effect and the Operating Partnership may thereafter exercise the
Option again at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be
in the form attached hereto as Exhibit C attached hereto and shall contain a
warranty of title that the Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and warranties
and the satisfaction of all covenants contained in Article III hereof,
or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent
that the Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
(i) the Grantor is a corporation, limited partnership, general
partnership, limited liability company or trust duly organized,
validly existing and in good standing under the laws of the state of
its organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of
this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the Grantor's
charter and/or bylaws, partnership agreement, operating agreement
and articles of organization or declaration of trust, as
applicable, or, to the knowledge of such counsel, any indenture,
deed of trust, mortgage, loan or credit agreement or other
material agreement or instrument to which the Grantor is a party
or by which it or its assets or properties are bound or affected,
except for such breach or violation as the Operating Partnership
has represented and warranted will be waived or cured, or
discharged or repaid prior to or contemporaneously with the
Closing;
(B) to the knowledge of such counsel, constitute a violation
or any order, judgment or decree to which the Grantor is a party
or by which it or any of its assets or properties are bound or
affected; or
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<PAGE> 5
(C) to the knowledge of such counsel, result in the creation
of any lien, charge or encumbrance upon any of the Grantor's
assets or properties, except for Permitted Pledges (as defined in
Section 3.1(a)); and
(iii) all applicable corporate, partnership, limited liability
company or trust action necessary for the Grantor to execute and
deliver this Agreement and the Closing Documents and to perform the
transactions contemplated hereby and thereby has been taken and that
the same have been validly executed and delivered and are the valid
and binding obligations of the Grantor enforceable against it in
accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) The Lock-up Agreements and a duly executed signature page to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, a copy of which is attached hereto as Exhibit D (the "PARTNERSHIP
AGREEMENT").
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey
the Grantor's Interests to the Operating Partnership and to otherwise effect
the transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to
file its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase
of the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action
as the Operating Partnership may reasonably request in order to effect the
transactions contemplated
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<PAGE> 6
by this Agreement, including instruments or documents deemed necessary or
desirable by the Operating Partnership to effect and evidence the purchase of
the Grantor's Interests by the Operating Partnership in accordance with the
terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity
financing of any real property owned by the Partnership (any such pledge, a
"PERMITTED PLEDGE")), voting agreement, option, charge, security interest,
mortgage, deed of trust, encumbrance, right of assignment, purchase right or
other rights of any nature whatsoever (each, an "ENCUMBRANCE"), and has full
power and authority to convey free and clear of any Encumbrances, its Interests
and, upon delivery of an Assignment by the Grantor conveying its Interests and
delivery of the Acquisition Consideration by the Operating Partnership for such
Interests as herein provided, the Operating Partnership will acquire good and
valid title thereto, free and clear of any Encumbrance, except Encumbrances
created in favor of the Operating Partnership by the transactions contemplated
hereby.
(b) Each of the Grantor's Interests representing an interest in the
Partnership has been validly issued and the Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Interest represents an interest that are required to
be funded or advanced prior to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with
respect to any of the Interests except, in the case of any Interest
constituting an interest in the Partnership, as set forth in the partnership
agreement of the Partnership.
(d) The Grantor has no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto
(the"Other Partnerships and Properties") except for the Interests identified on
Exhibit A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership
may reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantor may assume that the consents and waivers
of rights set forth in Section 6.9 hereof have been given by all partners of
the Partnership, partners in partnerships, members of limited liability
companies or beneficiaries of trusts (in each case, only in their capacity as
such) in which the Grantor's Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
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<PAGE> 7
(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing Document
and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor pursuant to this Agreement;
(ii) to perform the transactions contemplated hereby and thereby;
and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been
taken, or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal, state,
local or other laws applicable to the Grantor or require the Grantor
to obtain any approval, consent or waiver of, or make any filing with,
any person or authority (governmental or otherwise) that has not been
obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation of,
constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which the property of the Grantor is bound or
affected, or result in the creation of any Encumbrance on any of the
property or assets of any Partnership in which any Interest of the
Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantor may assume
(i) that the consents and waivers of rights set forth in Section
6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect
interests and
(ii) that, for purposes of making such representation as of the
date hereof, any Permitted Pledge has been released.
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<PAGE> 8
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or
arbitration against or affecting all or any portion of its Interests, which in
any such case would impair the Grantor's ability to enter into and perform all
of its obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantor may assume
(i) that the consents and waivers of rights set forth in Section
6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect
interests and
(ii) that, for purposes of making such representations as of the
date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that
it will not enter into, any agreement, arrangement or understanding with any
person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in
connection with the contribution of Interests to the capital of the Operating
Partnership (which Private Placement Memorandum includes a draft Registration
Statement, the Summary of Partnership Agreement Provisions (the "PARTNERSHIP
SUMMARY") and the Summary of Tax Matters (the "TAX MATTERS SUMMARY"), and
understands the risks of, and other considerations relating to, an investment
in OP Units.
(ii) The Grantor, by reason of its business and financial
experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with
respect to its investment in OP Units,
(A) has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions
of this type that it is capable of evaluating the merits and
risks of and of making an informed investment decision with
respect to an investment in OP Units,
(B) is capable of protecting its own interest or has engaged
representatives or advisors to assist it in protecting its
interests and
(C) is capable of bearing the economic risk of such
investment.
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<PAGE> 9
(iii) (A) The Grantor is an "accredited investor" as defined
in Rule 501 of the regulations promulgated under the Securities
Act.
(B) If the Grantor has retained or retains a person to
represent or advise it with respect to its investment in OP
Units, the Grantor will advise the Operating Partnership of such
retention and, at the Operating Partnership's request, the
Grantor shall, prior to or at the Closing,
(I) acknowledge in writing such representation and
(II) cause such representative or advisor to deliver a
certificate to the Operating Partnership containing such
representations as may be reasonably requested by the
Operating Partnership.
(b) (i) The Grantor understands that an investment in the Operating
Partnership involves substantial risks.
(ii) The Grantor has been given the opportunity to make a thorough
investigation of the proposed activities of the Operating Partnership and has
been furnished with materials relating to the Operating Partnership and its
proposed activities, including, without limitation, the Private Placement
Memorandum, the Partnership Summary and the Tax Matters Summary.
(iii) The Grantor has been afforded the opportunity to obtain any
additional information requested by it.
(iv) The Grantor has had an opportunity to ask questions of and
receive answers from representatives of the Operating Partnership concerning
the Operating Partnership and its proposed activities and the terms and
conditions of an investment in OP Units.
(v) The Grantor has relied and is making its investment decision
based upon the Private Placement Memorandum, the Partnership Summary, the Tax
Matters Summary and other written information provided to the Grantor by or on
behalf of the Operating Partnership.
(c) (i) The OP Units to be issued to the Grantor at the Closing will
be acquired by the Grantor for its own account, for investment only and not
with a view to, or with any intention of, a distribution or resale thereof, in
whole or in part, or the grant of any participation therein.
(ii) The Grantor was not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
(d) (i) The Grantor acknowledges that
(A) the OP Units to be issued to the Grantor at the Closing
have not been registered under the Securities Act or state
securities laws by reason of a specific exemption or exemptions
from registration under the Securities Act and applicable state
securities laws and, if such OP Units are represented by
certificates, such certificates will bear a legend to such
effect,
(B) the Company's and the Operating Partnership's reliance
on such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of the Grantor
contained herein,
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(C) the OP Units to be issued to the Grantor at the Closing
may not be resold or otherwise distributed unless registered
under the Securities Act and applicable state securities laws, or
unless an exemption from registration is available,
(D) there is no public market for such OP Units, and
(E) the Operating Partnership has no obligation or intention
to register such OP Units under the Securities Act or any state
securities laws or to take any action that would make available
any exemption from the registration requirements of such laws.
(ii) The Grantor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in
the Lockup Agreements, the Grantor may have to bear the economic risk
of the investment commitment evidenced by this Agreement and any OP
Units issued hereunder for an indefinite period of time.
(e) The address set forth under the Grantor's signature on the
signature page hereto is the address of the Grantor's principal place of
business or, if a natural person, the address of the Grantor's residence, and
the Grantor has no present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which such principal
place of business or residence is situated.
3.7 Private Placement Memorandum. (a) The Grantor understands and
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of the Grantor.
(b) Without limiting the foregoing, such changes may include the
deletion (or addition) of one or more properties expected to be acquired by the
Operating Partnership and changes in the amount of the indebtedness expected to
be repaid with the proceeds of the Offerings.
(c) The Operating Partnership shall not be obligated to obtain the
Grantor's consent as a result of such changes, although such changes could
affect the nature and value of the Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
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4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing Document
to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and thereby;
and
(iii) to issue OP Units to each Grantor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with
its respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal, state,
local or other laws applicable to the Operating Partnership or require
the Operating Partnership to obtain any approval, consent or waiver
of, or make any filing with, any person or authority (governmental or
otherwise) that has not been obtained or made and which does not
remain in effect; and
(iii) does not and will not result in a breach or a violation of,
constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V: POWER OF ATTORNEY
5.1 Grant of Power of Attorney. (a) The Grantor does hereby
irrevocably appoint Lawrence H. Feldman, Robert Cox and the Operating
Partnership, and each of them individually, with full power of substitution
(each such person or the Operating Partnership or any such successor of any of
them acting in his, her or its capacity as attorney-in-fact pursuant hereto, an
"ATTORNEY-IN-FACT"), as the true and lawful attorney-in-fact and agent of the
Grantor, to act in the name, place and stead of the Grantor:
(i) To take for the Grantor all steps deemed necessary or
advisable by the Operating Partnership in connection with the
Offerings, including without limitation
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(A) filing a registration statement and amendments thereto
(the "Registration Statement") under the Securities Act which
describes the benefit to be received by the Grantor in connection
with the formation of the Company and the offering of the
Company's Common Stock,
(B) distributing a preliminary prospectus and prospectus
regarding the offering of the Company's Common Stock
(respectively, the "PRELIMINARY PROSPECTUS" and "PROSPECTUS")
which contain such information as is deemed necessary or
desirable to lawfully effect the IPO, and preliminary and final
offering memoranda regarding the offering of the Company's Common
Stock in the concurrent private placement, which contain such
information as is deemed necessary or desirable to effect the
concurrent private placement,
(C) to enter into the Lock-Up Agreements, and
(D) to take such other steps as the Attorney-in-Fact may
deem necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the
sale of the Grantor's Interests to the Operating Partnership, and any
consents contemplated by Section 6.9 hereof) and, in general, to do
all things and to take all actions which the Attorney-in-Fact in its
sole discretion may consider necessary or proper in connection with or
to carry out the transactions contemplated by this Agreement and the
Closing Documents as fully as could the Grantor if personally present
and acting.
(b) (i) The Power of Attorney granted by the Grantor pursuant to this
Article V and all authority conferred hereby is granted and conferred
subject to and in consideration of the interest of the Operating
Partnership and the Company and is for the purpose of completing the
transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantor granted hereby and all
authority conferred hereby is coupled with an interest and therefore
shall be irrevocable and shall not be terminated by any act of the
Grantor or by operation of law, whether by the death, disability,
incapacity, dissolution or liquidation of the Grantor or by the
occurrence of any other event or events (including without limitation
the termination of any trust or estate for which the Grantor is acting
as a fiduciary or fiduciaries), and if, after the execution hereof,
the Grantor shall die or become disabled or incapacitated or is
dissolved or liquidated, or if any other such event or events shall
occur before the completion of the transactions contemplated by this
Agreement, each Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such death,
disability, incapacity, dissolution, liquidation or other event or
events had not occurred and regardless of notice thereof.
(c) The Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and
notarized.
(d) The Grantor acknowledges that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as
Attorney-in-Fact may have, an economic interest in the transactions
contemplated by this Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantor hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
12
<PAGE> 13
Prospectus or any Preliminary Prospectus, nor for any aspect of either
Offering, and it shall not be liable for any error of judgment or for any act
done or omitted or for any mistake of fact or law except for its own gross
negligence or bad faith.
(c) The Grantor agrees to indemnify each Attorney-in-Fact for and to
hold each Attorney-in-Fact harmless against any loss, claim, damage or
liability incurred or in part arising out of or in connection with its acting
as Attorney-in-Fact under the Power of Attorney created by the Grantor hereby,
as well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantor agrees that each Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership
and/or the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and
in accordance with the opinion of such counsel.
5.3 Ratification; Third Party Reliance. The Grantor does hereby ratify
and confirm all that any Attorney-in- Fact shall lawfully do or cause to be
done by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement without notice to or the consent of any Grantor
for the purpose of adding additional Grantors as parties hereto or deleting
Grantors as parties hereto and conforming Exhibits A and B in connection with
such additions or deletions. No waiver of any provisions of this Agreement
shall be valid unless in writing and signed by the party against whom
enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same
instrument and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law)
by the Operating Partnership without the prior written consent of the Grantor,
or by the Grantor without the prior written consent of the Operating
Partnership, and any attempted assignment without such consent shall be void
and of no effect; provided, further, however, that the Operating Partnership
may assign all or any portion of this Agreement and the Closing Documents and
any agreement contemplated hereunder or thereunder to the Company or to an
affiliate of the Operating Partnership or the Company without the consent of
the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
13
<PAGE> 14
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at
law or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or
may be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
14
<PAGE> 15
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of
a direct or indirect interest in a partnership in which an Interest of the
Grantor represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership interest
in any property,
(ii) the conveyance or agreement to convey by a partner thereof or
by any holder of an indirect interest therein of its direct or
indirect interest in such partnership to the Operating Partnership or
the Company or to another person in connection with the formation of
the Operating Partnership or the Company as described in the
Registration Statement, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
(B) the direct or indirect acquisition by the Operating
Partnership or the Company of any such direct or indirect interest, or
(C) the transactions described in or contemplated by the
Registration Statement, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a direct or
indirect interest in such partnership or an undivided tenant-in-common
interest in the property represented by such partnership interest,
(B) the entering into of any agreement with any person or
entity that grants to such person or entity the right to purchase a
direct or indirect interest in such partnership, and
(C) the giving of the Consents and Waivers contained in this
Section 6.9 or consents or waivers similar thereto in form or purpose.
15
<PAGE> 16
(v) As used herein, the term "CONSENTS" means, with respect to any
such partnership, any consent deemed by the Operating Partnership to be
necessary or desirable under the partnership agreement of such partnership or
any other agreement among all or any of the holders of interests therein or any
other agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions relating to such
partnership or to amend such partnership agreement and/or other
agreements so that no provision thereof prohibit, restricts, impairs
or interferes with any Conveyance Action (such amendment to include,
without limitation, the deletion of provisions which cause a default
under such agreement if interests therein are transferred for other
than cash),
(B) to admit the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in accordance
with Section 6.3 above) as a substitute limited partner or general
partner of such partnership upon the Operating Partnership's
acquisition of a limited or general partner interest therein,
respectively, and to adopt such amendment as is necessary or desirable
to effect such admission,
(C) to adopt any amendment as may be deemed desirable by the
Operating Partnership, either simultaneously with or immediately prior
to the acquisition of a limited or general partnership interest
therein, provided, however, that such amendment will not result in any
increased liability on the part of any Grantor hereunder or under the
applicable partnership agreement, and
(D) to continue such partnership following the transfer of
interests therein to the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in accordance
with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to a
partnership of which an Interest represents a direct or indirect interest, the
waiving of any and all rights that the Grantor may have with respect to, and
(to the extent possible) that any other person may have with respect to, or
that may accrue to the Grantor or other person upon the occurrence of, a
Conveyance Action relating to such partnership, including, but not limited to,
the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect interest of another
partner in such partnership (or the Interests represented by such
partnership interest) or to sell the Grantor's or other person's
direct or indirect interest therein to another partner,
(D) rights to sell the Grantor's or other person's direct or
indirect interest therein at a price other than as provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise restrict or
impair any such Conveyance Action or to cause a termination or
dissolution of such partnership because of such Conveyance Action.
(f) The Grantor by its execution hereof
(i) with respect to each Other Partnership in which an Interest owned
by the Grantor represents a direct or indirect interest therein, gives such
consent as is necessary to cause each Partnership, as applicable,
16
<PAGE> 17
to have authority to transfer all or substantially all of the assets of such
Partnership to the Operating Partnership on such terms and conditions as such
Other Partnership and the Operating Partnership may agree; and
(ii) agrees that the Grantor's Acquisition Consideration may be
reduced to reflect such direct transfer of assets and the consequent receipt of
cash and other consideration directly by such Other Partnership, provided that
the total consideration to be received by the Grantor either directly hereunder
or indirectly through the receipt of distributions from an Other Partnership
shall equal Grantor's Acquisition Consideration.
(g) (i) The Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of each
partnership in which an Interest of the Grantor represents, directly or
indirectly, a limited partner or general partner interest, an amendment thereto
to enable such partnership, to the extent permissible under applicable law,
(A) to admit the Operating Partnership (or the Company or
any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) as a substitute limited
partner therein and/or a substitute general partner therein if
the Operating Partnership (or the Company or any affiliate of the
Operating Partnership or the Company in accordance with Section
6.3 above) by the exercise of the Option acquires a limited
partnership interest or a general partnership interest in such
partnership,
(B) to redeem the interest of any other partner therein who
has not agreed to become a party to this Agreement,
(C) to distribute to all partners thereof, including any
partner who has not agreed to become a party to this Agreement,
OP Units and cash (in such proportions to each partner therein as
the general partner or general partners thereof may determine,
provided that the Grantor receives as a result of all such
distributions and the direct payment of consideration hereunder,
the amount of cash that is in conformity with the Acquisition
Consideration of the Grantor provided for herein), and
thereafter, at the Operating Partnership's option, to dissolve,
and
(D) any such other amendment as the Operating Partnership
may deem desirable,
provided that such amendment occurs simultaneously with or
immediately prior to the acquisition of the applicable
partnership interest, and provided further, that such amendment
will not result in any increased liability on the part of any
Grantor hereunder or under the applicable partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of the Grantor execute
such consents, amendments or other instruments as it deems necessary
or desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration
Statement with the Securities and Exchange Commission, and shall not
communicate at any time the terms of this Agreement to any person other than
counsel or advisors to the Grantor who agree to keep such terms confidential
and any lender holding a lien on any Interests.
(b) The Grantor shall treat all information received from the
Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate same only to
counsel to the Grantor who agree to keep such information confidential.
17
<PAGE> 18
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the
parties hereto that the representations, warranties and covenants of the
Grantor set forth in this Agreement shall survive the consummation of the
transactions contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
18
<PAGE> 19
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of
the date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC., its general
partner
By: /s/Robert Cox
-------------------------------
Name: Robert L. Cox
Title: Chief Operating Officer and
Executive Vice President
GRANTOR:
STELLAR ASSOCIATES
By: each of its partners
/s/Valerie Herts
-------------------------------
Valerie Herts
/s/Lawrence H. Feldman
-------------------------------
Lawrence H. Feldman
/s/Jeffrey Feldman
-------------------------------
Jeffrey Feldman
19
<PAGE> 20
Schedule A
Interests
Grantor's Name & Address Description of Interests
Stellar Associates Five percent (5%) Class B
c/o Feldman Limited Partner Interest in
120 West 45th Street the Partnership.
New York, NY 10036
<PAGE> 21
Schedule B
Form of Acquisition Consideration
Three (3) OP Units, with the
remaining balance paid in cash.
<PAGE> 22
Schedule C
Exceptions to Title
None
<PAGE> 23
Schedule D
Interests in Other Partnerships and Properties
None
Other Partnerships and Properties
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
</TABLE>
<PAGE> 1
EXHIBIT 10.31
TOWER 45
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 28th day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and Carlyle
Industries, Inc. (formerly named Belding-Hemingway Company, Inc.) (the
"GRANTOR").
R E C I T A L S:
A. The Grantor owns a limited partner interest in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to acquire through a contribution
to capital from the Grantor, and the Grantor desires to grant to the Operating
Partnership, an option to acquire, on the terms and conditions set forth herein,
all interests owned by the Grantor in the Partnership as set forth on Schedule A
attached hereto and any other direct or indirect interests the Grantor may have,
whether now owned or hereinafter acquired, in the Partnership, or in the
properties owned by the Partnership (collectively, the "INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to acquire through a
contribution to the capital of the Operating Partnership all the Grantor's
right, title and interest in the Interests, including but not limited to, the
Interest set forth on Schedule A attached hereto, on the terms and conditions
set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership during
the 10 business day period commencing on the first business day following the
removal of each such prohibition, stay, order, injunction, action, proceeding or
similar limitation in effect at that time. Subject to the foregoing, if the
Operating Partnership does not exercise the Option by the Option Termination
Date, such Option shall be deemed terminated and shall be of no further force or
effect and the Grantor shall have no further obligations hereunder.
1
<PAGE> 2
1.3 Acquisition Consideration. (a) The consideration (the "ACQUISITION
CONSIDERATION") to be received by the Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an aggregate
amount equal to $111,111. The Acquisition Consideration shall be paid in the
form of a combination of (i) cash and/or (ii) units of limited partnership
interest in the Operating Partnership ("OP UNITS"), in the percentages and
allocations set forth on Schedule B attached hereto. To the extent a percentage
of the Acquisition Consideration includes one or more OP Units, as set forth on
Schedule B, the number of OP Units the Grantor shall be entitled to receive upon
the exercise of the Option with respect to such percentage shall equal the
quotient of
(A) the amount of Acquisition Consideration to be
paid in OP Units, divided by
(B) the midpoint of the proposed per share offering
price for the shares of Common Stock as set forth in the final
preliminary prospectus included in the Company's Registration
Statement on Form S-11 prepared and filed with the Securities
and Exchange Commission in connection with the IPO.
1.4 Lock-Up Agreements. The OP Units to be issued to the Grantor
hereunder shall be subject to Lock-Up Agreements to be executed at the Closing
(as hereinafter defined) by the Operating Partnership and the Grantor,
substantially in the forms attached as Exhibits A and B attached hereto, whereby
the Grantor will not be permitted to transfer OP Units for up to two years after
the Closing, except as otherwise permitted under such agreement.
1.5 Other Agreements. At or prior to the Closing, the Company, the
Grantors and the other parties thereto shall enter into a Registration Rights
Agreement and an Exchange Rights Agreement, as described in Section 5.1(a) and
substantially in the forms attached as Exhibits C and D, respectively.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise of
the Option, the Grantor shall, in accordance with Section 2.2 hereof, transfer,
assign, and convey to the Operating Partnership and the Operating Partnership
shall accept as a contribution to its capital from the Grantor, all right, title
and interest in and to the Interests, free and clear of all Encumbrances (as
defined in Section 3.1(a)), in exchange for the Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute and
deliver all closing documents (the "CLOSING DOCUMENTS") required by the
Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP as
escrow agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the Company
is sufficient, as determined by
2
<PAGE> 3
the Operating Partnership in its reasonable discretion, to enable the Operating
Partnership (i) to acquire all the Interests, and (ii) to apply such portion of
the net proceeds to acquire such other properties or interests, to repay
principal, interest and other amounts due with respect to indebtedness and to
meet such other obligations as may be described in the Registration Statement on
Form S-11 prepared and filed in connection with the IPO (the "REGISTRATION
STATEMENT"), as the same shall be in effect on the day of the Offerings Closing.
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee
(A) the Acquisition Consideration (any cash portion
of which shall be delivered in immediately available funds by
check or wire transfer),
(B) a certificate of the general partner of the
Operating Partnership (the "GENERAL PARTNER") certifying that
the Grantor has been or will be, effective as of the Closing,
admitted as a limited partner of the Operating Partnership and
that the Operating Partnership's books and records indicate or
will indicate that the Grantor is the holder of the number of
OP Units that Grantor is entitled to receive pursuant to
Section 1.3, and
(C) if such OP Units are to be represented by
certificates, a certificate or certificates in the name of the
Grantor representing the number of OP Units to which the
Grantor is entitled; and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or
any third party necessary in order to consummate the contribution of
the Interests, or there exists an order or judgment enjoining,
restraining or prohibiting, or assessing substantial damages in respect
of such consummation, or there shall be any action or proceeding
instituted or threatened in writing to enjoin, restrain, prohibit or
assess substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the
contribution of all of the Interests, notify the Escrow Agent of such
election and direct the Escrow Agent to return the Grantor's Closing
Documents to the Grantor, or
(y) in all other cases, equitably adjust the delivery with
respect to the Grantor pursuant to clause (c)(i) above to reflect the
portion of the Grantor's Interests with respect to which the purchase
is actually being made(provided, that, in no event shall the
Acquisition Consideration, as adjusted hereunder, consist of less than
one OP Unit), which adjustment shall be determined in the Operating
Partnership's reasonable discretion, and shall in all events be binding
upon the Grantor.
3
<PAGE> 4
(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter remain in effect
and the Operating Partnership may thereafter exercise the Option again at any
time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be
in the form attached hereto as Exhibit E attached hereto and shall contain a
warranty of title that the Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article
III hereof, or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent
that the Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
(i) the Grantor is a corporation, limited partnership, general
partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of
this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the
Grantor's charter and/or bylaws, partnership agreement,
operating agreement and articles of organization or
declaration of trust, as applicable, or, to the knowledge of
such counsel, any indenture, deed of trust, mortgage, loan or
credit agreement or other material agreement or instrument to
which the Grantor is a party or by which it or its assets or
properties are bound or affected, except for such breach or
violation as the Operating Partnership has represented and
warranted will be waived or cured, or discharged or repaid
prior to or contemporaneously with the Closing;
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(B) to the knowledge of such counsel, constitute a
violation or any order, judgment or decree to which the
Grantor is a party or by which it or any of its assets or
properties are bound or affected; or
(C) to the knowledge of such counsel, result in the
creation of any lien, charge or encumbrance upon any of the
Grantor's assets or properties, except for Permitted Pledges
(as defined in Section 3.1(a)); and
(iii) all applicable corporate, partnership, limited liability
company or trust action necessary for the Grantor to execute and deliver this
Agreement and the Closing Documents and to perform the transactions contemplated
hereby and thereby has been taken and that the same have been validly executed
and delivered and are the valid and binding obligations of the Grantor
enforceable against it in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) The Lock-up Agreements, a duly executed signature page to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, a copy of which is attached hereto as Exhibit F (the "PARTNERSHIP
AGREEMENT"), the Exchange Rights Agreement, and the Registration Rights
Agreement.
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Interests to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
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2.7 Further Assurances. The Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated by this Agreement, including instruments or documents
deemed necessary or desirable by the Operating Partnership to effect and
evidence the purchase of the Grantor's Interests by the Operating Partnership in
accordance with the terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity financing
of any real property owned by the Partnership (any such pledge, a "PERMITTED
PLEDGE")), voting agreement, option, charge, security interest, mortgage, deed
of trust, encumbrance, right of assignment, purchase right or other rights of
any nature whatsoever (each, an "ENCUMBRANCE"), and has full power and authority
to convey free and clear of any Encumbrances, its Interests and, upon delivery
of an Assignment by the Grantor conveying its Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Interests as
herein provided, the Operating Partnership will acquire good and valid title
thereto, free and clear of any Encumbrance, except Encumbrances created in favor
of the Operating Partnership by the transactions contemplated hereby.
(b) Each of the Grantor's Interests representing an interest in the
Partnership has been validly issued and the Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Interest represents an interest that are required to
be funded or advanced prior to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with respect
to any of the Interests except, in the case of any Interest constituting an
interest in the Partnership, as set forth in the partnership agreement of the
Partnership.
(d) The Grantor has no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto
(the"Other Partnerships and Properties") except for the Interests identified on
Schedule A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantor may assume that the consents and waivers of
rights set forth in Section 6.9 hereof have been given by all partners of the
Partnership, partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such) in which
the Grantor's Interests represent direct or indirect interests.
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3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Grantor or require the
Grantor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which the property of the Grantor is bound or
affected, or result in the creation of any Encumbrance on any of the
property or assets of any Partnership in which any Interest of the
Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
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(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of its Interests, which in any such case
would impair the Grantor's ability to enter into and perform all of its
obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in
connection with the contribution of Interests to the capital of the
Operating Partnership (which Private Placement Memorandum includes a
draft Registration Statement, the Summary of Partnership Agreement
Provisions (the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters
(the "TAX MATTERS SUMMARY"), and understands the risks of, and other
considerations relating to, an investment in OP Units.
(ii) The Grantor, by reason of its business and financial
experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with
respect to its investment in OP Units,
(A) has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions of
this type that it is capable of evaluating the merits and risks of
and of making an informed investment decision with respect to an
investment in OP Units,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting its
interests and
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(C) is capable of bearing the economic risk of such
investment.
(iii) (A) The Grantor is an "accredited investor" as defined
in Rule 501 of the regulations promulgated under the
Securities Act.
(B) If the Grantor has retained or retains a person
to represent or advise it with respect to its investment in OP
Units, the Grantor will advise the Operating Partnership of
such retention and, at the Operating Partnership's request,
the Grantor shall, prior to or at the Closing,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Operating Partnership
containing such representations as may be reasonably
requested by the Operating Partnership.
(b) (i) The Grantor understands that an investment in the Operating Partnership
involves substantial risks.
(ii) The Grantor has been given the opportunity to make a thorough
investigation of the proposed activities of the Operating Partnership and has
been furnished with materials relating to the Operating Partnership and its
proposed activities, including, without limitation, the Private Placement
Memorandum, the Partnership Summary and the Tax Matters Summary.
(iii) The Grantor has been afforded the opportunity to obtain any additional
information requested by it.
(iv) The Grantor has had an opportunity to ask questions of and receive
answers from representatives of the Operating Partnership concerning the
Operating Partnership and its proposed activities and the terms and conditions
of an investment in OP Units.
(v) The Grantor has relied and is making its investment decision based upon
the Private Placement Memorandum, the Partnership Summary, the Tax Matters
Summary and other written information provided to the Grantor by or on behalf of
the Operating Partnership.
(c) (i) The OP Units to be issued to the Grantor at the Closing will be acquired
by the Grantor for its own account, for investment only and not with a view to,
or with any intention of, a distribution or resale thereof, in whole or in part,
or the grant of any participation therein.
(ii) The Grantor was not formed for the specific purpose of acquiring an
interest in the Operating Partnership.
(d) (i) The Grantor acknowledges that
(A) the OP Units to be issued to the Grantor at the
Closing have not been registered under the Securities Act or state
securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state
securities laws and, if such OP Units are represented by
certificates, such certificates will bear a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the accuracy
and completeness of the representations and warranties of the
Grantor contained herein,
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(C) the OP Units to be issued to the Grantor at the
Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there is no public market for such OP Units, and
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act
or any state securities laws or to take any action that would
make available any exemption from the registration
requirements of such laws, except as provided in the
Registration Rights Agreement (as defined below).
(ii) The Grantor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in
the Lockup Agreements, the Grantor may have to bear the economic risk
of the investment commitment evidenced by this Agreement and any OP
Units issued hereunder for an indefinite period of time, although, if
applicable,
(A) under the terms of the Exchange Rights Agreement,
as it will be in effect at the time of the Offerings, OP Units
will, subject to the limitations set forth in the Exchange
Rights Agreement, be exchangeable at the request of the holder
thereof at any time after the first anniversary of their
issuance for cash based on their fair market value or, at the
option of the Company, for Common Stock and
(B) the holder of any such Common Stock issued upon
exchange of OP Units will be afforded certain rights to have
such Common Stock registered under the Securities Act and
applicable state securities laws pursuant to the Registration
Rights Agreement (as described in Section 5.1 (a)).
(e) The address set forth under the Grantor's signature on the
signature page hereto is the address of the Grantor's principal place of
business or, if a natural person, the address of the Grantor's residence, and
the Grantor has no present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which such principal
place of business or residence is situated.
3.7 Private Placement Memorandum. (a) The Grantor understands and
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of the Grantor.
(b) Without limiting the foregoing, such changes may include the
deletion (or addition) of one or more properties expected to be acquired by the
Operating Partnership and changes in the amount of the indebtedness expected to
be repaid with the proceeds of the Offerings.
(c) The Operating Partnership shall not be obligated to obtain the
Grantor's consent as a result of such changes, although such changes could
affect the nature and value of the Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
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(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document
and instrument to be executed and delivered by or on behalf of it
pursuant to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue OP Units to each Grantor pursuant to and
in accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership
agreement of the Operating Partnership;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership
or require the Operating Partnership to obtain any approval, consent
or waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of, any indenture, deed
of trust, mortgage, loan or credit agreement, any other material
agreement, contract, instrument, lease, permit or authorization, or
any order, writ, judgment, injunction, decree, determination or
arbitration award to which the Operating Partnership is a party or
by which the property of the Operating Partnership is bound or
affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
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ARTICLE V: POWER OF ATTORNEY
5.1 Grant of Power of Attorney. (a) The Grantor does hereby irrevocably
appoint Lawrence H. Feldman, Robert Cox and the Operating Partnership, and each
of them individually, with full power of substitution (each such person or the
Operating Partnership or any such successor of any of them acting in his, her or
its capacity as attorney-in-fact pursuant hereto, an "ATTORNEY-IN-FACT"), as the
true and lawful attorney-in-fact and agent of the Grantor, to act in the name,
place and stead of the Grantor:
(i) To take for the Grantor all steps deemed necessary or
advisable by the Operating Partnership in connection with the
Offerings, including without limitation
(A) filing a registration statement and amendments
thereto (the "Registration Statement") under the Securities Act
which describes the benefit to be received by the Grantor in
connection with the formation of the Company and the offering of the
Company's Common Stock,
(B) distributing a preliminary prospectus and prospectus
regarding the offering of the Company's Common Stock (respectively,
the "PRELIMINARY PROSPECTUS" and "PROSPECTUS") which contain such
information as is deemed necessary or desirable to lawfully effect
the IPO, and preliminary and final offering memoranda regarding the
offering of the Company's Common Stock in the concurrent private
placement, which contain such information as is deemed necessary or
desirable to effect the concurrent private placement,
(C) to enter into the Exchange Rights Agreement, the
Registration Rights Agreement (which, if applicable, provides the
Grantor certain rights to have the Common Stock which may be issued
to the Grantor upon exchange of the Grantor's OP Units registered
under the Securities Act), and the Lock-Up Agreements, and
(D) to take such other steps as the Attorney-in-Fact may
deem necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the
sale of the Grantor's Interests to the Operating Partnership, and any
consents contemplated by Section 6.9 hereof) and, in general, to do all
things and to take all actions which the Attorney-in-Fact in its sole
discretion may consider necessary or proper in connection with or to
carry out the transactions contemplated by this Agreement and the
Closing Documents as fully as could the Grantor if personally present
and acting.
(b) (i) The Power of Attorney granted by the Grantor pursuant to this
Article V and all authority conferred hereby is granted and conferred
subject to and in consideration of the interest of the Operating
Partnership and the Company and is for the purpose of completing the
transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantor granted hereby and
all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act
of the Grantor or by operation of law, whether by the death,
disability, incapacity, dissolution or liquidation of the Grantor or by
the occurrence of any other event or events (including without
limitation the termination of any trust or estate for which the Grantor
is acting as a fiduciary or fiduciaries), and if, after the execution
hereof, the Grantor shall die or become disabled or incapacitated or is
dissolved or liquidated, or if any other such event or events shall
occur before the completion of the transactions contemplated by this
Agreement, each Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if
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such death, disability, incapacity, dissolution, liquidation or other
event or events had not occurred and regardless of notice thereof.
(c) The Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
(d) The Grantor acknowledges that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transactions contemplated by this
Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantor hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
Prospectus or any Preliminary Prospectus, nor for any aspect of either Offering,
and it shall not be liable for any error of judgment or for any act done or
omitted or for any mistake of fact or law except for its own gross negligence or
bad faith.
(c) The Grantor agrees to indemnify each Attorney-in-Fact for and to
hold each Attorney-in-Fact harmless against any loss, claim, damage or liability
incurred or in part arising out of or in connection with its acting as
Attorney-in-Fact under the Power of Attorney created by the Grantor hereby, as
well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantor agrees that each Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership
and/or the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.3 Ratification; Third Party Reliance. The Grantor does hereby ratify
and confirm all that any Attorney-in- Fact shall lawfully do or cause to be done
by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement shall not be amended without notice to or the
consent of any Grantor for the purpose of adding additional Grantors as parties
hereto or deleting Grantors as parties hereto and conforming Exhibits A and B in
connection with such additions or deletions. No waiver of any provisions of this
Agreement shall be valid unless in writing and signed by the party against whom
enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
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(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
14
<PAGE> 15
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which an Interest of the Grantor
represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership
interest in any property,
(ii) the conveyance or agreement to convey by a partner thereof or
by any holder of an indirect interest therein of its direct or indirect
interest in such partnership to the Operating Partnership or the
Company or to another person in connection with the formation of the
Operating Partnership or the Company as described in the Registration
Statement, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
15
<PAGE> 16
(B) the direct or indirect acquisition by the Operating
Partnership or the Company of any such direct or indirect interest,
or
(C) the transactions described in or contemplated by the
Registration Statement, or
(iv) the taking by any such partner or holder of any action necessary
or desirable to facilitate any of the foregoing, including, without limitation,
the following (provided that the same are taken in furtherance of the
foregoing):
(A) any sale or distribution to any person of a direct
or indirect interest in such partnership or an undivided
tenant-in-common interest in the property represented by such
partnership interest,
(B) the entering into of any agreement with any person
or entity that grants to such person or entity the right to purchase
a direct or indirect interest in such partnership, and
(C) the giving of the Consents and Waivers contained in
this Section 6.9 or consents or waivers similar thereto in form or
purpose.
(v) As used herein, the term "CONSENTS" means, with respect to any such
partnership, any consent deemed by the Operating Partnership to be necessary or
desirable under the partnership agreement of such partnership or any other
agreement among all or any of the holders of interests therein or any other
agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions relating to
such partnership or to amend such partnership agreement and/or other
agreements so that no provision thereof prohibit, restricts, impairs
or interferes with any Conveyance Action (such amendment to include,
without limitation, the deletion of provisions which cause a default
under such agreement if interests therein are transferred for other
than cash),
(B) to admit the Operating Partnership (or the Company
or any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) as a substitute limited partner
or general partner of such partnership upon the Operating
Partnership's acquisition of a limited or general partner interest
therein, respectively, and to adopt such amendment as is necessary
or desirable to effect such admission,
(C) to adopt any amendment as may be deemed desirable by
the Operating Partnership, either simultaneously with or immediately
prior to the acquisition of a limited or general partnership
interest therein, provided, however, that such amendment will not
result in any increased liability on the part of any Grantor
hereunder or under the applicable partnership agreement, and
(D) to continue such partnership following the transfer
of interests therein to the Operating Partnership (or the Company or
any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to a
partnership of which an Interest represents a direct or indirect interest, the
waiving of any and all rights that the Grantor may have with respect to, and (to
the extent possible) that any other person may have with respect to, or that may
accrue to the Grantor or other person upon the occurrence of, a Conveyance
Action relating to such partnership, including, but not limited to, the
following rights:
(A) rights of notice,
16
<PAGE> 17
(B) rights to response periods,
(C) rights to purchase the direct or indirect interest
of another partner in such partnership (or the Interests represented
by such partnership interest) or to sell the Grantor's or other
person's direct or indirect interest therein to another partner,
(D) rights to sell the Grantor's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such
Conveyance Action.
(f) The Grantor by its execution hereof
(i) with respect to each Other Partnership in which an Interest owned
by the Grantor represents a direct or indirect interest therein, gives such
consent as is necessary to cause each Partnership, as applicable, to have
authority to transfer all or substantially all of the assets of such Partnership
to the Operating Partnership on such terms and conditions as such Other
Partnership and the Operating Partnership may agree; and
(ii) agrees that the Grantor's Acquisition Consideration may be reduced
to reflect such direct transfer of assets and the consequent receipt of cash and
other consideration directly by such Other Partnership, provided that the total
consideration to be received by the Grantor either directly hereunder or
indirectly through the receipt of distributions from an Other Partnership shall
equal Grantor's Acquisition Consideration.
(g) (i) The Grantor by its execution hereof gives such consent as is necessary
to cause, with respect to the partnership agreement of each partnership in which
an Interest of the Grantor represents, directly or indirectly, a limited partner
or general partner interest, an amendment thereto to enable such partnership, to
the extent permissible under applicable law,
(A) to admit the Operating Partnership (or the Company
or any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) as a substitute limited partner
therein and/or a substitute general partner therein if the Operating
Partnership (or the Company or any affiliate of the Operating
Partnership or the Company in accordance with Section 6.3 above) by
the exercise of the Option acquires a limited partnership interest
or a general partnership interest in such partnership,
(B) to redeem the interest of any other partner therein
who has not agreed to become a party to this Agreement,
(C) to distribute to all partners thereof, including any
partner who has not agreed to become a party to this Agreement, OP
Units and cash (in such proportions to each partner therein as the
general partner or general partners thereof may determine, provided
that the Grantor receives as a result of all such distributions and
the direct payment of consideration hereunder, the amount of cash
that is in conformity with the Acquisition Consideration of the
Grantor provided for herein), and thereafter, at the Operating
Partnership's option, to dissolve, and
(D) any such other amendment as the Operating
Partnership may deem desirable,
17
<PAGE> 18
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of any Grantor hereunder or under the applicable
partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of the Grantor
execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel or advisors to
the Grantor who agree to keep such terms confidential and any lender holding a
lien on any Interests.
(b) The Grantor shall treat all information received from the Operating
Partnership or its counsel or advisors pertaining to the Operating Partnership
or the Company confidential and shall disseminate same only to counsel to the
Grantor who agree to keep such information confidential.
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Grantor set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
18
<PAGE> 19
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/Lawrence H. Feldman
------------------------------------
Name: Lawrence H. Feldman
Title: Chief Executive Officer and
President
CARLYLE INDUSTRIES, INC.
(formerly named Belding-Hemingway Company, Inc.)
By: /s/Edward F. Cooke
------------------------
Name: Edward F. Cooke
Title: Vice President
19
<PAGE> 20
Schedule A
Interests
Grantor's Name & Address Description of Interests
------------------------ ------------------------
Carlyle Industries, Inc. (formerly named 2.5% Class A Limited Partner
Belding-Hemingway Company, Inc.) Interest in the Partnership
1 Palmer Terrace
Carlstadt, NJ 07072
<PAGE> 21
Schedule B
Form of Acquisition Consideration
100% OP Units
<PAGE> 22
Schedule C
Exceptions to Title
None
<PAGE> 23
Schedule D
Interests in Other Partnerships and Properties
None
Other Partnerships and Properties
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
</TABLE>
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C> <C>
15. Maitland Forum Maitland Property Investors, Ltd.
Maitland, Florida
16. 2601 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
17. 2603 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
18. 2605 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
19. 5750 Major Blvd. 5750 Associates Limited Partnership
Orlando, Florida
</TABLE>
<PAGE> 1
EXHIBIT 10.32
TOWER 45
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 31st day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and 120 West
45th Street Associates (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns a limited partner interest in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to acquire through a contribution
to capital from the Grantor, and the Grantor desires to grant to the Operating
Partnership, an option to acquire, on the terms and conditions set forth herein,
all interests owned by the Grantor in the Partnership as set forth on Schedule A
attached hereto and any other direct or indirect interests the Grantor may have,
whether now owned or hereinafter acquired, in the Partnership, or in the
properties owned by the Partnership (collectively, the "INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to acquire through a
contribution to the capital of the Operating Partnership all the Grantor's
right, title and interest in the Interests, including but not limited to, the
Interest set forth on Schedule A attached hereto, on the terms and conditions
set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending
action or proceeding to enjoin, restrain, prohibit or assess substantial damages
in respect of the exercise by the Operating Partnership of the Option, then the
Option may be exercised by the Operating Partnership during the 10 business day
period commencing on the first business day following the removal of each such
prohibition, stay, order, injunction, action, proceeding or similar limitation
in effect at that time. Subject to the foregoing, if the Operating Partnership
does not exercise the Option by the Option Termination Date, such Option shall
be deemed terminated and shall be of no further force or effect and the Grantor
shall have no further obligations hereunder.
<PAGE> 2
1.3 Acquisition Consideration. The consideration (the "ACQUISITION
CONSIDERATION") to be received by the Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an amount of cash
equal to $185,185 subject to Section 6.9(g).
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise of
the Option, the Grantor shall, in accordance with Section 2.2 hereof, transfer,
assign, and convey to the Operating Partnership and the Operating Partnership
shall accept as a contribution to its capital from the Grantor, all right, title
and interest in and to the Interests, free and clear of all Encumbrances (as
defined in Section 3.1(a)), in exchange for the Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute and
deliver all closing documents (the "CLOSING DOCUMENTS") required by the
Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP as
escrow agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING").
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee the Acquisition Consideration
delivered in immediately available funds by check or wire transfer, and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of the Interests as follows:
(iii) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or is
otherwise then in breach of this Agreement beyond applicable grace and
notice periods, or
(iv) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or
any third party necessary in order to consummate the contribution of
the Interests are not received or waived, or there exists an order or
judgment enjoining, restraining or prohibiting, or assessing
substantial damages in respect of such consummation, or there shall be
any action or proceeding instituted to enjoin, restrain, prohibit or
assess substantial damages in respect of such consummation,
2
<PAGE> 3
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above notify the Escrow
Agent of such election and direct the Escrow Agent to return the Grantor's
Closing Documents to the Grantor.
(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter remain in effect
and the Operating Partnership may thereafter exercise the Option again at any
time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be
in the form attached hereto as Exhibit A attached hereto and shall contain a
warranty of title that the Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article
III hereof, or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent
that the Grantor has used reasonable efforts, which shall not require
Grantor to commence litigation, to take such actions as would permit
the Grantor to make such representations and warranties and/or to
comply with such covenants, and reaffirm the accuracy of all other
representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
(i) the Grantor is a corporation, limited partnership, general
partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of
this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the
Grantor's charter and/or bylaws, partnership agreement,
operating agreement and articles of organization or
declaration of trust, as applicable, or, to the knowledge of
such counsel, any indenture, deed of trust, mortgage, loan or
credit agreement or other material agreement or instrument to
which the Grantor is a party or by which
3
<PAGE> 4
it or its assets or properties are bound or affected, except
for such breach or violation as the Operating Partnership has
represented and warranted will be waived or cured, or
discharged or repaid prior to or contemporaneously with the
Closing;
(B) to the knowledge of such counsel, constitute a
violation or any order, judgment or decree to which the
Grantor is a party or by which it or any of its assets or
properties are bound or affected; or
(C) to the knowledge of such counsel, result in the
creation of any lien, charge or encumbrance upon any of the
Grantor's assets or properties, except for Permitted Pledges
(as defined in Section 3.1(a)); and
(iii) all applicable corporate, partnership, limited liability
company or trust action necessary for the Grantor to execute and deliver this
Agreement and the Closing Documents and to perform the transactions contemplated
hereby and thereby has been taken and that the same have been validly executed
and delivered and are the valid and binding obligations of the Grantor
enforceable against it in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Interests to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor the right of specific performance, however, the Operating Partnership
shall not be entitled to collect damages, consequential, punitive or otherwise,
as a result of such default.
4
<PAGE> 5
2.7 Further Assurances. The Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated by this Agreement, including instruments or documents
deemed reasonably necessary or desirable by the Operating Partnership to effect
and evidence the purchase of the Grantor's Interests by the Operating
Partnership in accordance with the terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true in all material respects as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantor owns beneficially, free and clear of any claim, lien, pledge
(except for pledges relating to the debt or equity financing of any real
property owned by the Partnership (any such pledge, a "PERMITTED PLEDGE")),
voting agreement, option, charge, security interest, mortgage, deed of trust,
encumbrance, right of assignment, purchase right or other rights of any nature
whatsoever (each, an "ENCUMBRANCE"), and has full power and authority to convey
free and clear of any Encumbrances, its Interests and, upon delivery of an
Assignment by the Grantor conveying its Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Interests as
herein provided, the Operating Partnership will acquire good and valid title
thereto, free and clear of any Encumbrance, except Encumbrances created in favor
of the Operating Partnership by the transactions contemplated hereby or those
created by the Operating Partnership, whether voluntarily or otherwise.
(b) Based on notices received from the Partnership, the Grantor has
funded (or will fund before the same is past due) all capital contributions and
advances to the Partnership (which have been demanded from it) in which such
Interest represents an interest that are required to be funded or advanced prior
to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with respect
to any of the Interests except as set forth in the partnership agreement of the
Grantor and, in the case of any Interest constituting an interest in the
Partnership, as set forth in the partnership agreement of the Partnership.
(d) The Grantor has no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto
(the"Other Partnerships and Properties") except for the Interests identified on
Schedule A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
(e) In making the representations in this Section 3.1 regarding the
absence of Encumbrances and the right to transfer the Interest, and in
reaffirming any such representations and warranties, the Grantor may assume that
the consents and waivers of rights set forth in Section 6.9 hereof have been
given by all partners of the Partnership, partners in partnerships, members of
limited liability companies or beneficiaries of trusts (in each case, only in
their capacity as such) in which the Grantor's Interests represent direct or
indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
5
<PAGE> 6
(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of the Grantor
pursuant to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents to which Grantor is a party and each other
agreement, document and instrument executed by or on behalf of the Grantor
pursuant to this Agreement, and to perform the transactions contemplated hereby
and thereby, has been taken, or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document to which Grantor is a party
and each other agreement, document and instrument executed and delivered by or
on behalf of the Grantor pursuant to this Agreement constitutes, or when
executed and delivered will constitute, the legal, valid and binding obligation
of the Grantor, each enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents to which Grantor is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Grantor or require the
Grantor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which the property of the Grantor is bound or
affected, or, except in favor of the Operating Partnership pursuant to
the terms hereof, result in the creation of any Encumbrance on any of
the property or assets of any Partnership in which any Interest of the
Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, and in
reaffirming such representations and warranties, the Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
6
<PAGE> 7
(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of its Interests, which in any such case
would impair the Grantor's ability to enter into and perform all of its
obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, and in
reaffirming such representations and warranties, the Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
3.6 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control which shall not require Grantor to
commence litigation
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
7
<PAGE> 8
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement and
(ii) to perform the transactions contemplated hereby and
thereby.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Company hereby makes
to the Grantor each of the representations and warranties set forth in this
Article V, which representations and warranties are true as of the date hereof
and shall be true as of the date of the Closing.
5.1 Authority. (a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of Maryland.
(b) The Company has full right, authority, power and capacity as
general partner of the Operating Partnership:
8
<PAGE> 9
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered on behalf of the Operating Partnership pursuant
to this Agreement and
(ii) to perform on behalf of the Operating Partnership the
transactions contemplated hereby and thereby.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Company on behalf of the Operating Partnership pursuant to this
Agreement constitutes, or when executed and delivered will constitute, the
legal, valid and binding obligation of the Company in its capacity as general
partner of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument on behalf of the Operating Partnership by the
Company:
(i) does not and will not violate the charter of the Company;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Company or require the
Company to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Company is a party or by which the property of the Company
is bound or affected.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement shall not be amended without notice to or the
consent of any Grantor for the purpose of adding additional Grantors as parties
hereto or deleting Grantors as parties hereto and conforming Schedules A and B
in connection with such additions or deletions. No waiver of any provisions of
this Agreement shall be valid unless in writing and signed by the party against
whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
9
<PAGE> 10
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership and the
Grantor to effect such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity, subject to the limitations on damages set forth in Section 2.6(b).
6.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
10
<PAGE> 11
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which an Interest of the Grantor
represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership
interest in any property,
(A) the conveyance or agreement to convey by a partner thereof
or by any holder of an indirect interest therein of its direct or
indirect interest in such partnership to the Operating Partnership or
the Company or to another person in connection with the formation of
the Operating Partnership or the Company as described in the
Registration Statement, or
(B) the entering into by any such partner or holder of any
agreement relating to
(1) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
(2) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(3) the transactions described in or contemplated by
the Registration Statement, or
11
<PAGE> 12
(C) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(1) any sale or distribution to any person of a
direct or indirect interest in such partnership or an
undivided tenant-in-common interest in the property
represented by such partnership interest,
(2) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in such
partnership, and
(3) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
(ii) As used herein, the term "CONSENTS" means, with respect
to any such partnership, any consent deemed by the Operating
Partnership to be necessary or desirable under the partnership
agreement of such partnership or any other agreement among all or any
of the holders of interests therein or any other agreement relating
thereto or referred to therein
(A) to permit any and all Conveyance Actions relating
to such partnership or to amend such partnership agreement
and/or other agreements so that no provision thereof
prohibits, restricts, impairs or interferes with any
Conveyance Action (such amendment to include, without
limitation, the deletion of provisions which cause a default
under such agreement if interests therein are transferred for
other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of such partnership upon
the Operating Partnership's acquisition of a limited or
general partner interest therein, respectively, and to adopt
such amendment as is necessary or desirable to effect such
admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of any Grantor hereunder or under the applicable
partnership agreement, and
(D) to continue such partnership following the
transfer of interests therein to the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(iii) As used herein, the term "WAIVERS" means, with respect
to a partnership of which an Interest represents a direct or indirect
interest, the waiving of any and all rights that the Grantor may have
with respect to, and (to the extent possible) that any other person may
have with respect to, or that may accrue to the Grantor or other person
upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
12
<PAGE> 13
(C) rights to purchase the direct or indirect
interest of another partner in such partnership (or the
Interests represented by such partnership interest) or to sell
the Grantor's or other person's direct or indirect interest
therein to another partner,
(D) rights to sell the Grantor's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such
Conveyance Action.
(f) The Grantor by its execution hereof with respect to each Other
Partnership in which an Interest owned by the Grantor represents a direct or
indirect interest therein, gives such consent as is necessary to cause each
Partnership, as applicable, to have authority to transfer all or substantially
all of the assets of such Partnership to the Operating Partnership on such terms
and conditions as such Other Partnership and the Operating Partnership may
agree.
(g) (i) The Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of each
partnership in which an Interest of the Grantor represents, directly or
indirectly, a limited partner or general partner interest, an amendment
thereto to enable such partnership, to the extent permissible under
applicable law,
(A) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner therein and/or a substitute general partner
therein if the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) by the exercise of the
Option acquires a limited partnership interest or a general
partnership interest in such partnership,
(B) to redeem the interest of any other partner
therein who has not agreed to become a party to this Agreement
or a similar agreement,
(C) to distribute to all partners thereof, including
any partner who has not agreed to become a party to this
Agreement or a similar agreement, OP Units and cash (in such
proportions to each partner therein as the general partner or
general partners thereof may determine, provided that the
Grantor receives as a result of all such distributions and the
direct payment of consideration hereunder and thereunder, the
amount of cash that is in conformity with and in proportion to
the Acquisition Consideration of the Grantor provided for
herein, except that the Acquisition Consideration cannot be
reduced) and thereafter, at the Operating Partnership's
option, to dissolve, and
(D) any such other amendment as the Operating
Partnership may deem desirable,
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of any Grantor hereunder or under the applicable
partnership agreement.
(ii) At the time of and in connection with the Closing, each
Attorney-in-Fact may on behalf of the Grantor execute such consents,
amendments or other instruments as it deems necessary or desirable in
connection with the foregoing.
13
<PAGE> 14
6.10 Confidentiality. (a) Except as required by law, the Grantor shall
treat as strictly confidential the fact that the Company is contemplating an
offering of its Common Stock until such time as the Company has filed the
Registration Statement with the Securities and Exchange Commission, and shall
not communicate at any time the terms of this Agreement to any person other than
counsel or advisors to the Grantor who agree to keep such terms confidential,
any lender holding a lien on any Interests, and to the partners of the Grantor.
(b) Except as required by law, the Grantor shall treat all information
received from the Operating Partnership or its counsel or advisors pertaining to
the Operating Partnership or the Company confidential and shall disseminate same
only to counsel to the Grantor who agree to keep such information confidential.
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the parties set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor and Operating Partnership under this Agreement.
14
<PAGE> 15
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/Lawrence H. Feldman
-----------------------------------------
Name: Lawrence H. Feldman
Title: Chief Executive Officer and
President
120 WEST 45TH STREET ASSOCIATES
By: /s/Peter L. Malkin
-----------------------------------------
Name: Peter L. Malkin
Title: General Partner
15
<PAGE> 16
Schedule A
Interests
<TABLE>
<CAPTION>
Grantor's Name & Address Description of Interests
- ------------------------ ------------------------
<S> <C>
120 West 45th Street Associates 1-2/3% (1.67%) Class A
c/o Peter Malkin Limited Partner Interest in the
Wein, Malkin & Bettex Partnership.
60 East 42nd Street
New York, NY 10017
</TABLE>
<PAGE> 17
Schedule B
Form of Acquisition Consideration
$185,185 in Cash
<PAGE> 18
Schedule C
Exceptions to Title
None
<PAGE> 19
Schedule D
Interests in Other Partnerships and Properties (see below)
None
Other Partnerships & Properties
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
15. Maitland Forum Maitland Property Investors, Ltd.
Maitland, Florida
16. 2601 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
</TABLE>
<PAGE> 1
EXHIBIT 10.33
TOWER 45
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 29th day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP") and Richard
Cook, Craig Cook and Brian Cook (collectively, the "GRANTORS").
R E C I T A L S:
A. The Grantors own limited partner interests in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to acquire through a contribution
to capital from the Grantors, and the Grantors desire to grant to the Operating
Partnership, an option to acquire, on the terms and conditions set forth herein,
all interests owned by the Grantors in the Partnership as set forth on Schedule
A attached hereto and any other direct or indirect interests the Grantors may
have, whether now owned or hereinafter acquired, in the Partnership, or in the
properties owned by the Partnership (collectively, the "INTERESTS").
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantors, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantors agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantors hereby irrevocably grant to the
Operating Partnership the right and option (the "OPTION") to acquire through a
contribution to the capital of the Operating Partnership all the Grantors'
right, title and interest in the Interests, including but not limited to, the
Interest set forth on Schedule A attached hereto, on the terms and conditions
set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantors are
prohibited by applicable law, or the Operating Partnership or the Grantors are
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership during
the 10 business day period commencing on the first business day following the
removal of each such prohibition, stay, order, injunction, action, proceeding or
similar limitation in effect at that time. Subject to the foregoing, if the
Operating Partnership does not exercise the Option by the Option Termination
Date, such Option
<PAGE> 2
shall be deemed terminated and shall be of no further force or effect and the
Grantors shall have no further obligations hereunder.
1.3 Acquisition Consideration. (a) The consideration (the "ACQUISITION
CONSIDERATION") to be received by each Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an amount equal to
$125,000. The Acquisition Consideration shall be paid in the form of a
combination of (i) cash and/or (ii) units of limited partnership interest in the
Operating Partnership ("OP UNITS"), in the percentages and allocations set forth
on Schedule B attached hereto. To the extent a percentage of the Acquisition
Consideration includes one or more OP Units, as set forth on Schedule B, the
number of OP Units each Grantor shall be entitled to receive upon the exercise
of the Option with respect to such percentage shall equal the quotient of
(A) the amount of Acquisition Consideration to be
paid in OP Units, divided by
(B) the midpoint of the proposed per share offering
price for the shares of Common Stock as set forth in the final
preliminary prospectus included in the Company's Registration
Statement on Form S-11 prepared and filed with the Securities
and Exchange Commission in connection with the IPO.
1.4 Lock-Up Agreements. The OP Units to be issued to the Grantors
hereunder shall be subject to Lock-Up Agreements to be executed at the Closing
(as hereinafter defined) by the Operating Partnership and the Grantors,
substantially in the forms attached hereto as Exhibits A and B, whereby the
Grantors will not be permitted to transfer OP Units for up to two years after
the Closing, except as otherwise permitted under such agreement.
1.5 Other Agreements. At or prior to the Closing, the Company, the
Grantors and the other parties thereto shall enter into a Registration Rights
Agreement and an Exchange Rights Agreement, as described in Section 5.1(a) and
substantially in the forms attached as Exhibits C and D, respectively.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise of
the Option, the Grantors shall, in accordance with Section 2.2 hereof, transfer,
assign, and convey to the Operating Partnership and the Operating Partnership
shall accept as a contribution to its capital from the Grantors, all right,
title and interest in and to the Interests, free and clear of all Encumbrances
(as defined in Section 3.1(a), in exchange for the Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantors a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantors will at or prior to the Closing execute
and deliver all closing documents (the "CLOSING DOCUMENTS") required by
the Operating Partnership pursuant to Section 2.3 and, pending the
Closing, deposit such Closing Documents in escrow with Battle Fowler
LLP as escrow agent of the Operating Partnership (the "ESCROW AGENT").
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<PAGE> 3
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the Company
is sufficient, as determined by the Operating Partnership in its reasonable
discretion, to enable the Operating Partnership (i) to acquire all the
Interests, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO (the "REGISTRATION STATEMENT"), as the same shall be in
effect on the day of the Offerings Closing.
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee
(A) the Acquisition Consideration (any cash portion
of which shall be delivered in immediately available funds by
check or wire transfer),
(B) a certificate of the general partner of the
Operating Partnership (the "GENERAL PARTNER") certifying that
the Grantors have been or will be, effective as of the
Closing, admitted as limited partners of the Operating
Partnership and that the Operating Partnership's books and
records indicate or will indicate that each Grantor is the
holder of the number of OP Units that such Grantor is entitled
to receive pursuant to Section 1.3, and
(C) if such OP Units are to be represented by
certificates, a certificate or certificates in the name of
each Grantor representing the number of OP Units to which the
Grantor is entitled; and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantors the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantors either identify in their
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
have otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or
any third party necessary in order to consummate the contribution of
the Interests, or there exists an order or judgment enjoining,
restraining or prohibiting, or assessing substantial damages in respect
of such consummation, or there shall be any action or proceeding
instituted or threatened in writing to enjoin, restrain, prohibit or
assess substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the
contribution of all of the Interests, notify the Escrow Agent of such
election and direct the Escrow Agent to return the Grantors' Closing
Documents to the Grantors, or
(y) in all other cases, equitably adjust the delivery with
respect to the Grantors pursuant to clause (c)(i) above to reflect the
portion of the Grantors' Interests with respect to which the purchase
is actually
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<PAGE> 4
being made (provided, that, in no event shall the Acquisition
Consideration, as adjusted hereunder, consist of less than one OP
Unit), which adjustment shall be determined in the Operating
Partnership's reasonable discretion, and shall in all events be binding
upon the Grantors.
(e) Except as the result of a default by the Grantors hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantors shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter remain in effect
and the Operating Partnership may thereafter exercise the Option again at any
time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantors shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be
in the form attached hereto as Exhibit E and shall contain a warranty of title
that the Grantors own the Interests free and clear of all Encumbrances (as
defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article
III hereof, or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantors can no longer make or comply with, represent
that the Grantors have used reasonable efforts to take such actions as
would permit the Grantors to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where a
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by said Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where a
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
(i) the Grantor is a corporation, limited partnership, general
partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of
this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the
Grantor's charter and/or bylaws, partnership agreement,
operating agreement and articles of organization or
declaration of trust, as applicable, or, to the knowledge of
such counsel, any indenture, deed of trust, mortgage, loan or
credit agreement or other material agreement or instrument to
which the Grantor is a party or by which it or its assets or
properties are bound or affected, except for such breach or
violation as the
4
<PAGE> 5
Operating Partnership has represented and warranted will be
waived or cured, or discharged or repaid prior to or
contemporaneously with the Closing;
(B) to the knowledge of such counsel, constitute a
violation or any order, judgment or decree to which the
Grantor is a party or by which it or any of its assets or
properties are bound or affected; or
(C) to the knowledge of such counsel, result in the
creation of any lien, charge or encumbrance upon any of the
Grantor's assets or properties, except for Permitted Pledges
(as defined in Section 3.1(a)); and
(iii) all applicable corporate, partnership, limited liability
company or trust action necessary for the Grantor to execute and deliver this
Agreement and the Closing Documents and to perform the transactions contemplated
hereby and thereby has been taken and that the same have been validly executed
and delivered and are the valid and binding obligations of the Grantor
enforceable against it in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if any Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) The Lock-up Agreements, a duly executed signature page to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, a copy of which is attached hereto as Exhibit F (the "PARTNERSHIP
AGREEMENT"), the Exchange Rights Agreement, and the Registration Rights
Agreement.
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantors' Interests to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantors in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantors' legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantors the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantors' damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantors' damages in such event.
5
<PAGE> 6
(b) If the Grantors default with respect to their obligations under
this Agreement, the Operating Partnership shall be entitled to exercise against
the Grantors any and all remedies provided at law or in equity, including but
not limited to, the right of specific performance.
2.7 Further Assurances. The Grantors will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated by this Agreement, including instruments or documents
deemed necessary or desirable by the Operating Partnership to effect and
evidence the purchase of the Grantors' Interests by the Operating Partnership in
accordance with the terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTORS
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantors hereby make to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantors own beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity financing
of any real property owned by the Partnership (any such pledge, a "PERMITTED
PLEDGE")), voting agreement, option, charge, security interest, mortgage, deed
of trust, encumbrance, right of assignment, purchase right or other rights of
any nature whatsoever (each, an "ENCUMBRANCE"), and have full power and
authority to convey free and clear of any Encumbrances, their Interests and,
upon delivery of an Assignment by the Grantors conveying their Interests and
delivery of the Acquisition Consideration by the Operating Partnership for such
Interests as herein provided, the Operating Partnership will acquire good and
valid title thereto, free and clear of any Encumbrance, except Encumbrances
created in favor of the Operating Partnership by the transactions contemplated
hereby.
(b) Each of the Grantors' Interests representing an interest in the
Partnership has been validly issued and the Grantors have funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Interest represents an interest that are required to
be funded or advanced prior to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with respect
to any of the Interests except, in the case of any Interest constituting an
interest in the Partnership, as set forth in the partnership agreement of the
Partnership.
(d) The Grantors have no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto (the
"OTHER PARTNERSHIPS AND PROPERTIES") except for the Interests identified on
Exhibit A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantors shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantors may assume that the consents and waivers
of rights set forth in Section 6.9 hereof have been given by all partners of
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<PAGE> 7
the Partnership, partners in partnerships, members of limited liability
companies or beneficiaries of trusts (in each case, only in their capacity as
such) in which the Grantors' Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If any Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
(b) The Grantors have full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantors pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantors to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantors pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantors
pursuant to this Agreement constitute, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantors, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantors:
(i) does not and will not violate any Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Grantors or require the
Grantors to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which any
Grantor is a party or by which the property of any Grantor is bound or
affected, or result in the creation of any Encumbrance on any of the
property or assets of any Partnership in which any Interest of any
Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantors may assume
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<PAGE> 8
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantors' Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Grantors know of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantors' ability to
consummate the transactions contemplated hereby.
(b) The Grantors know of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of their Interests, which in any such
case would impair the Grantors' ability to enter into and perform all of their
obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantors have made no agreement with,
and will not enter into any agreement with, and have no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantors'
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantors may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantors' Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantors have not entered into, and covenant that
they will not enter into, any agreement, arrangement or understanding with any
person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Grantors have received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in
connection with the contribution of Interests to the capital of the
Operating Partnership (which Private Placement Memorandum includes a
draft Registration Statement, the Summary of Partnership Agreement
Provisions (the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters
(the "TAX MATTERS SUMMARY"), and understand the risks of, and other
considerations relating to, an investment in OP Units.
(ii) The Grantors, by reason of their business and financial
experience, together with the business and financial experience of
those persons, if any, retained by them to represent or advise them
with respect to their investment in OP Units,
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<PAGE> 9
(A) have such knowledge, sophistication and
experience in financial and business matters and in making
investment decisions of this type that they are capable of
evaluating the merits and risks of and of making an informed
investment decision with respect to an investment in OP Units,
(B) are capable of protecting their own interests or
have engaged representatives or advisors to assist them in
protecting their interests and
(C) are capable of bearing the economic risk of such
investment.
(iii) (A) Each Grantor is an "accredited investor" as defined
in Rule 501 of the regulations promulgated under the
Securities Act.
(B) If the Grantors have retained or retain a person
to represent or advise them with respect to their investment
in OP Units, the Grantors will advise the Operating
Partnership of such retention and, at the Operating
Partnership's request, the Grantors shall, prior to or at the
Closing,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Operating Partnership
containing such representations as may be reasonably
requested by the Operating Partnership.
(b) (i) The Grantors understand that an investment in the
Operating Partnership involves substantial risks.
(ii) The Grantors have been given the opportunity to make a
thorough investigation of the proposed activities of the Operating
Partnership and have been furnished with materials relating to the
Operating Partnership and its proposed activities, including, without
limitation, the Private Placement Memorandum, the Partnership Summary
and the Tax Matters Summary.
(iii) The Grantors have been afforded the opportunity to
obtain any additional information requested by them.
(iv) The Grantors have had an opportunity to ask questions of
and receive answers from representatives of the Operating Partnership
concerning the Operating Partnership and its proposed activities and
the terms and conditions of an investment in OP Units.
(v) The Grantors have relied upon and are making their
investment decision based upon the Private Placement Memorandum, the
Partnership Summary, the Tax Matters Summary and other written
information provided to the Grantors by or on behalf of the Operating
Partnership.
(c) (i) The OP Units to be issued to the Grantors at the Closing
will be acquired by the Grantors for their own accounts, for investment
only and not with a view to, or with any intention of, a distribution
or resale thereof, in whole or in part, or the grant of any
participation therein.
(ii) The Grantors were not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
(d) (i) The Grantors acknowledge that
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(A) the OP Units to be issued to the Grantors at the
Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and
applicable state securities laws and, if such OP Units are
represented by certificates, such certificates will bear a
legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of the Grantors contained herein,
(C) the OP Units to be issued to the Grantors at the
Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there is no public market for such OP Units, and
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act
or any state securities laws or to take any action that would
make available any exemption from the registration
requirements of such laws, except as provided in the
Registration Rights Agreement (as defined below).
(ii) The Grantors hereby acknowledge that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in
the Lockup Agreements, the Grantors may have to bear the economic risk
of the investment commitment evidenced by this Agreement and any OP
Units issued hereunder for an indefinite period of time, although, if
applicable,
(A) under the terms of the Exchange Rights Agreement,
as it will be in effect at the time of the Offerings, OP Units
will, subject to the limitations set forth in the Exchange
Rights Agreement, be exchangeable at the request of the holder
thereof at any time after the first anniversary of their
issuance for cash based on their fair market value or, at the
option of the Company, for Common Stock and
(B) the holder of any such Common Stock issued upon
exchange of OP Units will be afforded certain rights to have
such Common Stock registered under the Securities Act and
applicable state securities laws pursuant to the Registration
Rights Agreement (as described in Section 5.1 (a)).
(e) The address set forth under each Grantor's signature on the
signature page hereto is the address of said Grantor's principal place of
business or, if a natural person, the address of the Grantor's residence, and
the Grantor has no present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which such principal
place of business or residence is situated.
3.7 Private Placement Memorandum. (a) The Grantors understand and
acknowledge that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, is in draft form only, and such transactions are subject
to change without the consent of the Grantors.
(b) Without limiting the foregoing, such changes may include the
deletion (or addition) of one or more properties expected to be acquired by the
Operating Partnership and changes in the amount of the indebtedness expected to
be repaid with the proceeds of the Offerings.
10
<PAGE> 11
(c) The Operating Partnership shall not be obligated to obtain the
Grantors' consent as a result of such changes, although such changes could
affect the nature and value of the Grantors' investments in OP Units.
3.8 Covenant to Remedy Breaches. The Grantors covenant to use all
reasonable efforts within their control
(a) to prevent the breach of any representation or warranty of the
Grantors hereunder,
(b) to satisfy all covenants of the Grantors hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantors hereunder upon their learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantors to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantors each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue OP Units to each Grantor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
11
<PAGE> 12
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V: POWER OF ATTORNEY
5.1 Grant of Power of Attorney. (a) The Grantors do hereby irrevocably
appoint Lawrence H. Feldman, Robert Cox and the Operating Partnership, and each
of them individually, with full power of substitution (each such person or the
Operating Partnership or any such successor of any of them acting in his, her or
its capacity as attorney-in-fact pursuant hereto, an "ATTORNEY-IN-FACT"), as the
true and lawful attorney-in-fact and agent of the Grantors, to act in the name,
place and stead of the Grantors:
(i) To take for the Grantors all steps deemed necessary or
advisable by the Operating Partnership in connection with the
Offerings, including without limitation
(A) filing a registration statement and amendments
thereto (the "REGISTRATION STATEMENT") under the Securities
Act which describe the benefits to be received by the Grantors
in connection with the formation of the Company and the
offering of the Company's Common Stock,
(B) distributing a preliminary prospectus and
prospectus regarding the offering of the Company's Common
Stock (respectively, the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed
necessary or desirable to lawfully effect the IPO, and
preliminary and final offering memoranda regarding the
offering of the Company's Common Stock in the concurrent
private placement, which contain such information as is deemed
necessary or desirable to effect the concurrent private
placement,
(C) to enter into the Exchange Rights Agreement, the
Registration Rights Agreement (which, if applicable, provides
the Grantors certain rights to have the Common Stock which may
be issued to the Grantors upon exchange of the Grantors' OP
Units registered under the Securities Act), and the Lock-Up
Agreements, and
(D) to take such other steps as the Attorney-in-Fact
may deem necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the
sale of the Grantors' Interests to the Operating Partnership, and any
consents contemplated by Section 6.9 hereof) and, in general, to do all
things and to take all actions which the Attorney-in-Fact in its sole
discretion may consider necessary or proper in connection with or to
carry out the transactions contemplated by this Agreement and the
Closing Documents as fully as could the Grantors if personally present
and acting.
(b) (i) The Power of Attorney granted by the Grantors pursuant to
this Article V and all authority conferred hereby is granted and
conferred subject to and in consideration of the interest of the
Operating
12
<PAGE> 13
Partnership and the Company and is for the purpose of completing the
transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantors granted hereby and
all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act
of any Grantor or by operation of law, whether by the death,
disability, incapacity, dissolution or liquidation of any Grantor or by
the occurrence of any other event or events (including without
limitation the termination of any trust or estate for which any Grantor
is acting as a fiduciary or fiduciaries), and if, after the execution
hereof, any Grantor shall die or become disabled or incapacitated or is
dissolved or liquidated, or if any other such event or events shall
occur before the completion of the transactions contemplated by this
Agreement, each Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such death,
disability, incapacity, dissolution, liquidation or other event or
events had not occurred and regardless of notice thereof.
(c) The Grantors agree that, at the request of the Operating
Partnership, they will promptly execute separate powers of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
(d) The Grantors acknowledge that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transactions contemplated by this
Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantors hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
Prospectus or any Preliminary Prospectus, nor for any aspect of either Offering,
and it shall not be liable for any error of judgment or for any act done or
omitted or for any mistake of fact or law except for its own gross negligence or
bad faith.
(c) The Grantors agree to indemnify each Attorney-in-Fact for and to
hold each Attorney-in-Fact harmless against any loss, claim, damage or liability
incurred or in part arising out of or in connection with its acting as
Attorney-in-Fact under the Power of Attorney created by the Grantors hereby, as
well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantors agree that each Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership
and/or the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.3 Ratification; Third Party Reliance. The Grantors do hereby ratify
and confirm all that any Attorney-in-Fact shall lawfully do or cause to be done
by virtue of the exercise of the powers granted unto it by the Grantors
hereunder, and the Grantors authorize the reliance of third parties on this
Power of Attorney and waive their rights, if any, as against any such third
party for its reliance hereon.
13
<PAGE> 14
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement without notice to or the consent of any Grantor
for the purpose of adding additional Grantors as parties hereto or deleting
Grantors as parties hereto and conforming Exhibits A and B in connection with
such additions or deletions. No waiver of any provisions of this Agreement shall
be valid unless in writing and signed by the party against whom enforcement is
sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantors, or
by the Grantors without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantors.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in
14
<PAGE> 15
the State of New York (as to which the parties agree to submit to jurisdiction
for the purposes of such action), this being in addition to any other remedy to
which they are entitled under this Agreement or otherwise at law or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212) 768-9010
Telecopy: (212) 768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212) 856-6996
Telecopy: (212) 858-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantors, to the address and telecopy number set forth under each Grantor's name
in Schedule A hereto.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantors acknowledge that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantors expressly give all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) Each Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which an Interest of the Grantor
represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
15
<PAGE> 16
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership
interest in any property,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein of its direct
or indirect interest in such partnership to the Operating Partnership
or the Company or to another person in connection with the formation of
the Operating Partnership or the Company as described in the
Registration Statement, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the Registration Statement, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in such partnership or an
undivided tenant-in-common interest in the property
represented by such partnership interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in such
partnership, and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
(v) As used herein, the term "CONSENTS" means, with respect to
any such partnership, any consent deemed by the Operating Partnership
to be necessary or desirable under the partnership agreement of such
partnership or any other agreement among all or any of the holders of
interests therein or any other agreement relating thereto or referred
to therein
(A) to permit any and all Conveyance Actions relating
to such partnership or to amend such partnership agreement
and/or other agreements so that no provision thereof prohibit,
restricts, impairs or interferes with any Conveyance Action
(such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if
interests therein are transferred for other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of such partnership upon
the Operating Partnership's acquisition of a limited or
general partner interest therein, respectively, and to adopt
such amendment as is necessary or desirable to effect such
admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general
partnership
16
<PAGE> 17
interest therein, provided, however, that such amendment will
not result in any increased liability on the part of any
Grantor hereunder or under the applicable partnership
agreement, and
(D) to continue such partnership following the
transfer of interests therein to the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
a partnership of which an Interest represents a direct or indirect
interest, the waiving of any and all rights that the Grantors may have
with respect to, and (to the extent possible) that any other person may
have with respect to, or that may accrue to the Grantors or other
person upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in such partnership (or the
Interests represented by such partnership interest) or to sell
the Grantors' or other person's direct or indirect interest
therein to another partner,
(D) rights to sell the Grantors' or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such
Conveyance Action.
(f) Each Grantor by its execution hereof
(i) with respect to each Other Partnership in which an
Interest owned by the Grantor represents a direct or indirect interest
therein, gives such consent as is necessary to cause each Partnership,
as applicable, to have authority to transfer all or substantially all
of the assets of such Partnership to the Operating Partnership on such
terms and conditions as such Other Partnership and the Operating
Partnership may agree; and
(ii) agrees that the Grantor's Acquisition Consideration may
be reduced to reflect such direct transfer of assets and the consequent
receipt of cash and other consideration directly by such Other
Partnership, provided that the total consideration to be received by
the Grantor either directly hereunder or indirectly through the receipt
of distributions from an Other Partnership shall equal Grantor's
Acquisition Consideration.
(g) (i) Each Grantor by its execution hereof gives such consent as
is necessary to cause, with respect to the partnership agreement of
each partnership in which an Interest of the Grantor represents,
directly or indirectly, a limited partner or general partner interest,
an amendment thereto to enable such partnership, to the extent
permissible under applicable law,
(A) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner therein and/or a substitute general partner
therein if the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above)
17
<PAGE> 18
by the exercise of the Option acquires a limited partnership
interest or a general partnership interest in such
partnership,
(B) to redeem the interest of any other partner
therein who has not agreed to become a party to this
Agreement,
(C) to distribute to all partners thereof, including
any partner who has not agreed to become a party to this
Agreement, OP Units and cash (in such proportions to each
partner therein as the general partner or general partners
thereof may determine, provided that the Grantor receives as a
result of all such distributions and the direct payment of
consideration hereunder, the amount of cash that is in
conformity with the Acquisition Consideration of the Grantor
provided for herein), and thereafter, at the Operating
Partnership's option, to dissolve, and
(D) any such other amendment as the Operating
Partnership may deem desirable,
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of any Grantor hereunder or under the applicable
partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of any Grantor
execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantors shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel or advisors to
the Grantors who agree to keep such terms confidential and any lender holding a
lien on any Interests.
(b) The Grantors shall treat all information received from the
Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate same only to
counsel to the Grantors who agree to keep such information confidential.
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Grantors set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantors under this Agreement.
18
<PAGE> 19
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/Lawrence H. Feldman
-----------------------------------
Name: Lawrence H. Feldman
Title: Chief Executive Officer and
President
/s/ Richard Cook
----------------------------------
Richard Cook
/s/ Craig Cook
----------------------------------
Craig Cook
/s/ Brian Cook
----------------------------------
Brian Cook
19
<PAGE> 20
Schedule A
Interests
Grantors's Name & Address Description of Interests
- ------------------------- ------------------------
Richard Cook 0.26650% Class A
c/o Steve Weinstein Limited Partner Interest in the
1401 11th Street Partnership.
Suite 1100
Denver, Colorado 80202
Craig Cook 0.13325% Class A
c/o Steve Weinstein Limited Partner Interest in the
1401 11th Street Partnership.
Suite 1100
Denver, Colorado 80202
Brian Cook 0.13325% Class A
c/o Steve Weinstein Limited Partner Interest in the
1401 11th Street Partnership.
Suite 1100
Denver, Colorado 80202
A-1
<PAGE> 21
Schedule B
Form of Acquisition Consideration
100% OP Units
B-1
<PAGE> 22
Schedule C
Exceptions to Title
None
C-1
<PAGE> 23
Schedule D
Interests in Other Partnerships and Properties (see below)
None
Other Partnerships and Properties
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
</TABLE>
D-1
<PAGE> 1
EXHIBIT 10.34
TOWER 45
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 28th day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and Charles
B. Hickcox (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns a limited partner interest in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to purchase for cash and through a
contribution to capital from the Grantor, and the Grantor desires to grant to
the Operating Partnership, an option to acquire, on the terms and conditions set
forth herein, all interests owned by the Grantor in the Partnership as set forth
on Schedule A attached hereto and any other direct or indirect interests the
Grantor may have, whether now owned or hereinafter acquired, in the Partnership,
or in the properties owned by the Partnership (collectively, the "INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to purchase for cash
and through a contribution to the capital of the Operating Partnership all the
Grantor's right, title and interest in the Interests, including but not limited
to, the Interest set forth on Schedule A attached hereto, on the terms and
conditions set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership during
the 10 business day period commencing on the first business day following the
removal of each such prohibition, stay, order, injunction, action, proceeding or
similar limitation in effect at that time. Subject to the foregoing, if the
Operating Partnership does not exercise the Option by the Option Termination
Date, such Option shall be deemed terminated and shall be of no further force or
effect and the Grantor shall have no further obligations hereunder.
<PAGE> 2
1.3 Acquisition Consideration. (a) The consideration (the "ACQUISITION
CONSIDERATION") to be received by each Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an amount equal to
$100.00 (one hundred dollars). The Acquisition Consideration shall be paid in
the form of a combination of (i) cash and/or (ii) units of limited partnership
interest in the Operating Partnership ("OP UNITS"), in the percentages and
allocations set forth on Schedule B attached hereto. To the extent a percentage
of the Acquisition Consideration includes one or more OP Units, as set forth on
Schedule B, the number of OP Units the Grantor shall be entitled to receive upon
the exercise of the Option with respect to such percentage shall equal the
quotient of
(A) the amount of Acquisition Consideration to be
paid in OP Units, divided by
(B) the midpoint of the proposed per share offering
price for the shares of Common Stock as set forth in the final
preliminary prospectus included in the Company's Registration
Statement on Form S-11 prepared and filed with the Securities
and Exchange Commission in connection with the IPO.
1.4 Lock-Up Agreements. The OP Units to be issued to the Grantor
hereunder shall be subject to Lock-Up Agreements to be executed at the Closing
(as hereinafter defined) by the Operating Partnership and the Grantor,
substantially in the forms attached as Exhibits A and B attached hereto, whereby
the Grantor will not be permitted to transfer OP Units for up to two years after
the Closing, except as otherwise permitted under such agreement.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise of
the Option, the Grantor shall, in accordance with Section 2.2 hereof, transfer,
assign, and convey to the Operating Partnership and the Operating Partnership
shall accept as a contribution to its capital from the Grantor, all right, title
and interest in and to the Interests, free and clear of all Encumbrances (as
defined in Section 3.1(a)), in exchange for the Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute and
deliver all closing documents (the "CLOSING DOCUMENTS") required by the
Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP as
escrow agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the Company
is sufficient, as determined by the Operating Partnership in its reasonable
discretion, to enable the Operating Partnership (i) to acquire all the
Interests, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO (the "REGISTRATION STATEMENT"), as the same shall be in
effect on the day of the Offerings Closing.
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(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee
(A) the Acquisition Consideration (any cash portion
of which shall be delivered in immediately available funds by
check or wire transfer),
(B) a certificate of the general partner of the
Operating Partnership (the "GENERAL PARTNER") certifying that
the Grantor has been or will be, effective as of the Closing,
admitted as a limited partner of the Operating Partnership and
that the Operating Partnership's books and records indicate or
will indicate that the Grantor is the holder of the number of
OP Units that Grantor is entitled to receive pursuant to
Section 1.3, and
(C) if such OP Units are to be represented by
certificates, a certificate or certificates in the name of the
Grantor representing the number of OP Units to which the
Grantor is entitled; and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or
any third party necessary in order to consummate the contribution of
the Interests, or there exists an order or judgment enjoining,
restraining or prohibiting, or assessing substantial damages in respect
of such consummation, or there shall be any action or proceeding
instituted or threatened in writing to enjoin, restrain, prohibit or
assess substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the
contribution of all of the Interests, notify the Escrow Agent of such
election and direct the Escrow Agent to return the Grantor's Closing
Documents to the Grantor, or
(y) in all other cases, equitably adjust the delivery with
respect to the Grantor pursuant to clause (c)(i) above to reflect the
portion of the Grantor's Interests with respect to which the purchase
is actually being made(provided, that, in no event shall the
Acquisition Consideration, as adjusted hereunder, consist of less than
one OP Unit), which adjustment shall be determined in the Operating
Partnership's reasonable discretion, and shall in all events be binding
upon the Grantor.
(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter
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remain in effect and the Operating Partnership may thereafter exercise the
Option again at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be
in the form attached hereto as Exhibit C attached hereto and shall contain a
warranty of title that the Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article
III hereof, or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent
that the Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
(i) the Grantor is a corporation, limited partnership, general
partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of
this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the
Grantor's charter and/or bylaws, partnership agreement,
operating agreement and articles of organization or
declaration of trust, as applicable, or, to the knowledge of
such counsel, any indenture, deed of trust, mortgage, loan or
credit agreement or other material agreement or instrument to
which the Grantor is a party or by which it or its assets or
properties are bound or affected, except for such breach or
violation as the Operating Partnership has represented and
warranted will be waived or cured, or discharged or repaid
prior to or contemporaneously with the Closing;
(B) to the knowledge of such counsel, constitute a
violation or any order, judgment or decree to which the
Grantor is a party or by which it or any of its assets or
properties are bound or affected; or
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(C) to the knowledge of such counsel, result in the
creation of any lien, charge or encumbrance upon any of the
Grantor's assets or properties, except for Permitted Pledges
(as defined in Section 3.1(a)); and
(iii) all applicable corporate, partnership, limited liability
company or trust action necessary for the Grantor to execute and deliver this
Agreement and the Closing Documents and to perform the transactions contemplated
hereby and thereby has been taken and that the same have been validly executed
and delivered and are the valid and binding obligations of the Grantor
enforceable against it in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) The Lock-up Agreements and a duly executed signature page to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, a copy of which is attached hereto as Exhibit D (the "PARTNERSHIP
AGREEMENT").
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Interests to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated
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by this Agreement, including instruments or documents deemed necessary or
desirable by the Operating Partnership to effect and evidence the purchase of
the Grantor's Interests by the Operating Partnership in accordance with the
terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity financing
of any real property owned by the Partnership (any such pledge, a "PERMITTED
PLEDGE")), voting agreement, option, charge, security interest, mortgage, deed
of trust, encumbrance, right of assignment, purchase right or other rights of
any nature whatsoever (each, an "ENCUMBRANCE"), and has full power and authority
to convey free and clear of any Encumbrances, its Interests and, upon delivery
of an Assignment by the Grantor conveying its Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Interests as
herein provided, the Operating Partnership will acquire good and valid title
thereto, free and clear of any Encumbrance, except Encumbrances created in favor
of the Operating Partnership by the transactions contemplated hereby.
(b) Each of the Grantor's Interests representing an interest in the
Partnership has been validly issued and the Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Interest represents an interest that are required to
be funded or advanced prior to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with respect
to any of the Interests except, in the case of any Interest constituting an
interest in the Partnership, as set forth in the partnership agreement of the
Partnership.
(d) The Grantor has no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto
(the"Other Partnerships and Properties") except for the Interests identified on
Exhibit A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantor may assume that the consents and waivers of
rights set forth in Section 6.9 hereof have been given by all partners of the
Partnership, partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such) in which
the Grantor's Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
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(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Grantor or require the
Grantor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which the property of the Grantor is bound or
affected, or result in the creation of any Encumbrance on any of the
property or assets of any Partnership in which any Interest of the
Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released.
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3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of its Interests, which in any such case
would impair the Grantor's ability to enter into and perform all of its
obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in
connection with the contribution of Interests to the capital of the
Operating Partnership (which Private Placement Memorandum includes a
draft Registration Statement, the Summary of Partnership Agreement
Provisions (the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters
(the "TAX MATTERS SUMMARY"), and understands the risks of, and other
considerations relating to, an investment in OP Units.
(ii) The Grantor, by reason of its business and financial
experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with
respect to its investment in OP Units,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in OP Units,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
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(iii) (A) The Grantor is an "accredited investor" as defined
in Rule 501 of the regulations promulgated under the
Securities Act.
(B) If the Grantor has retained or retains a person
to represent or advise it with respect to its investment in OP
Units, the Grantor will advise the Operating Partnership of
such retention and, at the Operating Partnership's request,
the Grantor shall, prior to or at the Closing,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Operating Partnership
containing such representations as may be reasonably
requested by the Operating Partnership.
(b) (i) The Grantor understands that an investment in the Operating
Partnership involves substantial risks.
(ii) The Grantor has been given the opportunity to make a
thorough investigation of the proposed activities of the Operating
Partnership and has been furnished with materials relating to the
Operating Partnership and its proposed activities, including, without
limitation, the Private Placement Memorandum, the Partnership Summary
and the Tax Matters Summary.
(iii) The Grantor has been afforded the opportunity to obtain
any additional information requested by it.
(iv) The Grantor has had an opportunity to ask questions of
and receive answers from representatives of the Operating Partnership
concerning the Operating Partnership and its proposed activities and
the terms and conditions of an investment in OP Units.
(v) The Grantor has relied and is making its investment
decision based upon the Private Placement Memorandum, the Partnership
Summary, the Tax Matters Summary and other written information provided
to the Grantor by or on behalf of the Operating Partnership.
(c) (i) The OP Units to be issued to the Grantor at the Closing will be
acquired by the Grantor for its own account, for investment only and
not with a view to, or with any intention of, a distribution or resale
thereof, in whole or in part, or the grant of any participation
therein.
(ii) The Grantor was not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
(d) (i) The Grantor acknowledges that
(A) the OP Units to be issued to the Grantor at the
Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and
applicable state securities laws and, if such OP Units are
represented by certificates, such certificates will bear a
legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of the Grantor contained herein,
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(C) the OP Units to be issued to the Grantor at the
Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there is no public market for such OP Units, and
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act
or any state securities laws or to take any action that would
make available any exemption from the registration
requirements of such laws.
(ii) The Grantor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in
the Lockup Agreements, the Grantor may have to bear the economic risk
of the investment commitment evidenced by this Agreement and any OP
Units issued hereunder for an indefinite period of time.
(e) The address set forth under the Grantor's signature on the
signature page hereto is the address of the Grantor's principal place of
business or, if a natural person, the address of the Grantor's residence, and
the Grantor has no present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which such principal
place of business or residence is situated.
3.7 Private Placement Memorandum. (a) The Grantor understands and
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of the Grantor.
(b) Without limiting the foregoing, such changes may include the
deletion (or addition) of one or more properties expected to be acquired by the
Operating Partnership and changes in the amount of the indebtedness expected to
be repaid with the proceeds of the Offerings.
(c) The Operating Partnership shall not be obligated to obtain the
Grantor's consent as a result of such changes, although such changes could
affect the nature and value of the Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
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4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue OP Units to each Grantor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V: POWER OF ATTORNEY
5.1 Grant of Power of Attorney. (a) The Grantor does hereby irrevocably
appoint Lawrence H. Feldman, Robert Cox and the Operating Partnership, and each
of them individually, with full power of substitution (each such person or the
Operating Partnership or any such successor of any of them acting in his, her or
its capacity as attorney-in-fact pursuant hereto, an "ATTORNEY-IN-FACT"), as the
true and lawful attorney-in-fact and agent of the Grantor, to act in the name,
place and stead of the Grantor:
(i) To take for the Grantor all steps deemed necessary or
advisable by the Operating Partnership in connection with the
Offerings, including without limitation
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(A) filing a registration statement and amendments
thereto (the "Registration Statement") under the Securities
Act which describes the benefit to be received by the Grantor
in connection with the formation of the Company and the
offering of the Company's Common Stock,
(B) distributing a preliminary prospectus and
prospectus regarding the offering of the Company's Common
Stock (respectively, the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed
necessary or desirable to lawfully effect the IPO, and
preliminary and final offering memoranda regarding the
offering of the Company's Common Stock in the concurrent
private placement, which contain such information as is deemed
necessary or desirable to effect the concurrent private
placement,
(C) to enter into the Lock-Up Agreements, and
(D) to take such other steps as the Attorney-in-Fact
may deem necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the
sale of the Grantor's Interests to the Operating Partnership, and any
consents contemplated by Section 6.9 hereof) and, in general, to do all
things and to take all actions which the Attorney-in-Fact in its sole
discretion may consider necessary or proper in connection with or to
carry out the transactions contemplated by this Agreement and the
Closing Documents as fully as could the Grantor if personally present
and acting.
(b) (i) The Power of Attorney granted by the Grantor pursuant to this
Article V and all authority conferred hereby is granted and conferred
subject to and in consideration of the interest of the Operating
Partnership and the Company and is for the purpose of completing the
transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantor granted hereby and
all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act
of the Grantor or by operation of law, whether by the death,
disability, incapacity, dissolution or liquidation of the Grantor or by
the occurrence of any other event or events (including without
limitation the termination of any trust or estate for which the Grantor
is acting as a fiduciary or fiduciaries), and if, after the execution
hereof, the Grantor shall die or become disabled or incapacitated or is
dissolved or liquidated, or if any other such event or events shall
occur before the completion of the transactions contemplated by this
Agreement, each Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such death,
disability, incapacity, dissolution, liquidation or other event or
events had not occurred and regardless of notice thereof.
(c) The Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
(d) The Grantor acknowledges that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transactions contemplated by this
Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantor hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
12
<PAGE> 13
Prospectus or any Preliminary Prospectus, nor for any aspect of either Offering,
and it shall not be liable for any error of judgment or for any act done or
omitted or for any mistake of fact or law except for its own gross negligence or
bad faith.
(c) The Grantor agrees to indemnify each Attorney-in-Fact for and to
hold each Attorney-in-Fact harmless against any loss, claim, damage or liability
incurred or in part arising out of or in connection with its acting as
Attorney-in-Fact under the Power of Attorney created by the Grantor hereby, as
well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantor agrees that each Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership
and/or the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.3 Ratification; Third Party Reliance. The Grantor does hereby ratify
and confirm all that any Attorney-in-Fact shall lawfully do or cause to be done
by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement without notice to or the consent of any Grantor
for the purpose of adding additional Grantors as parties hereto or deleting
Grantors as parties hereto and conforming Exhibits A and B in connection with
such additions or deletions. No waiver of any provisions of this Agreement shall
be valid unless in writing and signed by the party against whom enforcement is
sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
13
<PAGE> 14
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
14
<PAGE> 15
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which an Interest of the Grantor
represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership
interest in any property,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein of its direct
or indirect interest in such partnership to the Operating Partnership
or the Company or to another person in connection with the formation of
the Operating Partnership or the Company as described in the
Registration Statement, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the Registration Statement, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in such partnership or an
undivided tenant-in-common interest in the property
represented by such partnership interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in such
partnership, and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
15
<PAGE> 16
(v) As used herein, the term "CONSENTS" means, with respect to
any such partnership, any consent deemed by the Operating Partnership
to be necessary or desirable under the partnership agreement of such
partnership or any other agreement among all or any of the holders of
interests therein or any other agreement relating thereto or referred
to therein
(A) to permit any and all Conveyance Actions relating
to such partnership or to amend such partnership agreement
and/or other agreements so that no provision thereof prohibit,
restricts, impairs or interferes with any Conveyance Action
(such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if
interests therein are transferred for other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of such partnership upon
the Operating Partnership's acquisition of a limited or
general partner interest therein, respectively, and to adopt
such amendment as is necessary or desirable to effect such
admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of any Grantor hereunder or under the applicable
partnership agreement, and
(D) to continue such partnership following the
transfer of interests therein to the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
a partnership of which an Interest represents a direct or indirect
interest, the waiving of any and all rights that the Grantor may have
with respect to, and (to the extent possible) that any other person may
have with respect to, or that may accrue to the Grantor or other person
upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in such partnership (or the
Interests represented by such partnership interest) or to sell
the Grantor's or other person's direct or indirect interest
therein to another partner,
(D) rights to sell the Grantor's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such
Conveyance Action.
(f) The Grantor by its execution hereof
(i) with respect to each Other Partnership in which an
Interest owned by the Grantor represents a direct or indirect interest
therein, gives such consent as is necessary to cause each Partnership,
as applicable,
16
<PAGE> 17
to have authority to transfer all or substantially all of the assets of
such Partnership to the Operating Partnership on such terms and
conditions as such Other Partnership and the Operating Partnership may
agree; and
(ii) agrees that the Grantor's Acquisition Consideration may
be reduced to reflect such direct transfer of assets and the consequent
receipt of cash and other consideration directly by such Other
Partnership, provided that the total consideration to be received by
the Grantor either directly hereunder or indirectly through the receipt
of distributions from an Other Partnership shall equal Grantor's
Acquisition Consideration.
(g) (i) The Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of each
partnership in which an Interest of the Grantor represents, directly or
indirectly, a limited partner or general partner interest, an amendment
thereto to enable such partnership, to the extent permissible under
applicable law,
(A) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner therein and/or a substitute general partner
therein if the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) by the exercise of the
Option acquires a limited partnership interest or a general
partnership interest in such partnership,
(B) to redeem the interest of any other partner
therein who has not agreed to become a party to this
Agreement,
(C) to distribute to all partners thereof, including
any partner who has not agreed to become a party to this
Agreement, OP Units and cash (in such proportions to each
partner therein as the general partner or general partners
thereof may determine, provided that the Grantor receives as a
result of all such distributions and the direct payment of
consideration hereunder, the amount of cash that is in
conformity with the Acquisition Consideration of the Grantor
provided for herein), and thereafter, at the Operating
Partnership's option, to dissolve, and
(D) any such other amendment as the Operating
Partnership may deem desirable,
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of any Grantor hereunder or under the applicable
partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of the Grantor
execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel or advisors to
the Grantor who agree to keep such terms confidential and any lender holding a
lien on any Interests.
(b) The Grantor shall treat all information received from the Operating
Partnership or its counsel or advisors pertaining to the Operating Partnership
or the Company confidential and shall disseminate same only to counsel to the
Grantor who agree to keep such information confidential.
17
<PAGE> 18
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Grantor set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
18
<PAGE> 19
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/Lawrence H. Feldman
-----------------------------------
Name: Lawrence H. Feldman
Title: Chief Executive Officer and
President
/s/Charles B. Hickcox
---------------------------
Charles B. Hickcox
19
<PAGE> 20
Schedule A
Interests
Grantor's Name & Address Description of Interests
Charles B. Hickcox One percent (1%) Class B
5702 East Desert Winds Drive Limited Partner Interest in
Cave Creek, Arizona 85331 the Partnership.
<PAGE> 21
Schedule B
Form of Acquisition Consideration
One (1) OP Unit, with the remaining
balance paid in cash.
<PAGE> 22
Schedule C
Exceptions to Title
None
<PAGE> 23
Schedule D
Interests in Other Partnerships and Properties
None
Other Partnerships and Properties
<TABLE>
<CAPTION>
Property Partnership Owner
<S> <C> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
15. Maitland Forum Maitland Property Investors, Ltd.
Maitland, Florida
</TABLE>
<PAGE> 1
EXHIBIT 10.35
TOWER 45
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 31st day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and HAZAMA
T-45, a California corporation (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns a limited partner interest in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP"), which
the Grantor acquired from Hazama USA Corporation (formerly named American
Hazama, Inc.).
B. The Operating Partnership desires to purchase for cash and through a
contribution to capital from the Grantor, and the Grantor desires to grant to
the Operating Partnership, an option to acquire, on the terms and conditions set
forth herein, all interests owned by the Grantor in the Partnership as set forth
on Schedule A attached hereto and any other direct or indirect interests the
Grantor may have, whether now owned or hereinafter acquired, in the Partnership,
or in the properties owned by the Partnership (collectively, the "INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to purchase for cash
and through a contribution to the capital of the Operating Partnership all the
Grantor's right, title and interest in the Interests, including but not limited
to, the Interest set forth on Schedule A attached hereto, on the terms and
conditions set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership during
the 10 business day period commencing on the first business day following the
removal of each such prohibition, stay, order, injunction, action, proceeding or
similar limitation in effect at that time. Subject to the foregoing, if the
<PAGE> 2
Operating Partnership does not exercise the Option by the Option Termination
Date, such Option shall be deemed terminated and shall be of no further force or
effect and the Grantor shall have no further obligations hereunder.
1.3 Acquisition Consideration. (a) The consideration (the "ACQUISITION
CONSIDERATION") to be received by the Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an amount equal to
$350,000; $75,000 of which shall be non-refundable and paid by the Operating
Partnership to the Grantor upon the execution and delivery of this Agreement and
$275,000 of which shall be paid on the Closing Date. The Acquisition
Consideration shall be paid in cash.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise of
the Option, the Grantor shall, in accordance with Section 2.2 hereof, transfer,
assign, and convey to the Operating Partnership and the Operating Partnership
shall accept as a contribution to its capital from the Grantor, all right, title
and interest in and to the Interests, free and clear of all Encumbrances (as
defined in Section 3.1(a)), in exchange for the Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period
specified in the Option Notice at the offices of Battle Fowler
LLP, 75 East 55th Street, New York, New York, or at the
offices of the attorneys for the lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the
Operating Partnership and the Grantor will at or prior to the
Closing execute and deliver all closing documents (the
"CLOSING DOCUMENTS") required by the Operating Partnership
pursuant to Section 2.3 and, pending the Closing, deposit such
Closing Documents in escrow with Battle Fowler, LLP as escrow
agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of
the Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing
shall be deemed to have occurred only if that portion of the net proceeds from
the Offerings which is to be contributed to the Operating Partnership by the
Company is sufficient, as determined by the Operating Partnership in its
reasonable discretion, to enable the Operating Partnership (i) to acquire all
the Interests, and (ii) to apply such portion of the net proceeds to acquire
such other properties or interests, to repay principal, interest and other
amounts due with respect to indebtedness and to meet such other obligations as
may be described in the Registration Statement on Form S-11 prepared and filed
in connection with the IPO (the "REGISTRATION STATEMENT"), as the same shall be
in effect on the day of the Offerings Closing.
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be
delivered to the Escrow Agent or its designee
(A) $275,000 of the Acquisition
Consideration in immediately available funds by check
or wire transfer.
2
<PAGE> 3
(ii) upon receipt of the consideration set forth in
clause (i) above and the documents and deliveries required by
Section 2.3, the Escrow Agent will release the Closing
Documents to the Operating Partnership and deliver to the
Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) if the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section
2.3(a) a breach of or other exception with respect to any of
the representations, warranties or covenants contained in
Article III or has otherwise breached this Agreement, or
(ii) if all authorizations, consents or approvals of
any governmental or administrative agency or authority or any
third party necessary in order to consummate the contribution
of the Interests, or there exists an order or judgment
enjoining, restraining or prohibiting, or assessing
substantial damages in respect of such consummation, or there
shall be any action or proceeding instituted or threatened in
writing to enjoin, restrain, prohibit or assess substantial
damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, notify the Escrow
Agent of such election and direct the Escrow Agent to return the Grantor's
Closing Documents to the Grantor.
(e) Except as the result of a default by the Grantor
hereunder, if the Closing does not occur within 30 days of the date of the
Option Notice, then neither the Operating Partnership nor the Grantor shall have
any obligations under the Closing Documents, the Closing Documents shall be
deemed null and void ab initio and the Operating Partnership will direct the
Escrow Agent to destroy the Closing Documents it holds. This Agreement shall
thereafter remain in effect and the Operating Partnership may thereafter
exercise the Option again at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which
shall be in the form attached hereto as Exhibit A attached hereto and shall
contain a warranty of title that the Grantor owns the Interests free and clear
of all Encumbrances (as defined in Section 3.1(a), and shall either
(i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in
Article III hereof, or
(ii) if such reaffirmation cannot be made, identify
those representations, warranties and/or covenants contained
in Article III hereof which the Grantor can no longer make or
comply with, represent that the Grantor has used reasonable
efforts to take such actions as would permit the Grantor to
make such representations and warranties and/or to comply with
such covenants, and reaffirm the accuracy of all other
representations and warranties and the satisfaction of all
other covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case
where the Grantor is a corporation, partnership, limited liability company or
trust, a certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
3
<PAGE> 4
(c) An affidavit establishing an exemption from the
withholding requirements of the Foreign Investment in Real Property Tax Act
("FIRPTA"), as amended, provided, however, that if the Grantor fails to provide
such an affidavit, the Operating Partnership shall be entitled to withhold from
the Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld
shall be paid by the Operating Partnership to the Internal Revenue Service, in
order for the Operating Partnership to comply with the provisions of Section
1445 of the Internal Revenue Code of 1986 or successor similar legislation, as
the same may be amended hereafter).
(d) Any other documents, agreements or instruments as the
Operating Partnership shall reasonably request in order to assign, transfer and
convey the Grantor's Interests to the Operating Partnership and to otherwise
effect the transactions contemplated hereby, including filings with any
applicable governmental jurisdiction in which the Operating Partnership is
required to file its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 5.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations
under this Agreement, the Operating Partnership shall be entitled to exercise
against the Grantor any and all remedies provided at law or in equity, including
but not limited to, the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated by this Agreement, including instruments or documents
deemed necessary or desirable by the Operating Partnership to effect and
evidence the purchase of the Grantor's Interests by the Operating Partnership in
accordance with the terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true as of the Closing Date.
4
<PAGE> 5
3.1 Title to Interests. (a) Except as set forth on Schedule B attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity financing
of any real property owned by the Partnership (any such pledge, a "PERMITTED
PLEDGE")), voting agreement, option, charge, security interest, mortgage, deed
of trust, encumbrance, right of assignment, purchase right or other rights of
any nature whatsoever (each, an "ENCUMBRANCE"), and has full power and authority
to convey free and clear of any Encumbrances, its Interests and, upon delivery
of an Assignment by the Grantor conveying its Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Interests as
herein provided, the Operating Partnership will acquire good and valid title
thereto, free and clear of any Encumbrance, except Encumbrances created in favor
of the Operating Partnership by the transactions contemplated hereby.
(b) The Grantor has not entered into any agreements,
instruments or understandings with respect to the Interests, except as set forth
in the partnership agreement of the Partnership (the "TOWER 45 PARTNERSHIP
AGREEMENT").
(c) The Grantor has no interest, either direct or indirect, in
any of the partnerships or properties set forth on Schedule C attached hereto
(the"Other Partnerships and Properties") except for the Interests identified on
Schedule A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
(d) In making the representations in this Section 3.1
regarding the absence of Encumbrances, the Grantor may assume without
independent investigation that the consents and waivers of rights set forth in
Section 5.9 hereof have been given by all partners of the Partnership, partners
in partnerships, members of limited liability companies or beneficiaries of
trusts (in each case, only in their capacity as such) in which the Grantor's
Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each
Closing Document and each other agreement, document and
instrument to be executed and delivered by or on behalf of the
Grantor pursuant to this Agreement;
(ii) to perform the transactions contemplated hereby
and thereby; and
(iii) to transfer, assign, convey and deliver all of
the Interests to the Operating Partnership in accordance with
this Agreement.
(c) All applicable corporate, partnership, limited liability
company, trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of the
Grantor pursuant to this Agreement constitutes, or when executed and delivered
will constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
5
<PAGE> 6
(e) Except for any breaches, violations or defaults which will
be waived or cured, or discharged or repaid prior to or contemporaneously with
the Closing, the execution, delivery and performance of this Agreement, the
Closing Documents and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's
charter and/or bylaws, partnership agreement, operating
agreement or declaration of trust, as applicable;
(ii) does not and will not violate any foreign,
federal, state, local or other laws applicable to the Grantor
or require the Grantor to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made
and which does not remain in effect; and
(iii) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any
obligation under or give rise to a right of termination of,
any indenture, deed of trust, mortgage, loan or credit
agreement or any other agreement, contract, instrument, lease,
permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which the
Grantor is a party or by which the property of the Grantor is
bound or affected.
(f) In making the representations set forth in this Section
3.2, the Grantor may assume without independent investigation
(i) that the consents and waivers of rights set forth
in Section 5.9 hereof have been given by all partners of the
Partnership, partners in partnerships, members of limited
liability companies or beneficiaries of trusts (in each case,
only in their capacity as such) in which the Grantor's
Interests represent direct or indirect interests and
(ii) that, for purposes of making such representation
as of the date hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting the Grantor, the Interests or the Grantor's ability to consummate the
transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ,
injunction or decree of any court, government, governmental entity or authority
or arbitration against or affecting the Grantor or the Interests, which in any
such case would impair the Grantor's ability to enter into and perform all of
its obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section
3.4, the Grantor may assume
(i) that the consents and waivers of rights set forth
in Section 5.9 hereof have been given by all partners of the
Partnership, partners in partnerships, members of limited
liability companies or beneficiaries of trusts (in each case,
only in their capacity as such) in which the Grantor's
Interests represent direct or indirect interests and
6
<PAGE> 7
(ii) that, for purposes of making such
representations as of the date hereof, any Permitted Pledge
has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
3.6 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of
the Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty
or covenant of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power
and capacity:
(i) to execute and deliver this Agreement, each
Closing Document to which it is a party and each other
agreement, document and instrument to be executed and
delivered by or on behalf of it pursuant to this Agreement;
and
(ii) to perform the transactions contemplated hereby
and thereby.
(c) All action necessary for the Operating Partnership to
execute and deliver this Agreement, the Closing Documents and each other
agreement, document and instrument executed by or on behalf of the Operating
Partnership pursuant to this Agreement, and to perform the transactions
contemplated hereby and thereby, has been taken, or will be taken prior to the
Closing Date.
(d) This Agreement, each Closing Document to which the
Operating Partnership is a party and each agreement, document and instrument
executed and delivered by the Operating Partnership pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Operating Partnership, each enforceable in
accordance with its respective terms.
(e) The execution, delivery and performance of this Agreement,
each Closing Document to which the Operating Partnership is a party and each
such agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership
agreement of the Operating Partnership;
7
<PAGE> 8
(ii) does not and will not violate any foreign,
federal, state, local or other laws applicable to the
Operating Partnership or require the Operating Partnership to
obtain any approval, consent or waiver of, or make any filing
with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in
effect; and
(iii) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any
obligation under or give rise to a right of termination of,
any indenture, deed of trust, mortgage, loan or credit
agreement, any other material agreement, contract, instrument,
lease, permit or authorization, or any order, writ, judgment,
injunction, decree, determination or arbitration award to
which the Operating Partnership is a party or by which the
property of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
the Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4.3 Covenant to Remedy Breaches. The Operating Partnership covenants to
use all reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of
the Operating Partnership hereunder,
(b) to satisfy all covenants of the Operating Partnership
hereunder and
(c) to promptly clear any breach of a representation, warranty
or covenant of the Operating Partnership hereunder upon its learning of same.
ARTICLE V: MISCELLANEOUS
5.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement shall not be amended without notice to or the
consent of the Grantor for the purpose of adding additional Grantors as parties
hereto or deleting Grantors as parties hereto. No waiver of any provisions of
this Agreement shall be valid unless in writing and signed by the party against
whom enforcement is sought.
5.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which
will be deemed an original and all of which shall constitute one and the same
instrument and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
5.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and
8
<PAGE> 9
any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
5.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
5.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 5.3 and
5.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
5.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision and to execute any amendment,
consent or agreement deemed necessary or desirable by the Operating Partnership
to effect such replacement.
5.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
5.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
9
<PAGE> 10
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
5.9 Waiver of Rights; Consents with Respect to Interests. (a) The
Grantor acknowledges that the agreements contained herein and the transactions
contemplated hereby and any actions taken in contemplation of the transactions
contemplated hereby may conflict with, and may not have been contemplated by,
the Tower 45 Partnership Agreement or any other agreement among one or more of
the partners of the Partnership.
(b) The Grantor expressly gives all Consents (as defined
below) (and any consent necessary to authorize the proper parties in interest to
give all Consents) and Waivers (as defined below) necessary or desirable to
facilitate any Conveyance Action (as defined below) relating to the Partnership.
(c) The Grantor further agrees that the Grantor will take no
action to enjoin, or seek damages resulting from, any Conveyance Action by any
holder of a direct or indirect interest in the Partnership.
(d) The Waivers and Consent contained in this Section 5.9
shall terminate upon the termination of this Agreement, except as to
transactions completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means,
with respect to the Partnership,
(ii) the conveyance or agreement to convey by a
partner thereof or by any holder of an indirect interest
therein of its direct or indirect interest in the Partnership
to the Operating Partnership or the Company or to another
person in connection with the formation of the Operating
Partnership or the Company as described in the Registration
Statement, or
(iii) the entering into by any such partner or holder
of any agreement relating to
(A) the formation of the Operating
Partnership or the Company as described in the
Registration Statement,
(B) the direct or indirect acquisition by
the Operating Partnership or the Company of any such
direct or indirect interest, or
(C) the transactions described in or
contemplated by the Registration Statement, or
(iv) the taking by any such partner or holder of any
action necessary or desirable to facilitate any of the
foregoing, including, without limitation, the following
(provided that the same are taken in furtherance of the
foregoing):
(A) any sale or distribution to any person
of a direct or indirect interest in the Partnership
or an undivided tenant-in-common interest in the
property represented by such interest in the
Partnership,
10
<PAGE> 11
(B) the entering into of any agreement with
any person or entity that grants to such person or
entity the right to purchase a direct or indirect
interest in the Partnership, and
(C) the giving of the Consents and Waivers
contained in this Section 5.9 or consents or waivers
similar thereto in form or purpose.
(v) As used herein, the term "CONSENTS" means, with
respect to the Partnership, any consent deemed by the
Operating Partnership to be necessary or desirable under the
Tower 45 Partnership Agreement or any other agreement among
all or any of the holders of interests therein or any other
agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions
relating to the Partnership or to amend the Tower 45
Partnership Agreement and/or other agreements so that
no provision thereof prohibits, restricts, impairs or
interferes with any Conveyance Action (such amendment
to include, without limitation, the deletion of
provisions which cause a default under the Tower 45
Partnership Agreement if interests therein are
transferred for other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership
or the Company in accordance with Section 5.3 above) as
a substitute limited partner or general partner of the
Partnership upon the Operating Partnership's
acquisition of a limited or general partner interest
therein, respectively, and to adopt such amendment as
is necessary or desirable to effect such admission,
(C) to adopt any amendment as may be deemed
desirable by the Operating Partnership, either
simultaneously with or immediately prior to the
acquisition of a limited or general partnership
interest therein, provided, however, that such
amendment will not result in any increased liability on
the part of any Grantor hereunder or under the Tower 45
Partnership Agreement, and
(D) to continue the Partnership following the
transfer of interests therein to the Operating
Partnership (or the Company or any affiliate of the
Operating Partnership or the Company in accordance with
Section 5.3 above).
(vi) As used herein, the term "WAIVERS" means, with
respect to the Partnership, the waiving of any and all rights
that the Grantor may have with respect to, and (to the extent
possible) that any other person may have with respect to, or
that may accrue to the Grantor or other person upon the
occurrence of, a Conveyance Action relating to the
Partnership, including, but not limited to, the following
rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in the Partnership or to
sell the Grantor's or other person's direct or indirect
interest therein to another partner,
(D) rights to sell the Grantor's or other person's
direct or indirect interest therein at a price other
than as provided herein, or
11
<PAGE> 12
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to
cause a termination or dissolution of the Partnership
because of such Conveyance Action.
(f) The Grantor by its execution hereof with respect to each
Other Partnership in which an Interest owned by the Grantor represents a direct
or indirect interest therein, gives such consent as is necessary to cause each
Partnership, as applicable, to have authority to transfer all or substantially
all of the assets of such Partnership to the Operating Partnership on such terms
and conditions as such Other Partnership and the Operating Partnership may
agree.
(g) The Grantor by its execution hereof gives such consent as
is necessary to cause, with respect to the partnership agreement of each
partnership in which an Interest of the Grantor represents, directly or
indirectly, a limited partner or general partner interest, an amendment thereto
to enable such partnership, to the extent permissible under applicable law,
(A) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership
or the Company in accordance with Section 5.3 above) as
a substitute limited partner therein and/or a
substitute general partner therein if the Operating
Partnership (or the Company or any affiliate of the
Operating Partnership or the Company in accordance with
Section 5.3 above) by the exercise of the Option
acquires a limited partnership interest or a general
partnership interest in such partnership,
(B) to redeem the interest of any other partner
therein who has not agreed to become a party to this
Agreement,
(C) to distribute to all partners thereof, including
any partner who has not agreed to become a party to
this Agreement, OP Units and cash (in such proportions
to each partner therein as the general partner or
general partners thereof may determine, provided that
the Grantor receives as a result of all such
distributions and the direct payment of consideration
hereunder, the amount of cash that is equal to the
Acquisition Consideration provided for herein), and
thereafter, at the Operating Partnership's option, to
dissolve, and
(D) any such other amendment as the Operating
Partnership may deem desirable,
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of any Grantor hereunder or under the applicable
partnership agreement.
(h) Notwithstanding anything to the contrary contained in this
Agreement, the consents and waivers contained in this section 5.9 shall only be
effective upon the contemporaneous payment in full by the Operating Partnership
of the Acquisition Consideration.
5.10 Confidentiality. (a) Except as required by law, the Grantor shall
treat as strictly confidential the fact that the Company is contemplating an
offering of its Common Stock until such time as the Company has filed the
Registration Statement with the Securities and Exchange Commission, and shall
not communicate at any time the terms of this Agreement to any person other than
counsel or advisors to the Grantor who agree to keep such terms confidential,
any affiliate or shareholder of the Grantor whose approval is required for the
execution of this Agreement, and any lender holding a lien on any Interests.
(b) The Grantor shall treat all information received from the
Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate same only as
12
<PAGE> 13
required by law, to an affiliate or shareholder of Grantor to the extent
necessary to obtain approvals required for the transaction contemplated hereby,
and to counsel to the Grantor who agree to keep such information confidential.
5.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
5.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Grantor set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
5.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
5.14 Non Discrimination. If the Operating Partnership purchases any
interest in the Partnership from any entity other than the Grantor, the
Operating Partnership must exercise its Option to purchase Grantor's Interest
under this Agreement.
13
<PAGE> 14
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
---------------------------
Name: Lawrence H. Feldman
Title: Chief Executive Officer and
President
GRANTOR:
HAZAMA T-45
By: /s/ Hideaki Kato
---------------------------
Name: Hideaki Kato
Title: Secretary
14
<PAGE> 15
Schedule A
Interests
Grantor's Name & Address Description of Interests
------------------------ ------------------------
Hazama T-45 10% Class A Limited
1045 West Redondo Beach Boulevard Partner Interest in the
Suite 400 Partnership.
Gardena, CA 90247-4180
<PAGE> 16
Schedule B
Exceptions to Title
None
<PAGE> 17
Schedule C
Interests in Other Partnerships and Properties (see below)
None
Other Partnerships and Properties
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
</TABLE>
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EXHIBIT 10.36
TOWER 45
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 25th day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and Leo V.
Berger (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns a limited partner interest in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to acquire through a contribution
to capital from the Grantor, and the Grantor desires to grant to the Operating
Partnership, an option to acquire, on the terms and conditions set forth
herein, all interests owned by the Grantor in the Partnership as set forth on
Schedule A attached hereto and any other direct or indirect interests the
Grantor may have, whether now owned or hereinafter acquired, in the
Partnership, or in the properties owned by the Partnership (collectively, the
"INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares
of the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to acquire through a
contribution to the capital of the Operating Partnership all the Grantor's
right, title and interest in the Interests, including but not limited to, the
Interest set forth on Schedule A attached hereto, on the terms and conditions
set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership
during the 10 business day period commencing on the first business day
following the removal of each such prohibition, stay, order, injunction,
action, proceeding or similar limitation in effect at that time. Subject to the
foregoing, if the Operating Partnership does not exercise the Option by the
Option Termination Date, such Option shall be deemed terminated and shall be of
no further force or effect and the Grantor shall have no further obligations
hereunder.
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1.3 Acquisition Consideration. (a) The consideration (the "ACQUISITION
CONSIDERATION") to be received by each Grantor in respect of the contribution
of the Grantor's Interests to the Operating Partnership shall be an amount
equal to $150,000. The Acquisition Consideration shall be paid in the form of a
combination of (i) cash and/or (ii) units of limited partnership interest in
the Operating Partnership ("OP UNITS"), in the percentages and allocations set
forth on Schedule B attached hereto. To the extent a percentage of the
Acquisition Consideration includes one or more OP Units, as set forth on
Schedule B, the number of OP Units the Grantor shall be entitled to receive
upon the exercise of the Option with respect to such percentage shall equal the
quotient of
(A) the amount of Acquisition Consideration to be
paid in OP Units, divided by
(B) the midpoint of the proposed per share offering
price for the shares of Common Stock as set forth in the
final preliminary prospectus included in the Company's
Registration Statement on Form S-11 prepared and filed with
the Securities and Exchange Commission in connection with the
IPO.
1.4 Lock-Up Agreements. The OP Units to be issued to the Grantor
hereunder shall be subject to Lock-Up Agreements to be executed at the Closing
(as hereinafter defined) by the Operating Partnership and the Grantor,
substantially in the forms attached as Exhibits A and B attached hereto,
whereby the Grantor will not be permitted to transfer OP Units for up to two
years after the Closing, except as otherwise permitted under such agreement.
1.5 Other Agreements. At or prior to the Closing, the Company, the
Grantors and the other parties thereto shall enter into a Registration Rights
Agreement and an Exchange Rights Agreement, as described in Section 5.1(a) and
substantially in the forms attached as Exhibits C and D, respectively.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise
of the Option, the Grantor shall, in accordance with Section 2.2 hereof,
transfer, assign, and convey to the Operating Partnership and the Operating
Partnership shall accept as a contribution to its capital from the Grantor, all
right, title and interest in and to the Interests, free and clear of all
Encumbrances (as defined in Section 3.1(a)), in exchange for the Acquisition
Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute
and deliver all closing documents (the "CLOSING DOCUMENTS") required
by the Operating Partnership pursuant to Section 2.3 and, pending the
Closing, deposit such Closing Documents in escrow with Battle Fowler,
LLP as escrow agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the
Company is sufficient, as determined by
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the Operating Partnership in its reasonable discretion, to enable the Operating
Partnership (i) to acquire all the Interests, and (ii) to apply such portion of
the net proceeds to acquire such other properties or interests, to repay
principal, interest and other amounts due with respect to indebtedness and to
meet such other obligations as may be described in the Registration Statement
on Form S-11 prepared and filed in connection with the IPO (the "REGISTRATION
STATEMENT"), as the same shall be in effect on the day of the Offerings
Closing.
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee
(A) the Acquisition Consideration (any cash portion
of which shall be delivered in immediately available funds by
check or wire transfer),
(B) a certificate of the general partner of the
Operating Partnership (the "GENERAL PARTNER") certifying that
the Grantor has been or will be, effective as of the Closing,
admitted as a limited partner of the Operating Partnership
and that the Operating Partnership's books and records
indicate or will indicate that the Grantor is the holder of
the number of OP Units that Grantor is entitled to receive
pursuant to Section 1.3, and
(C) if such OP Units are to be represented by
certificates, a certificate or certificates in the name of
the Grantor representing the number of OP Units to which the
Grantor is entitled; and
(ii) upon receipt of the consideration set forth in clause
(i) above and the documents and deliveries required by Section 2.3,
the Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or
any third party necessary in order to consummate the contribution of
the Interests, or there exists an order or judgment enjoining,
restraining or prohibiting, or assessing substantial damages in
respect of such consummation, or there shall be any action or
proceeding instituted or threatened in writing to enjoin, restrain,
prohibit or assess substantial damages in respect of such
consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the
contribution of all of the Interests, notify the Escrow Agent of such
election and direct the Escrow Agent to return the Grantor's Closing
Documents to the Grantor, or
(y) in all other cases, equitably adjust the delivery with
respect to the Grantor pursuant to clause (c)(i) above to reflect the
portion of the Grantor's Interests with respect to which the purchase
is actually being made(provided, that, in no event shall the
Acquisition Consideration, as adjusted hereunder, consist of less than
one OP Unit), which adjustment shall be determined in the Operating
Partnership's reasonable discretion, and shall in all events be
binding upon the Grantor.
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(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and
void ab initio and the Operating Partnership will direct the Escrow Agent to
destroy the Closing Documents it holds. This Agreement shall thereafter remain
in effect and the Operating Partnership may thereafter exercise the Option
again at any time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be
in the form attached hereto as Exhibit E attached hereto and shall contain a
warranty of title that the Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article
III hereof, or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent
that the Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
(i) the Grantor is a corporation, limited partnership,
general partnership, limited liability company or trust duly
organized, validly existing and in good standing under the laws of the
state of its organization and had and has all applicable power and
authority to execute, deliver and perform this Agreement and the
Closing Documents;
(ii) the execution, delivery and performance by the Grantor
of this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the
Grantor's charter and/or bylaws, partnership agreement,
operating agreement and articles of organization or
declaration of trust, as applicable, or, to the knowledge of
such counsel, any indenture, deed of trust, mortgage, loan or
credit agreement or other material agreement or instrument to
which the Grantor is a party or by which it or its assets or
properties are bound or affected, except for such breach or
violation as the Operating Partnership has represented and
warranted will be waived or cured, or discharged or repaid
prior to or contemporaneously with the Closing;
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(B) to the knowledge of such counsel, constitute a
violation or any order, judgment or decree to which the
Grantor is a party or by which it or any of its assets or
properties are bound or affected; or
(C) to the knowledge of such counsel, result in the
creation of any lien, charge or encumbrance upon any of the
Grantor's assets or properties, except for Permitted Pledges
(as defined in Section 3.1(a)); and
(iii) all applicable corporate, partnership, limited
liability company or trust action necessary for the Grantor to execute and
deliver this Agreement and the Closing Documents and to perform the
transactions contemplated hereby and thereby has been taken and that the same
have been validly executed and delivered and are the valid and binding
obligations of the Grantor enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting creditors' rights
and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) The Lock-up Agreements, a duly executed signature page to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, a copy of which is attached hereto as Exhibit F, (the "PARTNERSHIP
AGREEMENT"), the Exchange Rights Agreement, and the Registration Rights
Agreement.
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey
the Grantor's Interests to the Operating Partnership and to otherwise effect
the transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to
file its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase
of the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
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2.7 Further Assurances. The Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action
as the Operating Partnership may reasonably request in order to effect the
transactions contemplated by this Agreement, including instruments or documents
deemed necessary or desirable by the Operating Partnership to effect and
evidence the purchase of the Grantor's Interests by the Operating Partnership
in accordance with the terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity
financing of any real property owned by the Partnership (any such pledge, a
"PERMITTED PLEDGE")), voting agreement, option, charge, security interest,
mortgage, deed of trust, encumbrance, right of assignment, purchase right or
other rights of any nature whatsoever (each, an "ENCUMBRANCE"), and has full
power and authority to convey free and clear of any Encumbrances, its Interests
and, upon delivery of an Assignment by the Grantor conveying its Interests and
delivery of the Acquisition Consideration by the Operating Partnership for such
Interests as herein provided, the Operating Partnership will acquire good and
valid title thereto, free and clear of any Encumbrance, except Encumbrances
created in favor of the Operating Partnership by the transactions contemplated
hereby.
(b) Each of the Grantor's Interests representing an interest in the
Partnership has been validly issued and the Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Interest represents an interest that are required to
be funded or advanced prior to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with
respect to any of the Interests except, in the case of any Interest
constituting an interest in the Partnership, as set forth in the partnership
agreement of the Partnership.
(d) The Grantor has no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto
(the"Other Partnerships and Properties") except for the Interests identified on
Exhibit A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership
may reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantor may assume that the consents and waivers
of rights set forth in Section 6.9 hereof have been given by all partners of
the Partnership, partners in partnerships, members of limited liability
companies or beneficiaries of trusts (in each case, only in their capacity as
such) in which the Grantor's Interests represent direct or indirect interests.
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3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been
taken, or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter
and/or bylaws, partnership agreement, operating agreement or
declaration of trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Grantor or require the
Grantor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which the property of the Grantor is bound or
affected, or result in the creation of any Encumbrance on any of the
property or assets of any Partnership in which any Interest of the
Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect
interests and
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(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or
arbitration against or affecting all or any portion of its Interests, which in
any such case would impair the Grantor's ability to enter into and perform all
of its obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all partners of the Partnership,
partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect
interests and
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that
it will not enter into, any agreement, arrangement or understanding with any
person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in
connection with the contribution of Interests to the capital of the
Operating Partnership (which Private Placement Memorandum includes a
draft Registration Statement, the Summary of Partnership Agreement
Provisions (the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters
(the "TAX MATTERS SUMMARY"), and understands the risks of, and other
considerations relating to, an investment in OP Units.
(ii) The Grantor, by reason of its business and financial
experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with
respect to its investment in OP Units,
(A) has such knowledge, sophistication and
experience in financial and business matters and in making
investment decisions of this type that it is capable of
evaluating the merits and risks of and of making an informed
investment decision with respect to an investment in OP
Units,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in
protecting its interests and
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(C) is capable of bearing the economic risk of such
investment.
(iii) (A) The Grantor is an "accredited investor" as defined
in Rule 501 of the regulations promulgated under the
Securities Act.
(B) If the Grantor has retained or retains a person
to represent or advise it with respect to its investment in
OP Units, the Grantor will advise the Operating Partnership
of such retention and, at the Operating Partnership's
request, the Grantor shall, prior to or at the Closing,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor
to deliver a certificate to the Operating
Partnership containing such representations as may
be reasonably requested by the Operating
Partnership.
(b) (i) The Grantor understands that an investment in the
Operating Partnership involves substantial risks.
(ii) The Grantor has been given the opportunity to make a
thorough investigation of the proposed activities of the Operating
Partnership and has been furnished with materials relating to the
Operating Partnership and its proposed activities, including, without
limitation, the Private Placement Memorandum, the Partnership Summary
and the Tax Matters Summary.
(iii) The Grantor has been afforded the opportunity to obtain
any additional information requested by it.
(iv) The Grantor has had an opportunity to ask questions of
and receive answers from representatives of the Operating Partnership
concerning the Operating Partnership and its proposed activities and
the terms and conditions of an investment in OP Units.
(v) The Grantor has relied and is making its investment
decision based upon the Private Placement Memorandum, the Partnership
Summary, the Tax Matters Summary and other written information
provided to the Grantor by or on behalf of the Operating Partnership.
(c) (i) The OP Units to be issued to the Grantor at the Closing
will be acquired by the Grantor for its own account, for investment
only and not with a view to, or with any intention of, a distribution
or resale thereof, in whole or in part, or the grant of any
participation therein.
(ii) The Grantor was not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
(d) (i) The Grantor acknowledges that
(A) the OP Units to be issued to the Grantor at the
Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and
applicable state securities laws and, if such OP Units are
represented by certificates, such certificates will bear a
legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of the Grantor contained herein,
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(C) the OP Units to be issued to the Grantor at the
Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there is no public market for such OP Units, and
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act
or any state securities laws or to take any action that would
make available any exemption from the registration
requirements of such laws, except as provided in the
Registration Rights Agreement (as defined below).
(ii) The Grantor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in
the Lock-up Agreements, the Grantor may have to bear the economic risk
of the investment commitment evidenced by this Agreement and any OP
Units issued hereunder for an indefinite period of time, although, if
applicable,
(A) under the terms of the Exchange Rights
Agreement, as it will be in effect at the time of the
Offerings, OP Units will, subject to the limitations set
forth in the Exchange Rights Agreement, be exchangeable at
the request of the holder thereof at any time after the first
anniversary of their issuance for cash based on their fair
market value or, at the option of the Company, for Common
Stock and
(B) the holder of any such Common Stock issued upon
exchange of OP Units will be afforded certain rights to have
such Common Stock registered under the Securities Act and
applicable state securities laws pursuant to the Registration
Rights Agreement (as described in Section 5.1 (a)).
(e) The address set forth under the Grantor's signature on the
signature page hereto is the address of the Grantor's principal place of
business or, if a natural person, the address of the Grantor's residence, and
the Grantor has no present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which such principal
place of business or residence is situated.
3.7 Private Placement Memorandum. (a) The Grantor understands and
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of the Grantor.
(b) Without limiting the foregoing, such changes may include the
deletion (or addition) of one or more properties expected to be acquired by the
Operating Partnership and changes in the amount of the indebtedness expected to
be repaid with the proceeds of the Offerings.
(c) The Operating Partnership shall not be obligated to obtain the
Grantor's consent as a result of such changes, although such changes could
affect the nature and value of the Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
10
<PAGE> 11
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue OP Units to each Grantor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with
its respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or
give rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
11
<PAGE> 12
ARTICLE V: POWER OF ATTORNEY
5.1 Grant of Power of Attorney. (a) The Grantor does hereby
irrevocably appoint Lawrence H. Feldman, Robert Cox and the Operating
Partnership, and each of them individually, with full power of substitution
(each such person or the Operating Partnership or any such successor of any of
them acting in his, her or its capacity as attorney-in-fact pursuant hereto, an
"ATTORNEY-IN-FACT"), as the true and lawful attorney-in-fact and agent of the
Grantor, to act in the name, place and stead of the Grantor:
(i) To take for the Grantor all steps deemed necessary or
advisable by the Operating Partnership in connection with the
Offerings, including without limitation
(A) filing a registration statement and amendments
thereto (the "Registration Statement") under the Securities
Act which describes the benefit to be received by the Grantor
in connection with the formation of the Company and the
offering of the Company's Common Stock,
(B) distributing a preliminary prospectus and
prospectus regarding the offering of the Company's Common
Stock (respectively, the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed
necessary or desirable to lawfully effect the IPO, and
preliminary and final offering memoranda regarding the
offering of the Company's Common Stock in the concurrent
private placement, which contain such information as is
deemed necessary or desirable to effect the concurrent
private placement,
(C) to enter into the Exchange Rights Agreement, the
Registration Rights Agreement (which, if applicable, provides
the Grantor certain rights to have the Common Stock which may
be issued to the Grantor upon exchange of the Grantor's OP
Units registered under the Securities Act), and the Lock-Up
Agreements, and
(D) to take such other steps as the Attorney-in-Fact
may deem necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the
sale of the Grantor's Interests to the Operating Partnership, and any
consents contemplated by Section 6.9 hereof) and, in general, to do
all things and to take all actions which the Attorney-in-Fact in its
sole discretion may consider necessary or proper in connection with or
to carry out the transactions contemplated by this Agreement and the
Closing Documents as fully as could the Grantor if personally present
and acting.
(b) (i) The Power of Attorney granted by the Grantor pursuant to
this Article V and all authority conferred hereby is granted and
conferred subject to and in consideration of the interest of the
Operating Partnership and the Company and is for the purpose of
completing the transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantor granted hereby and
all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act
of the Grantor or by operation of law, whether by the death,
disability, incapacity, dissolution or liquidation of the Grantor or
by the occurrence of any other event or events (including without
limitation the termination of any trust or estate for which the
Grantor is acting as a fiduciary or fiduciaries), and if, after the
execution hereof, the Grantor shall die or become disabled or
incapacitated or is dissolved or liquidated, or if any other such
event or events shall occur before the completion of the transactions
contemplated by this Agreement, each Attorney-in-Fact shall
nevertheless be authorized and directed to complete all such
transactions as if
12
<PAGE> 13
such death, disability, incapacity, dissolution, liquidation or other
event or events had not occurred and regardless of notice thereof.
(c) The Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and
notarized.
(d) The Grantor acknowledges that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as
Attorney-in-Fact may have, an economic interest in the transactions
contemplated by this Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantor hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
Prospectus or any Preliminary Prospectus, nor for any aspect of either
Offering, and it shall not be liable for any error of judgment or for any act
done or omitted or for any mistake of fact or law except for its own gross
negligence or bad faith.
(c) The Grantor agrees to indemnify each Attorney-in-Fact for and to
hold each Attorney-in-Fact harmless against any loss, claim, damage or
liability incurred or in part arising out of or in connection with its acting
as Attorney-in-Fact under the Power of Attorney created by the Grantor hereby,
as well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantor agrees that each Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership
and/or the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and
in accordance with the opinion of such counsel.
5.3 Ratification; Third Party Reliance. The Grantor does hereby ratify
and confirm all that any Attorney-in- Fact shall lawfully do or cause to be
done by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement without notice to or the consent of any Grantor
for the purpose of adding additional Grantors as parties hereto or deleting
Grantors as parties hereto and conforming Exhibits A and B in connection with
such additions or deletions. No waiver of any provisions of this Agreement
shall be valid unless in writing and signed by the party against whom
enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same
instrument and
13
<PAGE> 14
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law)
by the Operating Partnership without the prior written consent of the Grantor,
or by the Grantor without the prior written consent of the Operating
Partnership, and any attempted assignment without such consent shall be void
and of no effect; provided, further, however, that the Operating Partnership
may assign all or any portion of this Agreement and the Closing Documents and
any agreement contemplated hereunder or thereunder to the Company or to an
affiliate of the Operating Partnership or the Company without the consent of
the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at
law or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or
may be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
14
<PAGE> 15
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of
a direct or indirect interest in a partnership in which an Interest of the
Grantor represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership
interest in any property,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein of its direct
or indirect interest in such partnership to the Operating Partnership
or the Company or to another person in connection with the formation
of the Operating Partnership or the Company as described in the
Registration Statement, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or
the Company as described in the Registration Statement,
15
<PAGE> 16
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the Registration Statement, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in such partnership or an
undivided tenant-in-common interest in the property
represented by such partnership interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in such
partnership, and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
(v) As used herein, the term "CONSENTS" means, with respect
to any such partnership, any consent deemed by the Operating
Partnership to be necessary or desirable under the partnership
agreement of such partnership or any other agreement among all or any
of the holders of interests therein or any other agreement relating
thereto or referred to therein
(A) to permit any and all Conveyance Actions
relating to such partnership or to amend such partnership
agreement and/or other agreements so that no provision
thereof prohibit, restricts, impairs or interferes with any
Conveyance Action (such amendment to include, without
limitation, the deletion of provisions which cause a default
under such agreement if interests therein are transferred for
other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of such partnership upon
the Operating Partnership's acquisition of a limited or
general partner interest therein, respectively, and to adopt
such amendment as is necessary or desirable to effect such
admission,
(C) to adopt any amendment as may be deemed
desirable by the Operating Partnership, either simultaneously
with or immediately prior to the acquisition of a limited or
general partnership interest therein, provided, however, that
such amendment will not result in any increased liability on
the part of any Grantor hereunder or under the applicable
partnership agreement, and
(D) to continue such partnership following the
transfer of interests therein to the Operating Partnership
(or the Company or any affiliate of the Operating Partnership
or the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect
to a partnership of which an Interest represents a direct or indirect
interest, the waiving of any and all rights that the Grantor may have
with respect to, and (to the extent possible) that any other person
may have with respect to, or that may accrue to the Grantor or other
person upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights:
(A) rights of notice,
16
<PAGE> 17
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in such partnership (or the
Interests represented by such partnership interest) or to
sell the Grantor's or other person's direct or indirect
interest therein to another partner,
(D) rights to sell the Grantor's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of
such Conveyance Action.
(f) The Grantor by its execution hereof
(i) with respect to each Other Partnership in which an
Interest owned by the Grantor represents a direct or indirect interest
therein, gives such consent as is necessary to cause each Partnership,
as applicable, to have authority to transfer all or substantially all
of the assets of such Partnership to the Operating Partnership on such
terms and conditions as such Other Partnership and the Operating
Partnership may agree; and
(ii) agrees that the Grantor's Acquisition Consideration may
be reduced to reflect such direct transfer of assets and the
consequent receipt of cash and other consideration directly by such
Other Partnership, provided that the total consideration to be
received by the Grantor either directly hereunder or indirectly
through the receipt of distributions from an Other Partnership shall
equal Grantor's Acquisition Consideration.
(g) (i) The Grantor by its execution hereof gives such consent as
is necessary to cause, with respect to the partnership agreement of
each partnership in which an Interest of the Grantor represents,
directly or indirectly, a limited partner or general partner interest,
an amendment thereto to enable such partnership, to the extent
permissible under applicable law,
(A) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner therein and/or a substitute general partner
therein if the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) by the exercise of the
Option acquires a limited partnership interest or a general
partnership interest in such partnership,
(B) to redeem the interest of any other partner
therein who has not agreed to become a party to this
Agreement,
(C) to distribute to all partners thereof, including
any partner who has not agreed to become a party to this
Agreement, OP Units and cash (in such proportions to each
partner therein as the general partner or general partners
thereof may determine, provided that the Grantor receives as
a result of all such distributions and the direct payment of
consideration hereunder, the amount of cash that is in
conformity with the Acquisition Consideration of the Grantor
provided for herein), and thereafter, at the Operating
Partnership's option, to dissolve, and
(D) any such other amendment as the Operating
Partnership may deem desirable,
17
<PAGE> 18
provided that such amendment occurs simultaneously with or
immediately prior to the acquisition of the applicable partnership
interest, and provided further, that such amendment will not result
in any increased liability on the part of any Grantor hereunder or
under the applicable partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of the Grantor
execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration
Statement with the Securities and Exchange Commission, and shall not
communicate at any time the terms of this Agreement to any person other than
counsel or advisors to the Grantor who agree to keep such terms confidential
and any lender holding a lien on any Interests.
(b) The Grantor shall treat all information received from the
Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate same only to
counsel to the Grantor who agree to keep such information confidential.
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the
parties hereto that the representations, warranties and covenants of the
Grantor set forth in this Agreement shall survive the consummation of the
transactions contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
18
<PAGE> 19
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of
the date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
------------------------------
Name: Lawrence H. Feldman
Title: Chief Executive Officer and
President
/s/Leo V. Berger
------------------------
Leo V. Berger
19
<PAGE> 20
Schedule A
Interests
<TABLE>
<CAPTION>
Grantor's Name & Address Description of Interests
------------------------ ------------------------
<S> <C>
Leo V. Berger 1-2/3% (1.67%) Class A
c/o Clifford Spelke Limited Partner Interest in the
2001 Marcus Avenue, Suite N215 Partnership.
Lake Success, NY 11042
</TABLE>
<PAGE> 21
Schedule B
Form of Acquisition Consideration
100% OP Units
<PAGE> 22
Schedule C
Exceptions to Title
None
<PAGE> 23
Schedule D
Interests in Other Partnerships and Properties (see below)
None
Other Partnerships and Properties
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
</TABLE>
<PAGE> 1
EXHIBIT 10.37
TOWER 45
OMNIBUS OPTION AGREEMENT
This Omnibus Option Agreement (the "AGREEMENT"), dated as of the 31st day
of July, 1997, is entered into by and between TOWER REALTY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"),
and SHOEN U.S.A. INC. (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns a limited partner interest in Tower 45 Associates
Limited Partnership, a Delaware limited partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to acquire through a contribution to
capital from the Grantor, and the Grantor desires to grant to the Operating
Partnership, an option to acquire, on the terms and conditions set forth herein,
all interests owned by the Grantor in the Partnership as set forth on Schedule A
attached hereto and any other direct or indirect interests the Grantor may have,
whether now owned or hereinafter acquired, in the Partnership, or in the
properties owned by the Partnership (collectively, the "INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to acquire through a
contribution to the capital of the Operating Partnership all the Grantor's
right, title and interest in the Interests, including but not limited to, the
Interest set forth on Schedule A attached hereto, on the terms and conditions
set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership during
the 10 business day period commencing on the first business day following the
removal of each such prohibition, stay, order, injunction, action, proceeding or
similar limitation in effect at that time. Subject to the foregoing, if the
Operating Partnership does not exercise the Option by the Option Termination
Date, such Option shall be deemed terminated and shall be of no further force or
effect and the Grantor shall have no further obligations hereunder.
1.3 Acquisition Consideration. (a) The consideration (the "ACQUISITION
CONSIDERATION") to be received by the Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an amount
<PAGE> 2
equal to $74,074. The Acquisition Consideration shall be paid in the form of a
combination of (i) cash and/or (ii) units of limited partnership interest in the
Operating Partnership ("OP UNITS"), in the percentages and allocations set forth
on Schedule B attached hereto. To the extent a percentage of the Acquisition
Consideration includes one or more OP Units, as set forth on Schedule B, the
number of OP Units the Grantor shall be entitled to receive upon the exercise of
the Option with respect to such percentage shall equal the quotient of
(A) the amount of Acquisition Consideration to be paid in OP
Units, divided by
(B) the midpoint of the proposed per share offering price for
the shares of Common Stock as set forth in the final preliminary
prospectus included in the Company's Registration Statement on Form
S-11 prepared and filed with the Securities and Exchange Commission
in connection with the IPO.
1.4 Lock-Up Agreements. The OP Units to be issued to the Grantor hereunder
shall be subject to Lock-Up Agreements to be executed at the Closing (as
hereinafter defined) by the Operating Partnership and the Grantor, substantially
in the forms attached as Exhibits A and B attached hereto, whereby the Grantor
will not be permitted to transfer OP Units for two years after the Closing,
except as otherwise permitted under such agreement.
1.5 Other Agreements. At or prior to the Closing, the Company, the
Grantors and the other parties thereto shall enter into a Registration Rights
Agreement and an Exchange Rights Agreement, as described in Section 5.1(a) and
substantially in the forms attached as Exhibits C and D, respectively.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise of
the Option, the Grantor shall, in accordance with Section 2.2 hereof, transfer,
assign, and convey to the Operating Partnership and the Operating Partnership
shall accept as a contribution to its capital from the Grantor, all right, title
and interest in and to the Interests, free and clear of all Encumbrances (as
defined in Section 3.1(a)), in exchange for the Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating Partnership
shall exercise the Option by delivering to the Grantor a notice (the
"OPTION NOTICE"), which notice shall state the date (the "CLOSING DATE")
of the closing of the transactions contemplated by Section 2.1 (the
"CLOSING"), which date shall be no less than 10 days and no more than 30
days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in the
Option Notice at the offices of Battle Fowler LLP, 75 East 55th Street,
New York, New York, or at the offices of the attorneys for the lead
underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute and
deliver all closing documents (the "CLOSING DOCUMENTS") required by the
Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP as escrow
agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the Company
is sufficient, as determined by the Operating Partnership in its reasonable
discretion, to enable the Operating Partnership (i) to acquire all the
Interests, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO (the "REGISTRATION STATEMENT"), as the same shall be in
effect on the day of the Offerings Closing.
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(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to the
Escrow Agent or its designee
(A) the Acquisition Consideration (any cash portion of which
shall be delivered in immediately available funds by check or wire
transfer),
(B) a certificate of the general partner of the Operating
Partnership (the "GENERAL PARTNER") certifying that the Grantor has
been or will be, effective as of the Closing, admitted as a limited
partner of the Operating Partnership and that the Operating
Partnership's books and records indicate or will indicate that the
Grantor is the holder of the number of OP Units that Grantor is
entitled to receive pursuant to Section 1.3, and
(C) if such OP Units are to be represented by certificates, a
certificate or certificates in the name of the Grantor representing
the number of OP Units to which the Grantor is entitled; and
(ii) upon receipt of the consideration set forth in clause (i) above
and the documents and deliveries required by Section 2.3, the Escrow Agent
will release the Closing Documents to the Operating Partnership and
deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the Operating
Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a breach
of or other exception with respect to any of the representations,
warranties or covenants contained in Article III or has otherwise breached
this Agreement, or
(ii) in the event that all authorizations, consents or approvals of
any governmental or administrative agency or authority or any third party
necessary in order to consummate the contribution of the Interests, or
there exists an order or judgment enjoining, restraining or prohibiting,
or assessing substantial damages in respect of such consummation, or there
shall be any action or proceeding instituted or threatened in writing to
enjoin, restrain, prohibit or assess substantial damages in respect of
such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the contribution of
all of the Interests, notify the Escrow Agent of such election and direct
the Escrow Agent to return the Grantor's Closing Documents to the Grantor,
or
(y) in all other cases, equitably adjust the delivery with respect
to the Grantor pursuant to clause (c)(i) above to reflect the portion of
the Grantor's Interests with respect to which the purchase is actually
being made (provided, that, in no event shall the Acquisition
Consideration, as adjusted hereunder, consist of less than one OP Unit),
which adjustment shall be determined in the Operating Partnership's
reasonable discretion, and shall in all events be binding upon the
Grantor.
(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter remain in effect
and the Operating Partnership may thereafter exercise the Option again at any
time before the Option Termination Date.
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2.3 Documents to Be Delivered at the Closing. At or prior to the Closing,
the Grantor shall, directly or through the attorney-in-fact appointed pursuant
to Article V hereof, execute, acknowledge where deemed necessary or desirable by
the Operating Partnership, and deliver to the Escrow Agent, in addition to any
other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be in
the form attached hereto as Exhibit E and shall contain a warranty of title that
the Grantor owns the Interests free and clear of all Encumbrances (as defined in
Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and warranties and
the satisfaction of all covenants contained in Article III hereof, or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent that
the Grantor has used reasonable efforts to take such actions as would
permit the Grantor to make such representations and warranties and/or to
comply with such covenants, and reaffirm the accuracy of all other
representations and warranties and the satisfaction of all other covenants
contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
(i) the Grantor is a corporation, limited partnership, general
partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of this
Agreement and the Closing Documents, and the transactions contemplated
hereby and thereby, do not:
(A) constitute a breach or a violation of the Grantor's
charter and/or bylaws, partnership agreement, operating agreement
and articles of organization or declaration of trust, as applicable,
or, to the knowledge of such counsel, any indenture, deed of trust,
mortgage, loan or credit agreement or other material agreement or
instrument to which the Grantor is a party or by which it or its
assets or properties are bound or affected, except for such breach
or violation as the Operating Partnership has represented and
warranted will be waived or cured, or discharged or repaid prior to
or contemporaneously with the Closing;
(B) to the knowledge of such counsel, constitute a violation
or any order, judgment or decree to which the Grantor is a party or
by which it or any of its assets or properties are bound or
affected; or
(C) to the knowledge of such counsel, result in the creation
of any lien, charge or encumbrance upon any of the Grantor's assets
or properties, except for Permitted Pledges (as defined in Section
3.1(a)); and
(iii) all applicable corporate, partnership, limited liability
company or trust action necessary for the Grantor to execute and deliver this
Agreement and the Closing Documents and to perform the transactions contemplated
hereby and thereby has been taken and that the same have been validly executed
and delivered and are the valid and
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<PAGE> 5
binding obligations of the Grantor enforceable against it in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting
creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) The Lock-up Agreements, a duly executed signature page to the Amended
and Restated Agreement of Limited Partnership of the Operating Partnership, a
copy of which is attached hereto as Exhibit F, (the "PARTNERSHIP AGREEMENT"),
the Exchange Rights Agreement, and the Registration Rights Agreement.
(f) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Interests to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of the
Company determines in good faith to abandon the formation of the Company or the
Offerings, the Operating Partnership will so advise the Grantor in writing and
thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute and
deliver to the Operating Partnership all such other and further instruments and
documents and take or cause to be taken all such other and further action as the
Operating Partnership may reasonably request in order to effect the transactions
contemplated by this Agreement, including instruments or documents deemed
necessary or desirable by the Operating Partnership to effect and evidence the
purchase of the Grantor's Interests by the Operating Partnership in accordance
with the terms of this Agreement.
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ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into this
Agreement and to consummate the transactions contemplated hereby, the Grantor
hereby makes to the Operating Partnership each of the representations and
warranties set forth in this Article III, which representations and warranties
(unless otherwise noted) are true as of the date hereof. As a condition to the
Operating Partnership's obligation to purchase the Interests after the exercise
of the Option, such representations and warranties must be true as of the
Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity financing
of any real property owned by the Partnership (any such pledge, a "PERMITTED
PLEDGE")), voting agreement, option, charge, security interest, mortgage, deed
of trust, encumbrance, right of assignment, purchase right or other rights of
any nature whatsoever (each, an "ENCUMBRANCE"), and has full power and authority
to convey free and clear of any Encumbrances, its Interests and, upon delivery
of an Assignment by the Grantor conveying its Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Interests as
herein provided, the Operating Partnership will acquire good and valid title
thereto, free and clear of any Encumbrance, except Encumbrances created in favor
of the Operating Partnership by the transactions contemplated hereby.
(b) Each of the Grantor's Interests representing an interest in the
Partnership has been validly issued and the Grantor has funded (or will fund
before the same is past due) all capital contributions and advances to the
Partnership in which such Interest represents an interest that is required to be
funded or advanced prior to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with respect to
any of the Interests except, in the case of any Interest constituting an
interest in the Partnership, as set forth in the partnership agreement of the
Partnership.
(d) The Grantor has no interest, either direct or indirect, in any of the
partnerships or properties set forth on Schedule D attached hereto (the"Other
Partnerships and Properties") except for the Interests identified on Exhibit A
which are the subject of this Agreement, and other interests in the Other
Partnerships and Properties which are the subject of other, similar, option
agreements with the Operating Partnership.
(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantor may assume that the consents and waivers of
rights set forth in Section 6.9 hereof have been given by all partners of the
Partnership, partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such) in which
the Grantor's Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing Document and
each other agreement, document and instrument to be executed and delivered
by or on behalf of the Grantor pursuant to this Agreement;
(ii) to perform the transactions contemplated hereby and thereby;
and
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(iii) to transfer, assign, convey and deliver all of the Interests
to the Operating Partnership in accordance with this Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be waived
or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal, state,
local or other laws applicable to the Grantor or require the Grantor to
obtain any approval, consent or waiver of, or make any filing with, any
person or authority (governmental or otherwise) that has not been obtained
or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation of,
constitute a default under, accelerate any obligation under or give rise
to a right of termination of, any indenture, deed of trust, mortgage, loan
or credit agreement or any other agreement, contract, instrument, lease,
permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which the Grantor is a party or by
which the property of the Grantor is bound or affected, or result in the
creation of any Encumbrance on any of the property or assets of any
Partnership in which any Interest of the Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantor may assume
(i) that the consents and waivers of rights set forth in Section 6.9
hereof have been given by all partners of the Partnership, partners in
partnerships, members of limited liability companies or beneficiaries of
trusts (in each case, only in their capacity as such) in which the
Grantor's Interests represent direct or indirect interests and
(ii) that, for purposes of making such representation as of the date
hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or decree
of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of its Interests, which in any such case
would impair the Grantor's ability to enter into and perform all of its
obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with, and
will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any
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way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantor may assume
(i) that the consents and waivers of rights set forth in Section 6.9
hereof have been given by all partners of the Partnership, partners in
partnerships, members of limited liability companies or beneficiaries of
trusts (in each case, only in their capacity as such) in which the
Grantor's Interests represent direct or indirect interests and
(ii) that, for purposes of making such representations as of the
date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) (i) The Grantor has received and reviewed a copy of the Private
Placement Memorandum (the "PRIVATE PLACEMENT MEMORANDUM") prepared in
connection with the contribution of Interests to the capital of the
Operating Partnership (which Private Placement Memorandum includes a draft
Registration Statement, the Summary of Partnership Agreement Provisions
(the "PARTNERSHIP SUMMARY") and the Summary of Tax Matters (the "TAX
MATTERS SUMMARY"), and understands the risks of, and other considerations
relating to, an investment in OP Units.
(ii) The Grantor, by reason of its business and financial
experience, together with the business and financial experience of those
persons, if any, retained by it to represent or advise it with respect to
its investment in OP Units,
(A) has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions of
this type that it is capable of evaluating the merits and risks of
and of making an informed investment decision with respect to an
investment in OP Units,
(B) is capable of protecting its own interest or has engaged
representatives or advisors to assist it in protecting its interests
and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) The Grantor is an "accredited investor" as defined in Rule
501 of the regulations promulgated under the Securities Act.
(B) If the Grantor has retained or retains a person to
represent or advise it with respect to its investment in OP Units,
the Grantor will advise the Operating Partnership of such retention
and, at the Operating Partnership's request, the Grantor shall,
prior to or at the Closing,
(I) acknowledge in writing such representation and
(II) cause such representative or advisor to deliver a
certificate to the Operating Partnership containing such
representations as may be reasonably requested by the
Operating Partnership.
(b) (i) The Grantor understands that an investment in the Operating
Partnership involves substantial risks.
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<PAGE> 9
(ii) The Grantor has been given the opportunity to make a thorough
investigation of the proposed activities of the Operating Partnership and
has been furnished with materials relating to the Operating Partnership
and its proposed activities, including, without limitation, the Private
Placement Memorandum, the Partnership Summary and the Tax Matters Summary.
(iii) The Grantor has been afforded the opportunity to obtain any
additional information requested by it.
(iv) The Grantor has had an opportunity to ask questions of and
receive answers from representatives of the Operating Partnership
concerning the Operating Partnership and its proposed activities and the
terms and conditions of an investment in OP Units.
(v) The Grantor has relied and is making its investment decision
based upon the Private Placement Memorandum, the Partnership Summary, the
Tax Matters Summary and other written information provided to the Grantor
by or on behalf of the Operating Partnership.
(c) (i) The OP Units to be issued to the Grantor at the Closing will be
acquired by the Grantor for its own account, for investment only and not
with a view to, or with any intention of, a distribution or resale
thereof, in whole or in part, or the grant of any participation therein.
(ii) The Grantor was not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
(d) (i) The Grantor acknowledges that
(A) the OP Units to be issued to the Grantor at the Closing
have not been registered under the Securities Act or state
securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state
securities laws and, if such OP Units are represented by
certificates, such certificates will bear a legend to such effect,
(B) the Company's and the Operating Partnership's reliance on
such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of the Grantor
contained herein,
(C) the OP Units to be issued to the Grantor at the Closing
may not be resold or otherwise distributed unless registered under
the Securities Act and applicable state securities laws, or unless
an exemption from registration is available,
(D) there is no public market for such OP Units, and
(E) the Operating Partnership has no obligation or intention
to register such OP Units under the Securities Act or any state
securities laws or to take any action that would make available any
exemption from the registration requirements of such laws, except as
provided in the Registration Rights Agreement (as defined below).
(ii) The Grantor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in the
Lockup Agreements, the Grantor may have to bear the economic risk of the
investment commitment evidenced by this Agreement and any OP Units issued
hereunder for an indefinite period of time, although, if applicable,
(A) under the terms of the Exchange Rights Agreement, as it
will be in effect at the time of the Offerings, OP Units will,
subject to the limitations set forth in the Exchange Rights
Agreement, be exchangeable at the request of the holder thereof at
any time after the first anniversary of their
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<PAGE> 10
issuance for cash based on their fair market value or, at the option
of the Company, for Common Stock and
(B) the holder of any such Common Stock issued upon exchange
of OP Units will be afforded certain rights to have such Common
Stock registered under the Securities Act and applicable state
securities laws pursuant to the Registration Rights Agreement (as
described in Section 5.1 (a)).
(e) The address set forth under the Grantor's signature on the signature
page hereto is the address of the Grantor's principal place of business or, if a
natural person, the address of the Grantor's residence, and the Grantor has no
present intention of becoming a resident of any country, state or jurisdiction
other than the country and state in which such principal place of business or
residence is situated.
3.7 Private Placement Memorandum. (a) The Grantor understands and
acknowledges that the Private Placement Memorandum, including, but not limited
to, the descriptions of the various transactions relating to the formation and
business of the Company and the Operating Partnership set forth in the Private
Placement Memorandum, are in draft form only, and such transactions are subject
to change without the consent of the Grantor.
(b) Without limiting the foregoing, such changes may include the deletion
(or addition) of one or more properties expected to be acquired by the Operating
Partnership and changes in the amount of the indebtedness expected to be repaid
with the proceeds of the Offerings.
(c) The Operating Partnership shall not be obligated to obtain the
Grantor's consent as a result of such changes, although such changes could
affect the nature and value of the Grantor's investment in OP Units.
3.8 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the Grantor
hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty or covenant
of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement and
to consummate the transactions contemplated hereby, the Operating Partnership
hereby makes to the Grantor each of the representations and warranties set forth
in this Article IV, which representations and warranties are true as of the date
hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited partnership duly
organized, validly existing and in good standing under the laws of the state of
Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing Document to
which it is a party and each other agreement, document and instrument to
be executed and delivered by or on behalf of it pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and thereby;
and
(iii) to issue OP Units to the Grantor pursuant to and in accordance
with the terms of this Agreement.
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(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of the
Operating Partnership;
(ii) does not and will not violate any foreign, federal, state,
local or other laws applicable to the Operating Partnership or require the
Operating Partnership to obtain any approval, consent or waiver of, or
make any filing with, any person or authority (governmental or otherwise)
that has not been obtained or made and which does not remain in effect;
and
(iii) does not and will not result in a breach or a violation of,
constitute a default under, accelerate any obligation under or give rise
to a right of termination of, any indenture, deed of trust, mortgage, loan
or credit agreement, any other material agreement, contract, instrument,
lease, permit or authorization, or any order, writ, judgment, injunction,
decree, determination or arbitration award to which the Operating
Partnership is a party or by which the property of the Operating
Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
the Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V: POWER OF ATTORNEY
5.1 Grant of Power of Attorney. (a) The Grantor does hereby irrevocably
appoint Lawrence H. Feldman, Robert Cox and the Operating Partnership, and each
of them individually, with full power of substitution (each such person or the
Operating Partnership or any such successor of any of them acting in his, her or
its capacity as attorney-in-fact pursuant hereto, an "ATTORNEY-IN-FACT"), as the
true and lawful attorney-in-fact and agent of the Grantor, to act in the name,
place and stead of the Grantor:
(i) To take for the Grantor all steps deemed necessary or advisable
by the Operating Partnership in connection with the Offerings, including
without limitation
(A) filing a registration statement and amendments thereto
(the "Registration Statement") under the Securities Act which
describes the benefit to be received by the Grantor in connection
with the formation of the Company and the offering of the Company's
Common Stock,
(B) distributing a preliminary prospectus and prospectus
regarding the offering of the Company's Common Stock (respectively,
the "PRELIMINARY PROSPECTUS" and "PROSPECTUS") which contain such
information as is deemed necessary or desirable to lawfully effect
the IPO, and preliminary and final offering memoranda regarding the
offering of the Company's Common Stock in the concurrent private
placement, which contain such information as is deemed necessary or
desirable to effect the concurrent private placement,
(C) to enter into the Exchange Rights Agreement, the
Registration Rights Agreement (which, if applicable, provides the
Grantor certain rights to have the Common Stock which may be issued
to the Grantor upon exchange of the Grantor's OP Units registered
under the Securities Act), and the Lock-Up Agreements, and
11
<PAGE> 12
(D) to take such other steps as the Attorney-in-Fact may deem
necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the sale
of the Grantor's Interests to the Operating Partnership, and any consents
contemplated by Section 6.9 hereof) and, in general, to do all things and
to take all actions which the Attorney-in-Fact in its sole discretion may
consider necessary or proper in connection with or to carry out the
transactions contemplated by this Agreement and the Closing Documents as
fully as could the Grantor if personally present and acting.
(b) (i) The Power of Attorney granted by the Grantor pursuant to this
Article V and all authority conferred hereby is granted and conferred
subject to and in consideration of the interest of the Operating
Partnership and the Company and is for the purpose of completing the
transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantor granted hereby and all
authority conferred hereby is coupled with an interest and therefore shall
be irrevocable and shall not be terminated by any act of the Grantor or by
operation of law, whether by the death, disability, incapacity,
dissolution or liquidation of the Grantor or by the occurrence of any
other event or events (including without limitation the termination of any
trust or estate for which the Grantor is acting as a fiduciary or
fiduciaries), and if, after the execution hereof, the Grantor shall die or
become disabled or incapacitated or is dissolved or liquidated, or if any
other such event or events shall occur before the completion of the
transactions contemplated by this Agreement, each Attorney-in-Fact shall
nevertheless be authorized and directed to complete all such transactions
as if such death, disability, incapacity, dissolution, liquidation or
other event or events had not occurred and regardless of notice thereof.
(c) The Grantor agrees that, at the request of the Operating Partnership,
it will promptly execute a separate power of attorney on the same terms set
forth in this Article V, such execution to be witnessed and notarized.
(d) The Grantor acknowledges that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transactions contemplated by this
Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantor hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
Prospectus or any Preliminary Prospectus, nor for any aspect of either Offering,
and it shall not be liable for any error of judgment or for any act done or
omitted or for any mistake of fact or law except for its own gross negligence or
bad faith.
(c) The Grantor agrees to indemnify each Attorney-in-Fact for and to hold
each Attorney-in-Fact harmless against any loss, claim, damage or liability
incurred or in part arising out of or in connection with its acting as
Attorney-in-Fact under the Power of Attorney created by the Grantor hereby, as
well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantor agrees that each Attorney-in-Fact may consult with counsel
of its own choice (who may be counsel for the Operating Partnership and/or the
Company) and it shall have full and complete authorization and protection for
any action taken or suffered by it hereunder in good faith and in accordance
with the opinion of such counsel.
12
<PAGE> 13
5.3 Ratification; Third Party Reliance. The Grantor does hereby ratify and
confirm all that any Attorney-in-Fact shall lawfully do or cause to be done by
virtue of the exercise of the powers granted unto it by the Grantor hereunder,
and the Grantor authorizes the reliance of third parties on this Power of
Attorney and waives its right, if any, as against any such third party for its
reliance hereon.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement without notice to or the consent of the Grantor
for the purpose of adding additional Grantors as parties hereto or deleting
Grantors as parties hereto and conforming Exhibits A and B in connection with
such additions or deletions. No waiver of any provisions of this Agreement shall
be valid unless in writing and signed by the party against whom enforcement is
sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof,
(b) may be executed in several counterparts, each of which will be deemed
an original and all of which shall constitute one and the same instrument and
(c) shall be governed in all respects, including validity, interpretation
and effect, by the laws of the State of New York, without giving effect to the
conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is intended,
nor shall it be interpreted, to provide or create any third party beneficiary
right or any other right of any kind in any customer, affiliate, stockholder,
partner, director, officer or employee of any party hereto or any other person
or entity, provided, however, that Article V and Sections 6.3 and 6.9 of this
Agreement shall be enforceable by and shall inure to the benefit of the persons
described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
13
<PAGE> 14
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or may be
given under this Agreement (including the exercise by the Operating Partnership
of the Option) or by law shall, except as otherwise provided, be in writing and
shall be deemed to have been given (i) when physically received by personal
delivery (which shall include the confirmed receipt of a telecopied facsimile
transmission), (ii) three (3) business days after being deposited in the United
States certified or registered mail, return receipt requested, postage prepaid,
or (iii) one (1) business day after being deposited with a nationally known
commercial courier service utilizing its next day delivery service (such as
Federal Express); addressed and delivered or telecopied in the case of a notice
to the Operating Partnership to the following address and telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests. (a)
The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which an Interest of the Grantor
represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall terminate
upon the termination of this Agreement, except as to transactions completed
hereunder prior to termination.
14
<PAGE> 15
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with respect
to any Other Partnership having a direct or indirect ownership interest in
any property,
(A) the conveyance or agreement to convey by a partner thereof
or by any holder of an indirect interest therein of its direct or
indirect interest in such partnership to the Operating Partnership
or the Company or to another person in connection with the formation
of the Operating Partnership or the Company as described in the
Registration Statement, or
(B) the entering into by any such partner or holder of any
agreement relating to
(I) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
(II) the direct or indirect acquisition by the Operating
Partnership or the Company of any such direct or indirect
interest, or
(III) the transactions described in or contemplated by
the Registration Statement, or
(C) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing,
including, without limitation, the following (provided that the same
are taken in furtherance of the foregoing):
(I) any sale or distribution to any person of a direct
or indirect interest in such partnership or an undivided
tenant-in-common interest in the property represented by such
partnership interest,
(II) the entering into of any agreement with any person
or entity that grants to such person or entity the right to
purchase a direct or indirect interest in such partnership,
and
(III) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
(ii) As used herein, the term "CONSENTS" means, with respect to any
such partnership, any consent deemed by the Operating Partnership to be
necessary or desirable under the partnership agreement of such partnership
or any other agreement among all or any of the holders of interests
therein or any other agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions relating to such
partnership or to amend such partnership agreement and/or other
agreements so that no provision thereof prohibit, restricts, impairs
or interferes with any Conveyance Action (such amendment to include,
without limitation, the deletion of provisions which cause a default
under such agreement if interests therein are transferred for other
than cash),
(B) to admit the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in accordance
with Section 6.3 above) as a substitute limited partner or general
partner of such partnership upon the Operating Partnership's
acquisition of a limited or general partner interest therein,
respectively, and to adopt such amendment as is necessary or
desirable to effect such admission,
(C) to adopt any amendment as may be deemed desirable by the
Operating Partnership, either simultaneously with or immediately
prior to the acquisition of a limited or general partnership
interest therein, provided, however, that such amendment will not
result in any increased liability on the part of the Grantor
hereunder or under the applicable partnership agreement, and
15
<PAGE> 16
(D) to continue such partnership following the transfer of
interests therein to the Operating Partnership (or the Company or
any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above).
(iii) As used herein, the term "WAIVERS" means, with respect to a
partnership of which an Interest represents a direct or indirect interest,
the waiving of any and all rights that the Grantor may have with respect
to, and (to the extent possible) that any other person may have with
respect to, or that may accrue to the Grantor or other person upon the
occurrence of, a Conveyance Action relating to such partnership,
including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect interest of
another partner in such partnership (or the Interests represented by
such partnership interest) or to sell the Grantor's or other
person's direct or indirect interest therein to another partner,
(D) rights to sell the Grantor's or other person's direct or
indirect interest therein at a price other than as provided herein,
or
(E) rights to prohibit, limit, invalidate, otherwise restrict
or impair any such Conveyance Action or to cause a termination or
dissolution of such partnership because of such Conveyance Action.
(f) The Grantor by its execution hereof
(i) with respect to each Other Partnership in which an Interest
owned by the Grantor represents a direct or indirect interest therein,
gives such consent as is necessary to cause each Partnership, as
applicable, to have authority to transfer all or substantially all of the
assets of such Partnership to the Operating Partnership on such terms and
conditions as such Other Partnership and the Operating Partnership may
agree; and
(ii) agrees that the Grantor's Acquisition Consideration may be
reduced to reflect such direct transfer of assets and the consequent
receipt of cash and other consideration directly by such Other
Partnership, provided that the total consideration to be received by the
Grantor either directly hereunder or indirectly through the receipt of
distributions from an Other Partnership shall equal Grantor's Acquisition
Consideration.
(g) (i) The Grantor by its execution hereof gives such consent as is
necessary to cause, with respect to the partnership agreement of each
partnership in which an Interest of the Grantor represents, directly or
indirectly, a limited partner or general partner interest, an amendment
thereto to enable such partnership, to the extent permissible under
applicable law,
(A) to admit the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in accordance
with Section 6.3 above) as a substitute limited partner therein
and/or a substitute general partner therein if the Operating
Partnership (or the Company or any affiliate of the Operating
Partnership or the Company in accordance with Section 6.3 above) by
the exercise of the Option acquires a limited partnership interest
or a general partnership interest in such partnership,
(B) to redeem the interest of any other partner therein who
has not agreed to become a party to this Agreement,
16
<PAGE> 17
(C) to distribute to all partners thereof, including any
partner who has not agreed to become a party to this Agreement, OP
Units and cash (in such proportions to each partner therein as the
general partner or general partners thereof may determine, provided
that the Grantor receives as a result of all such distributions and
the direct payment of consideration hereunder, the amount of cash
that is in conformity with the Acquisition Consideration of the
Grantor provided for herein), and thereafter, at the Operating
Partnership's option, to dissolve, and
(D) any such other amendment as the Operating Partnership may
deem desirable,
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of the Grantor hereunder or under the applicable
partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of the Grantor execute such
consents, amendments or other instruments as it deems necessary or
desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantor shall treat as strictly confidential
the fact that the Company is contemplating an offering of its Common Stock until
such time as the Company has filed the Registration Statement with the
Securities and Exchange Commission, and shall not communicate at any time the
terms of this Agreement to any person other than counsel or advisors to the
Grantor who agree to keep such terms confidential and any lender holding a lien
on any Interests.
(b) The Grantor shall treat all information received from the Operating
Partnership or its counsel or advisors pertaining to the Operating Partnership
or the Company confidential and shall disseminate same only to counsel to the
Grantor who agree to keep such information confidential.
6.11 Computation of Time. Any time period provided for herein which shall
end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00 p.m. of
the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Grantor set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
17
<PAGE> 18
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/Lawrence H. Feldman
--------------------------------
Name: Lawrence H. Feldman
Title: Chief Executive Officer
and President
SHOEN U.S.A. INC.
By: /s/Daisake Hyode
---------------------------------------
Name: Daisake Hyode
Title: President
18
<PAGE> 19
Schedule A
Interests
Grantor's Name & Address Description of Interests
------------------------ ------------------------
Shoen U.S.A. Inc. 1-2/3% (1.67%) Class A
2222 Kalakauka Ave. Limited Partner Interest in the
#909 Partnership.
Honolulu, HI 96815-2524
<PAGE> 20
Schedule B
Form of Acquisition Consideration
100% OP Units
<PAGE> 21
Schedule C
Exceptions to Title
None
<PAGE> 22
Schedule D
Interests in Other Partnerships and Properties (see below)
None
Other Partnerships and Properties
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
15. Maitland Forum Maitland Property Investors, Ltd.
Maitland, Florida
16. 2601 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
</TABLE>
<PAGE> 1
EXHIBIT 10.38
OMNIBUS MANAGEMENT COMPANY
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 28th day of
July, 1997, is entered into by and among TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), TOWER
EQUITIES MANAGEMENT, INC., a Delaware corporation ("TEMI") and TOWER EQUITIES &
REALTY CORP., a New York corporation, CXX MINEOLA MANAGEMENT CORP., a New York
corporation, FORUM MANAGEMENT & REALTY CORP., a New York corporation, MADISON
40/41 MANAGEMENT CORP., a New York corporation, TOWER 45 ASSET MANAGEMENT CORP.,
a New York corporation, and SJP REALTY CORP., a New York corporation (each, a
"GRANTOR").
R E C I T A L S:
A. Each Grantor desires to contribute to the Operating Partnership all
of its assets other than the stock of TEMI, and which the Operating Partnership
desires to contribute such assets to TEMI.
B. The Operating Partnership desires to acquire through a contribution
to capital from each Grantor, and each Grantor desires to grant to the Operating
Partnership, an option to acquire, on the terms and conditions set forth herein,
all of the assets owned by the Grantor other than any shares of stock, or rights
in or to or to acquire shares of stock, issued by TEMI (collectively, the
"ASSETS"). TEMI in turn desires to acquire through a contribution to capital
from the Operating Partnership, and the Operating Partnership desires to
contribute to TEMI, the Assets upon the exercise of the foregoing option by the
Operating Partnership.
C. The Operating Partnership desires to acquire the Assets in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to each Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership, TEMI and the Grantors agree as follows:
<PAGE> 2
ARTICLE I: THE OPTION
1.1 Grant of Option. Each Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to purchase through a
contribution to the capital of the Operating Partnership all of such Grantor's
right, title and interest in the Assets on the terms and conditions set forth
herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or a Grantor is prohibited
by applicable law, or the Operating Partnership or a Grantor is subject to a
stay, order, injunction, or similar limitation or any pending or threatened
action or proceeding to enjoin, restrain, prohibit or assess substantial damages
in respect of the exercise by the Operating Partnership of the Option, then the
Option may be exercised by the Operating Partnership during the 10 business day
period commencing on the first business day following the removal of each such
prohibition, stay, order, injunction, action, proceeding or similar limitation
in effect at that time. Subject to the foregoing, if the Operating Partnership
does not exercise the Option by the Option Termination Date, such Option shall
be deemed terminated and shall be of no further force or effect and no Grantor
shall have any further obligations hereunder.
1.3 Acquisition Consideration. The consideration (the "ACQUISITION
CONSIDERATION") to be received by each Grantor in respect of the contribution of
its Assets to the Operating Partnership shall be an 143 units of limited
partnership interest in the Operating Partnership ("OP UNITS"). The Acquisition
Consideration shall be divided among the Grantors as specified by the Grantors
in a notice to the Operating Partnership.
1.4 Lock-Up Agreements. The OP Units to be issued to each Grantor
hereunder shall be subject to a Lock-Up Agreement to be executed at the Closing
(as hereinafter defined) by the Operating Partnership and the Grantor,
substantially in the forms attached as Exhibit A attached hereto, whereby the
Grantor will not be permitted to transfer OP Units for up to two years after the
Closing, except as otherwise permitted under such agreement.
ARTICLE II: CLOSING PROCEDURES
2.1 Contribution of Assets. Upon the Operating Partnership's exercise
of the Option, each Grantor shall, in accordance with Section 2.2 hereof,
transfer, assign, and convey to the Operating Partnership and the Operating
Partnership shall accept as a contribution to its capital from such Grantor, all
right, title and interest in and to the Assets, free and clear of all
Encumbrances (as defined in Section 3.1(a)), in exchange for the Acquisition
Consideration. Immediately after the consummation of such contribution
transaction, the Operating Partnership shall, in accordance with Section 2.2
hereof, transfer, assign, and convey to TEMI and TEMI shall accept as a
contribution to its capital from the Operating Partnership, all right, title and
interest in and to the Assets, free and clear of all Encumbrances, in exchange
for 50 shares of non-voting common stock of TEMI. All of the Assets will be
contributed to the Operating Partnership subject to all their existing
liabilities and the Operating Partnership shall at the Closing assume such
liabilities (the "Assumed Liabilities"). At the time Assets are recontributed to
TEMI all of the Assumed Liabilities shall be expressly assumed by TEMI.
2
<PAGE> 3
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to each Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and each Grantor will at or prior to the Closing execute
and deliver all closing documents (the "CLOSING DOCUMENTS") required by
the Operating Partnership pursuant to Section 2.3 and, pending the
Closing, deposit such Closing Documents in escrow with Battle Fowler,
LLP as escrow agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the Company
is sufficient, as determined by the Operating Partnership in its reasonable
discretion, to enable the Operating Partnership (i) to acquire all the interests
to be acquired by it, and (ii) to apply such portion of the net proceeds to
acquire such other properties or interests, to repay principal, interest and
other amounts due with respect to indebtedness and to meet such other
obligations as may be described in the Registration Statement on Form S-11
prepared and filed in connection with the IPO (the "REGISTRATION STATEMENT"), as
the same shall be in effect on the day of the Offerings Closing.
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee
(A) the Acquisition Consideration,
(B) a certificate of the general partner of the
Operating Partnership (the "GENERAL PARTNER") certifying that
each Grantor has been or will be, effective as of the Closing,
admitted as a limited partner of the Operating Partnership and
that the Operating Partnership's books and records indicate or
will indicate that such Grantor is the holder of the number of
OP Units that such Grantor is entitled to receive pursuant to
Section 1.3, and
(C) if such OP Units are to be represented by
certificates, a certificate or certificates in the name of
such Grantor representing the number of OP Units to which such
Grantor is entitled; and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the
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<PAGE> 4
Operating Partnership and deliver to each Grantor the Acquisition
Consideration to be received by it.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Assets as follows:
(i) in the event that a Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
has otherwise breached this Agreement, or
(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or
any third party necessary in order to consummate the contribution of
the Assets, or there exists an order or judgment enjoining, restraining
or prohibiting, or assessing substantial damages in respect of such
consummation, or there shall be any action or proceeding instituted or
threatened in writing to enjoin, restrain, prohibit or assess
substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the
contribution of all of the Assets, notify the Escrow Agent of such
election and direct the Escrow Agent to return such Grantor's Closing
Documents to such Grantor, or
(y) in all other cases, equitably adjust the delivery with
respect to such Grantor pursuant to clause (c)(i) above to reflect the
portion of such Grantor's Assets with respect to which the purchase is
actually being made (provided, that in no event shall the Acquisition
Consideration, as adjusted hereunder, consist of less than one OP
Unit), which adjustment shall be determined in the Operating
Partnership's reasonable discretion, and shall in all events be binding
upon such Grantor.
(e) Except as the result of a default by a Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantors shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter remain in effect
and the Operating Partnership may thereafter exercise the Option again at any
time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, each Grantor shall execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Assets (the "ASSIGNMENT"), which shall be in
the form attached hereto as Exhibit B attached hereto and shall contain a
warranty of title that such Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
4
<PAGE> 5
(i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article
III hereof, or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which such Grantor can no longer make or comply with, represent
that such Grantor has used reasonable efforts to take such actions as
would permit such Grantor to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) a certified copy of all necessary or appropriate corporate
resolutions authorizing the execution, delivery and performance by such Grantor
of this Agreement and the Closing Documents.
(c) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if such Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(d) The Lock-up Agreement and a duly executed signature page to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, a copy of which is attached hereto as Exhibit D (the "PARTNERSHIP
AGREEMENT").
(e) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey
such Grantor's Assets to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
(f) All intercompany indebtedness owed by Grantor to any present or
former officer, director, shareholder or affiliate thereof shall be cancelled.
In addition, the Operating Partnership and TEMI shall execute and
deliver an OP Assignment in the form of Exhibit C attached hereto.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5 and 2.6).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs arising from the purchase of the Assets pursuant to the exercise
by the Operating Partnership of the Option.
5
<PAGE> 6
2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to each Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of a Grantor's damages in the event
of the Operating Partnership's default and the parties agree that $100.00 is a
fair reflection of each Grantor's damages in such event.
(b) If a Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against such
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assurances. Each Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated by this Agreement, including instruments or documents
deemed necessary or desirable by the Operating Partnership to effect and
evidence the purchase of such Grantor's Assets by the Operating Partnership in
accordance with the terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership and TEMI to enter
into this Agreement and to consummate the transactions contemplated hereby, each
Grantor hereby severally makes to the Operating Partnership and TEMI each of the
representations and warranties set forth in this Article III, which
representations and warranties (unless otherwise noted) are true as of the date
hereof. As a condition to the Operating Partnership's obligation to purchase the
Assets after the exercise of the Option, such representations and warranties
must be true as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule A attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge, voting agreement, option, charge, security interest,
mortgage, deed of trust, encumbrance, right of assignment, purchase right or
other rights of any nature whatsoever (each, an "ENCUMBRANCE"), and has full
power and authority to convey free and clear of any Encumbrances, its Assets
and, upon delivery of an Assignment by the Grantor conveying its Assets and
delivery of the Acquisition Consideration by the Operating Partnership for such
Assets as herein provided, the Operating Partnership will acquire good and valid
title thereto, free and clear of any Encumbrance, except Encumbrances created in
favor of the Operating Partnership by the transactions contemplated hereby.
(c) There are no agreements, instruments or understandings with respect
to any of the Assets, other than Assets which constitute rights under agreements
of instruments..
3.2 Organization; Authority; No Conflicts. (a) The Grantor is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its organization.
(b) The Grantor has full right, authority, power and capacity:
6
<PAGE> 7
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Assets to the Operating Partnership in accordance with this Agreement.
(c) All applicable corporate or other action necessary for Grantor to
execute and deliver this Agreement, the Closing Documents and each other
agreement, document and instrument executed by or on behalf of the Grantor
pursuant to this Agreement, and to perform the transactions contemplated hereby
and thereby, has been taken, or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Grantor or require the
Grantor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which the property of the Grantor is bound or
affected, or result in the creation of any Encumbrance on any of its
Assets.
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of its Interests, which in any such case
would impair the Grantor's ability to enter into and perform all of its
obligations under this Agreement.
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<PAGE> 8
3.4 No Other Agreements. The Grantor has made no agreement with, and
will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Assets or restricting in any way the Grantor's
ability to sell the Assets to the Operating Partnership or to enter into any
agreement with respect to the Assets.
3.5 Investment Representations and Warranties.
(a) (i) The Grantor, by reason of its business and financial
experience, together with the business and financial experience of
those persons, if any, retained by it to represent or advise it with
respect to its investment in OP Units,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in OP Units,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(ii) The Grantor is an "accredited investor" as defined in
Rule 501 of the regulations promulgated under the Securities
Act.
(b) (i) The Grantor understands that an investment in the Operating
Partnership involves substantial risks.
(ii) The Grantor has been given the opportunity to make a
thorough investigation of the proposed activities of the Operating
Partnership and has been furnished with materials relating to the
Operating Partnership and its proposed activities.
(iii) The Grantor has been afforded the opportunity to obtain
any additional information requested by it.
(iv) The Grantor has had an opportunity to ask questions of
and receive answers from representatives of the Operating Partnership
concerning the Operating Partnership and its proposed activities and
the terms and conditions of an investment in OP Units.
(c) (i) The OP Units to be issued to the Grantor at the Closing will be
acquired by the Grantor for its own account, for investment only and
not with a view to, or with any intention of, a distribution or resale
thereof, in whole or in part, or the grant of any participation
therein.
(ii) The Grantor was not formed for the specific purpose of
acquiring an interest in the Operating Partnership.
(d) (i) The Grantor acknowledges that
8
<PAGE> 9
(A) the OP Units to be issued to the Grantor at the
Closing have not been registered under the Securities Act or
state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and
applicable state securities laws and, if such OP Units are
represented by certificates, such certificates will bear a
legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of the Grantor contained herein,
(C) the OP Units to be issued to the Grantor at the
Closing may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there is no public market for such OP Units, and
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act
or any state securities laws or to take any action that would
make available any exemption from the registration
requirements of such laws.
(ii) The Grantor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the Partnership Agreement and in
the Lock-up Agreement, the Grantor may have to bear the economic risk
of the investment commitment evidenced by this Agreement and any OP
Units issued hereunder for an indefinite period of time.
3.6 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantors to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to each Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
9
<PAGE> 10
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue OP Units to each Grantor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
ARTICLE V: MISCELLANEOUS
5.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. No waiver of any provisions of this Agreement shall be valid
unless in writing and signed by the party against whom enforcement is sought.
5.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
10
<PAGE> 11
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
5.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of each Grantor, or
by any Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
5.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
5.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Section 6.3 of this Agreement
shall be enforceable by and shall inure to the benefit of the persons described
therein.
5.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
5.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
5.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
11
<PAGE> 12
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice to a Grantor,
to the Grantor at
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479.
5.9 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
5.10 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of each Grantor set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
5.11 Time of the Essence. Time is of the essence with respect to all
obligations of each Grantor under this Agreement.
12
<PAGE> 13
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Robert L. Cox
------------------------------
Name: Robert L. Cox
Title: Executive Vice President and
Chief Operating Officer
TOWER EQUITIES MANAGEMENT, INC.
By: /s/ Lawrence H. Feldman
------------------------------
Lawrence H. Feldman
President
GRANTORS:
TOWER EQUITIES & REALTY CORP.
By: /s/ Lawrence H. Feldman
------------------------------
Lawrence H. Feldman
President
CXX MINEOLA MANAGEMENT CORP.
By: /s/Lawrence H. Feldman
------------------------------
Lawrence H. Feldman
President
FORUM MANAGEMENT & REALTY CORP.
13
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By: /s/Lawrence H. Feldman
------------------------------
Lawrence H. Feldman
President
MADISON 40/41 MANAGEMENT CORP.
By: /s/Lawrence H. Feldman
------------------------------
Lawrence H. Feldman
President
TOWER 45 ASSET MANAGEMENT CORP.
By: /s/Lawrence H. Feldman
------------------------------
Lawrence H. Feldman
President
SJP REALTY CORP.
By: /s/Lawrence H. Feldman
------------------------------
Lawrence H. Feldman
President
14
<PAGE> 15
Schedule A
Exceptions to Title
None
15
<PAGE> 1
EXHIBIT 10.39
- --------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
by and between
REID BERMAN
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of July 31, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
RECITALS .................................................................. -1-
1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP
UNITS................................................................. -2-
1.1 CONTRIBUTION TRANSACTION........................................ -2-
1.2 ISSUANCE OF OP UNITS............................................ -3-
1.3 ADJUSTED CONSIDERATION.......................................... -3-
1.4 AUTHORIZATION................................................... -3-
1.5 CONTRIBUTION OF CERTAIN RIGHTS.................................. -3-
1.6 PRORATIONS...................................................... -3-
1.7 TREATMENT AS CONTRIBUTION....................................... -4-
2. CLOSING............................................................... -4-
2.1 CONDITIONS PRECEDENT............................................ -4-
2.2 TIME AND PLACE.................................................. -5-
2.3 CLOSING DELIVERIES.............................................. -6-
2.4 CLOSING COSTS................................................... -6-
3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES........................... -7-
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP..................................................... -7-
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR................... -7-
3.3 INDEMNIFICATION................................................. -7-
4. COVENANTS............................................................. -8-
4.1 COVENANTS OF CONTRIBUTOR........................................ -8-
5. RELEASES AND WAIVERS.................................................. -8-
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP........................ -9-
5.2 GENERAL RELEASE OF CONTRIBUTOR.................................. -9-
5.3 INTENTIONALLY OMITTED........................................... -9-
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT.................... -9-
6. POWER OF ATTORNEY..................................................... -9-
6.1 GRANT OF POWER OF ATTORNEY...................................... -9-
6.2 LIMITATION ON LIABILITY......................................... -10-
7. MISCELLANEOUS......................................................... -11-
7.1 FURTHER ASSURANCES.............................................. -11-
-i-
<PAGE> 3
7.2 COUNTERPARTS.................................................... -11-
7.3 GOVERNING LAW................................................... -11-
7.4 NOTICES......................................................... -11-
EXHIBIT LIST
SECTION FIRST
EXHIBITS REFERENCED
A Constituent Interests of Contributor's Partnership Interest..... Recital D
B Contribution and Assumption Agreement................................ 1.1
C Form of Quitclaim.................................................... 1.1
D Calculation of Number of OP Units.................................... 1.2
E Representations, Warranties and Indemnities of Contributor........... 3.2
Attachment 1................................... Exchange Rights Agreement
Attachment 2............................... Registration Rights Agreement
Attachment 3.......................................... Lock-Up Agreements
Attachment 4................................ List of Portfolio Agreements
-ii-
<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"Contribution Agreement") is made and entered into as of July 31, 1997 by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), and Reid Berman, an individual (the
"Contributor").
RECITALS
A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office properties (the "Participating Properties") owned or managed
by Tower Equities & Realty Corp. or its affiliates through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively,
the "Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").
B. The Formation Transactions relate to the proposed initial public
offering (the "Public Offering") of the common stock, par value $.01 per share
(the "Common Stock") of Tower Realty Trust, Inc., a Maryland corporation (the
"Company"), which will operate as a self-administered and self-managed real
estate investment trust ("REIT") and will be the sole general partner of the
Operating Partnership.
C. The owners of the Property Interests and the partners and members
of the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "Cash Participants") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP Participants").
D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT A (the "Partnerships") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT A (the "Property" or the
"Properties"). As used herein, "Partnership Agreement" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.
E. The Contributor has previously contributed certain interests in the
Partnerships to the Operating Partnership in exchange for OP Units (as defined
below).
F. The Contributor desires to, and the Operating Partnership desires
the Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, as a
<PAGE> 5
partner (or member) of the Partnerships, including, without limitation, all of
its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in the Partnerships (such right, title and interest are hereinafter
collectively referred to as the "Partnership Interest"), in exchange for
partnership units in the Operating Partnership (the "OP Units"), on the terms
and subject to the conditions set forth herein.
G. The Operating Partnership desires to make, and the Contributor
desires to receive, a return of certain contributions previously made by the
Contributor to the Operating Partnership that relate to direct or indirect
interests in certain limited partnerships, limited liability companies and
certain other entities that do not relate to the Consolidation (the "Excluded
Interests").
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR
OP UNITS
1.1 CONTRIBUTION TRANSACTION
(a) At the Closing (as defined in ARTICLE 2.2 hereof) and subject
to the terms and conditions contained in this Contribution Agreement, the
Contributor shall transfer to the Operating Partnership, absolutely and
unconditionally, all of its Partnership Interest (as such term is defined in
Recital F herein) not previously contributed to the Operating Partnership. The
contribution of the Contributor's Partnership Interest shall be evidenced by a
"Contribution and Assumption Agreement" for each of the Partnerships in
substantially the form of EXHIBIT B attached hereto. Furthermore, the
Contributor shall execute and have duly acknowledged an individual quitclaim
deed for each property in the form of EXHIBIT C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the Agreement
of Limited Partnership of the Operating Partnership (the "OP Agreement") in
order to effect the transactions contemplated hereby.
(b) At the Closing, and subject to the terms and conditions set
forth in this Contribution Agreement, the Operating Partnership shall transfer
to the Contributor, absolutely and unconditionally, all of the Excluded
Interests (as such term is defined in Recital G herein) previously contributed
by the Contributor to the Operating Partnership.
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<PAGE> 6
1.2 ISSUANCE OF OP UNITS
The Operating Partnership shall, in exchange for the Partnership
Interest and after taking into account the transfer of the Excluded Interests to
the Contributor, increase or decrease the number of OP Units issued to the
Contributor in accordance with EXHIBIT D hereto. The increase or decrease of OP
Units Issued to the Contributor shall be evidenced by either an amendment (the
"Amendment") to the OP Agreement or by certificates relating to such units (the
"Certificates") in either case, as shall be acceptable to the Contributor. The
parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the OP
Agreement in order to effect the transactions contemplated hereby.
1.3 ADJUSTED CONSIDERATION
The Operating Partnership reserves the right not to acquire any
particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the number of OP Units to be received by the Contributor pursuant to this
Contribution Agreement may be reduced by an amount determined by Lawrence H.
Feldman, in his sole discretion, to reflect the reduction in total value of the
Partnership Interest ultimately contributed by the Contributor.
1.4 AUTHORIZATION
Contributor hereby authorizes Lawrence H. Feldman to make any and
all determinations to be made by him pursuant to ARTICLE 1.3 hereof, and any and
all such determinations shall be final and binding on all parties.
1.5 CONTRIBUTION OF CERTAIN RIGHTS
Effective upon the Closing, the Contributor hereby contributes to
the Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.
1.6 PRORATIONS
At the Closing, or as promptly as practicable following the
Closing, to the extent such matters are not the right or responsibility of all
tenants of a given Property, all revenue and all charges that are customarily
prorated in transactions of this nature, including accrued rent currently due
and payable, overpaid taxes or fees, real and personal property taxes, common
area maintenance charges and other similar periodic charges payable or
-3-
<PAGE> 7
receivable with respect to such Property shall be ratably prorated between the
partners of the Partnership which holds such Property prior to the Closing and
the Operating Partnership on and after the Closing, effective as of the Closing.
After providing for such prorations, (i) if any of the Partnerships has a
resultant cash surplus, the value of the Contributor's Partnership Interest
shall be increased in proportion to Contributor's ratable share of such cash
surplus and additional OP Units (based on the Mid-Point (as such term is defined
in Exhibit D attached hereto) of the proposed offering prices per share set
forth in the final preliminary prospectus relating to the offering of shares of
Common Stock ) shall be issued to the Contributor as a valuation adjustment to
the consideration to be received by the Contributor pursuant to this
Contribution Agreement, and (ii) if any of the Partnerships has a resultant cash
deficit, the value of the Contributor's Partnership Interest shall be reduced in
proportion to Contributor's ratable share of such cash deficit, and fewer OP
Units shall be issued to the Contributor as a valuation adjustment to the
consideration to be received by the Contributor pursuant to this Contribution
Agreement, unless such deficit is cured prior to the Closing.
1.7 TREATMENT AS CONTRIBUTION
The transfer, assignment and exchange of interests effectuated with
respect to the Operating Partnership, pursuant to this Contribution Agreement,
shall constitute a "Capital Contribution" pursuant to Article IV of the OP
Agreement and is intended to be governed by Section 721(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
ARTICLE 2. CLOSING
2.1 CONDITIONS PRECEDENT
The effectiveness of the Company's registration statement filed with
the Securities and Exchange Commission on Form S-11 (the "Registration
Statement") is a condition precedent to the obligations of all parties to this
Contribution Agreement to effect the transactions contemplated by this
Contribution Agreement on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the transactions
contemplated hereby shall be subject to the following additional conditions:
(a) The representations and warranties of the Contributor contained in
this Contribution Agreement shall have been true and correct in all material
respects on the date such representations and warranties were made, and shall be
true and correct in all material respects on the Closing Date as if made at and
as of such date;
(b) Each of the obligations of the Contributor to be performed by it
shall have been duly performed by it on or before the Closing Date;
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<PAGE> 8
(c) Concurrently with the Closing, the Contributor shall have executed
and delivered to the Operating Partnership the documents required to be
delivered pursuant to ARTICLE 2.3 hereof;
(d) The Contributor shall have obtained all necessary consents or
approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its covenants
contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order, injunction,
stay, decree or restraining order shall have been enacted, entered, promulgated
or enforced by any court of competent jurisdiction or governmental or regulatory
authority or instrumentality that prohibits the consummation of the transactions
contemplated hereby, and no litigation or governmental proceeding seeking such
an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof and the
Closing Date any material adverse change in any of the Partnerships' businesses;
(h) All existing management agreements with respect to the Properties
shall have been contributed to the Operating Partnership prior to or
simultaneously with the Closing; and
(i) All management functions with respect to the Properties presently
conducted by Tower Equities & Realty Corp. and its affiliates shall be assumed
by the Operating Partnership or Tower Equities Management, Inc.
2.2 TIME AND PLACE
The date, time and place of the transactions contemplated hereunder
shall be the day the Operating Partnership receives the proceeds from the Public
Offering from the underwriter(s), at 10:00 a.m. in the office of Battle Fowler
LLP, 75 East 55th Street, New York, New York 10022 (the "Closing" or "Closing
Date"). The transfers described in ARTICLE 1.1 of this Contribution Agreement,
and all closing deliveries, and the consummation of the Public Offering, shall
be deemed concurrent for all purposes.
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<PAGE> 9
2.3 CLOSING DELIVERIES
At the Closing, the parties shall make, execute, acknowledge and
deliver, or cause to be made, executed, acknowledged and delivered through the
Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other items
(collectively, the "Closing Documents") necessary to carry out the intention of
this Contribution Agreement, which Closing Documents and other items shall
include, without limitation, the following:
(i) A Contribution and Assumption Agreement for each
Partnership;
(ii) An individual quitclaim deed for each Property, fully
executed and duly acknowledged from each of the individual constituent
partners and/or members of the Contributor, as required by the Operating
Partnership;
(iii) The Amendment or the Certificates evidencing the transfer of
OP Units to the Contributor;
(iv) American Land Title Assurances ("ALTA") policies of title
insurance with appropriate endorsements and levels of reinsurance for the
Properties issued as of the Closing Date or endorsements or other
assurances that the existing policy or policies of title insurance are
sufficient for purposes of this Contribution Agreement, which the
Contributor shall cause the title company to issue to the Operating
Partnership in a form acceptable to the Operating Partnership (the "Title
Policies") including satisfaction by the Contributor of any and all title
company requirements applicable to it;
(v) The Partnerships' books and records and securities or other
evidences of ownership held by the Contributor; and
(vi) An affidavit from the Contributor stating, under penalty of
perjury, the Contributor's United States Taxpayer Identification Number and
that the Contributor is not a foreign person pursuant to section 1445(b)(2)
of the Code and a comparable affidavit satisfying California and any other
withholding requirements.
(vii) The Exchange Rights Agreement, the Registration Rights
Agreement and the Lock-Up Agreements substantially in the form attached
hereto as ATTACHMENTS 1, 2, and 3, respectively.
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<PAGE> 10
2.4 CLOSING COSTS
The Operating Partnership shall pay any documentary transfer taxes,
escrow charges, title charges and recording taxes or fees incurred in connection
with the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP
The Operating Partnership hereby represents and warrants to and
covenants with the Contributor that:
(a) Organization; Authority. The Operating Partnership has been duly
formed and is validly existing with requisite power to enter this Contribution
Agreement and all agreements contemplated hereby. The persons and entities
executing this Contribution Agreement and all agreements contemplated hereby on
behalf of the Operating Partnership have the power and authority to enter into
this Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and performance by the
Operating Partnership of its obligations under this Contribution Agreement and
all agreements contemplated hereby will not contravene any provision of
applicable law, the OP Agreement, charter, declaration of trust or other
constituent document of the Operating Partnership, or any agreement or other
instrument binding upon the Operating Partnership or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over the
Operating Partnership, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Operating Partnership of its obligations under this
Contribution Agreement and all other agreements contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
The Contributor represents and warrants to and covenants with the
Operating Partnership as provided in EXHIBIT E attached hereto, and acknowledges
and agrees to be bound by the indemnification provisions contained therein.
3.3 INDEMNIFICATION
The Operating Partnership shall indemnify and hold harmless the
Contributor (the "Indemnified Contributor Party") from and against any and all
claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable
-7-
<PAGE> 11
attorneys' fees, costs of investigation and remediation, costs of investigative
judicial or administrative proceedings or appeals therefrom and costs of
attachment or similar bonds (collectively, "Losses") asserted against, imposed
upon or incurred by the Indemnified Contributor Party in connection with: (i)
any breach of a representation or warranty of the Operating Partnership
contained in this Contribution Agreement; and (ii) all fees, costs and expenses
of the Operating Partnership in connection with the transactions contemplated by
this Contribution Agreement, including, without limitation, any and all costs
associated with the transfers contemplated herein.
ARTICLE 4. COVENANTS
4.1 Covenants of Contributor
(a) From the date hereof through the Closing, the Contributor shall
not:
(i) Sell or transfer all or any portion of the Partnership
Interest; or
(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of the Partnership Interest.
(b) From the date hereof through the Closing, the Contributor shall
permit each of the Partnerships to conduct its business in the ordinary course,
consistent with past practice, and shall not permit any of the Partnerships to:
(i) Enter into any material transaction not in the ordinary
course of business;
(ii) Sell or transfer any assets of the Partnerships;
(iii) Mortgage, pledge or encumber (or permit to become
encumbered) any assets of the Partnerships, except (x) liens for taxes not
due, (y) purchase money security interests and (z) mechanics' liens being
disputed by any of the Partnerships in good faith and by appropriate
proceedings;
(iv) Amend, modify or terminate any material agreements or other
instruments to which any of the Partnerships is a party; or
(v) Materially alter the manner of keeping the Partnerships'
books, accounts or records or the accounting practices therein reflected.
(c) The Contributor shall use its good faith diligent efforts to
obtain any approvals, waivers or other consents of third parties required to
effect the transactions contemplated by this Contribution Agreement.
-8-
<PAGE> 12
ARTICLE 5. RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this ARTICLE 5 shall
become effective only upon the Closing of the contribution and exchange of the
Partnership Interest pursuant to ARTICLES 1 and 2 hereof.
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP
As of the Closing, the Contributor irrevocably waives, releases and
forever discharges the Operating Partnership and the Operating Partnership's
affiliates, partners (including Lawrence H. Feldman), agents, attorneys,
successors and assigns of and from any and all charges, complaints, claims,
liabilities, damages, actions, causes of action, losses and costs of any nature
whatsoever (collectively, "Contributor Claims"), known or unknown, suspected or
unsuspected, arising out of or relating to any of the Partnership Agreements,
this Contribution Agreement or any other matter which exists at the Closing,
except for Contributor Claims arising from the breach of any representation,
warranty, covenant or obligation under this Contribution Agreement.
5.2 GENERAL RELEASE OF CONTRIBUTOR
As of the Closing, the Operating Partnership irrevocably waives,
releases and forever discharges the Contributor and Contributor's agents,
attorneys, successors and assigns of and from any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "Operating Partnership Claims"), known or
unknown, suspected or unsuspected, arising out of or relating to any of the
Partnership Agreements, this Contribution Agreement or any other matter which
exists at the Closing, except for Operating Partnership Claims arising from the
breach of any representation, warranty, covenant or obligation under this
Contribution Agreement or any supplemental representations and warranties
agreement entered into as of the Closing Date by and among the Contributor,
certain other continuing investors in the Operating Partnership and the
Operating Partnership.
5.3 INTENTIONALLY OMITTED
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT
As of the Closing, the Contributor waives and relinquishes all rights
and benefits otherwise afforded to Contributor under the Partnership Agreements
including, without limitation, any right to consent to or approve of the sale or
contribution by the other partners (or members) of the Partnerships of their
partnership interests to the Company or the Operating Partnership.
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<PAGE> 13
ARTICLE 6. POWER OF ATTORNEY
6.1 GRANT OF POWER OF ATTORNEY
Contributor does hereby irrevocably appoint the Operating Partnership
(or its designee) and each of them individually and any successor thereof from
time to time (such Operating Partnership or designee or any such successor of
any of them acting in his, her or its capacity as attorney-in-fact pursuant
hereto, the "Attorney-in-Fact") as the true and lawful attorney-in-fact and
agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including, without limitation, the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney- in-Fact a proxy (the
"Proxy") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.
Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of Contributor, by operation of law or by the
occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Contribution Agreement, the Attorney-in-Fact shall nevertheless be authorized
and directed to complete all such transactions as if such other act or events
had not occurred and regardless of notice thereof. Contributor agrees that, at
the request of the Operating Partnership, it will promptly execute a separate
power of attorney and proxy on the same terms set forth in this ARTICLE 6, such
execution to be witnessed and notarized. Contributor hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.
Contributor acknowledges that the Operating Partnership has, and any
designee or successor thereof acting as Attorney-in-Fact may have, an economic
interest in the transactions contemplated by this Contribution Agreement.
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<PAGE> 14
6.2 LIMITATION ON LIABILITY
It is understood that the Attorney-in-Fact assumes no responsibility or
liability to any person by virtue of the Power of Attorney or Proxy granted by
Contributor hereby. The Attorney-in-Fact makes no representations with respect
to and shall have no responsibility for the Formation Transactions or the Public
Offering, or the acquisition of the Partnership Interest by the Operating
Partnership and shall not be liable for any error or judgment or for any act
done or omitted or for any mistake of fact or law except for its own gross
negligence or bad faith. Contributor agrees to indemnify the Attorney-in-Fact
for and to hold the Attorney-in-Fact harmless against any loss, claim, damage or
liability incurred on its part arising out of or in connection with it acting as
the Attorney-in-Fact under the Power of Attorney or Proxy created by Contributor
hereby, as well as the cost and expense of investigating and defending against
any such loss, claim, damage or liability, except to the extent such loss,
claim, damage or liability is due to the gross negligence or bad faith of the
Attorney-in-Fact. Contributor agrees that the Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for Operating Partnership or its
successors or affiliates), and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel. It is understood that the
Attorney-in-Fact may, without breaching any express or implied obligation to
Contributor hereunder, release, amend or modify any other power of attorney or
proxy granted by any other person under any related agreement.
ARTICLE 7. MISCELLANEOUS
7.1 FURTHER ASSURANCES.
The Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
7.2 COUNTERPARTS
This Contribution Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.3 GOVERNING LAW
This Contribution Agreement shall be governed by the internal laws of
the State of New York, without regard to the conflicts of laws provisions
thereof.
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<PAGE> 15
7.4 NOTICES
Any notice to be given hereunder by any party to the other shall be
given in writing by personal delivery or by registered or certified mail,
postage prepaid, return receipt requested, and shall be deemed communicated as
of the date of personal delivery (including delivery by overnight courier).
Mailed notices shall be addressed as set forth below, but any party may change
the address set forth below by written notice to other parties in accordance
with this paragraph.
To the Contributor:
Reid Berman
c/o Feldman Equities
120 West 45th Street
New York, NY 10022
To the Operating Partnership:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, NY 10022
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<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this Contribution
Agreement as of the date first written above.
OPERATING PARTNERSHIP:
Tower Realty Operating Partnership, L.P.
By: Tower Realty Trust, Inc.
By: /s/ Lawrence H. Feldman
--------------------------------
Name: Lawrence H. Feldman
Title: Chief Executive Officer
and President
CONTRIBUTOR:
/s/ Reid Berman
-----------------------------------------
Reid Berman
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<PAGE> 17
EXHIBIT A
CONSTITUENT INTERESTS OF
REID BERMAN'S (THE "CONTRIBUTOR") PARTNERSHIP INTEREST
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PARTNERSHIPS IN WHICH CONTRIBUTOR PARTNERSHIPS IN WHICH CONTRIBUTOR PROPERTIES HELD BY THE PARTNERSHIPS
HOLDS A DIRECT INTEREST* HOLDS AN INDIRECT INTEREST
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
5750 Associates Limited Partnership 5750 Major Blvd.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------
* Corporations owned by Reid Berman that hold interests in any of the
Properties shall contribute the partnership interests held by such
corporations to the Operating Partnership.
A-1
<PAGE> 18
EXHIBIT B
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby assigns, transfers,
contributes and conveys to Tower Realty Operating Partnership, L.P., a Delaware
limited partnership (the "Operating Partnership"), its entire legal and
beneficial right, title and interest in and to ______________________________, a
__________________________ (the "Partnership"), including, without limitation,
all right, title and interest, if any, of the undersigned in and to the assets
of the Partnership and the right to receive distributions of money, profits and
other assets from the Partnership, presently existing or hereafter at any time
arising or accruing (such right, title and interest are hereinafter collectively
referred to as the "Partnership Interest"), TO HAVE AND TO HOLD the same unto
the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating Partnership
assumes all obligations in respect of the Partnership Interest.
The Partnership owns certain real property as described in Attachment 1
attached hereto.
Executed: ___________ ___, 1997
By: _____________________________________
Reid Berman
B-1
<PAGE> 19
EXHIBIT C
FORM OF QUITCLAIM
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ ............
......... Computed on the consideration or
value of property conveyed; OR
......... Computed on the consideration or
value less liens or encumbrances
remaining at time of sale.
-------------------------------------------------
Signature of Declarant of Agent determining
tax -- Firm name
- --------------------------------------------------------------------------------
QUITCLAIM DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, do(es)
hereby REMISE, RELEASE and FOREVER QUITCLAIM to Tower Realty Operating
Partnership, L.P., a Delaware limited partnership the real property in the City
of ____________, County of _____________, State of _____________, described as
Dated ____________ ____________________________________
____________________________________
____________________________________
C-1
<PAGE> 20
STATE OF NEW YORK )
)
COUNTY OF )
On __________________________________________________________________ before me,
_______________________________________________________________________________,
personally appeared_____________________________________________________________
_______________________________________________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature__________________________ (This area for official notarial seal)
C-2
<PAGE> 21
EXHIBIT D
CALCULATION OF NUMBER OF OP UNITS
The number of OP units to be issued to Contributor shall be calculated
as follows:
$202,561/Mid-Point
For purposes of this Contribution Agreement, the "Mid-Point" means the
median of the proposed per share price range for the Common Stock as set forth
in the Preliminary Prospectus.
D-1
<PAGE> 22
EXHIBIT E
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
OF CONTRIBUTOR
ARTICLE 1. ADDITIONAL DEFINED TERMS
1.1 For purposes of this EXHIBIT E, the following terms have the
meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT E is attached:
ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively, "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.
CONTRIBUTION AGREEMENT: Means the Contribution Agreement to which this
EXHIBIT E is attached.
GOVERNMENTAL ENTITY: Means any government or agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign.
INDEMNIFYING PARTY: Means any party required to indemnify any other
party under ARTICLE 3.2 of this EXHIBIT E or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.
KNOWLEDGE: Means, with respect to any representation or warranty so
indicated, the actual knowledge, upon reasonable investigation and inquiry in
good faith, of the signatory to the Contribution Agreement.
LIENS: Means, with respect to any real and personal property, all
mortgages, pledges, liens, options, charges, security interests, restrictions,
prior assignments, encumbrances, covenants, encroachments, assessments, rights
of others, licenses, easements, liabilities or claims of any kind or nature
whatsoever, direct or indirect, including, without limitation, interests in or
claims to revenues generated by such property.
E-1
<PAGE> 23
PERMITTED LIENS: Means (a) Liens, or deposits made to secure the
release of such Liens, securing taxes, the payment of which is not delinquent or
the payment of which is actively being contested in good faith by appropriate
proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the districts in
which the Properties are located which are not violated by the existing
structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's and
mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor encroachments,
rights of access or other non-monetary matters that do not have a material
adverse effect upon, or materially interfere with the use of, the Properties;
and
(e) any exceptions contained in the Title Policies.
PERSON: Means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
PORTFOLIO AGREEMENTS: Means the agreements, including the Contribution
Agreement, listed on ATTACHMENT 1 hereto, which contemplate the transfer of
partnership and/or limited liability company membership interests in certain of
the Participating Partnerships and LLCs from any entity directly or indirectly
owned by Contributor to the Company and the Operating Partnership.
PROSPECTUS: Means the Company's Form S-11 Registration Statement.
REIT STOCK: Shall have the meaning set forth in the OP Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
The Contributor represents and warrants to the Operating Partnership as
set forth below in this ARTICLE 2. Notwithstanding any other provision of the
Contribution Agreement or this EXHIBIT E, the Contributor makes representations,
warranties and indemnities only with respect to: (i) the Properties identified
on EXHIBIT A to the Contribution Agreement (the "Property" or the "Properties"),
and (ii) the interests in the Partnerships to be transferred by the Contributor.
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2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural person,
has the legal capacity to enter the Contribution Agreement; if not a natural
person, is duly formed, validly existing and in good standing (to the extent
applicable) under the laws of the jurisdiction of its formation, and (B) has all
requisite power and authority to own, lease or operate its property and to carry
on its business as presently conducted and, to the extent required under
applicable law, is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
2.2 DUE AUTHORIZATION. The execution, delivery and performance of the
Contribution Agreement by the Contributor has been duly and validly authorized
by all necessary action of the Contributor. This Contribution Agreement and each
agreement, document and instrument executed and delivered by or on behalf of the
Contributor pursuant to this Contribution Agreement constitutes, or when
executed and delivered will constitute, the legal, valid and binding obligation
of the Contributor, each enforceable against the Contributor in accordance with
its terms, as such enforceability may be limited by bankruptcy or the
application of equitable principles.
2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is the sole
owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.
2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes all of
the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of all
security interests, mortgages, pledges, liens, encumbrances, claims and equities
to the Operating Partnership.
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2.6 NO VIOLATION. None of the execution, delivery or performance of the
Contribution Agreement and the transactions contemplated hereby does or will,
with or without the giving of notice, lapse of time, or both, (i) violate,
conflict with, result in a breach of, or constitute a default under or give to
others any right of termination or cancellation of (A) the organizational
documents, including the charters and bylaws, if any, of the Contributor, (B)
any material agreement, document or instrument to which the Contributor is a
party or by which the Contributor or its Property is bound or (C) any term or
provision of any judgment, order, writ, injunction, or decree of any
governmental or regulatory authority binding on the Contributor or by which the
Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.
2.7 NON-FOREIGN STATUS. The Contributor is not a foreign person,
foreign corporation, foreign partnership, foreign trust or foreign estate (as
defined in the Code), and is, therefore, not subject to the provisions of the
Code relating to the withholding of sales proceeds to foreign persons.
2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions. If Contributor fails to provide
such certificates or affidavits, the Operating Partnership may withhold a
portion of any payments otherwise to be made to the Contributor as required by
the Code or New York law.
2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her or its
understanding that the offering and sale of the OP Units to be acquired pursuant
to the Contribution Agreement are intended to be exempt from registration under
the Securities Act of 1933, as amended, and the rules and regulations in effect
thereunder (the "Act"). In furtherance thereof, the Contributor represents and
warrants to the Company as follows:
2.9.1 INVESTMENT. The Contributor is acquiring the OP Units solely
for his, her or its own account for the purpose of investment and not as a
nominee or agent for any other person and not with a view to, or for offer or
sale in connection with, any distribution of any thereof. The Contributor agrees
and acknowledges that he, she or it will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of
(hereinafter, "Transfer") any of the OP Units unless (i) the Transfer is
pursuant to an effective registration statement under the Act and qualification
or other compliance under applicable blue sky or state securities laws, or (ii)
counsel for the Contributor (which counsel shall be reasonably acceptable to the
Operating Partnership) shall have furnished the Operating Partnership with an
opinion, reasonably satisfactory in form and substance to the Operating
Partnership to the effect that no such registration is required because of the
availability of an exemption from registration under the Act and qualification
or other compliance under applicable blue sky or state securities laws.
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2.9.2 KNOWLEDGE. The Contributor is knowledgeable, sophisticated
and experienced in business and financial matters; the Contributor has
previously invested in securities similar to the OP Units and fully understands
the limitations on transfer imposed by the Federal securities laws and as
described in the Contribution Agreement. The Contributor is able to bear the
economic risk of holding the OP Units for an indefinite period and is able to
afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.
2.9.3 HOLDING PERIOD. The Contributor acknowledges that he, she or
it has been advised that (i) the OP Units and the common stock of the Company
into which the OP Units may be exchanged in certain circumstances (the "Common
Stock") must be held indefinitely, and the Contributor must continue to bear the
economic risk of the investment in the OP Units (and any Common Stock that might
be exchanged therefor) unless they are subsequently registered under the Act or
an exemption from such registration is available, (ii) a restrictive legend in
the form hereafter set forth shall be placed on the certificates representing
the OP Units (and any Common Stock that might be exchanged therefor), and (iii)
a notation shall be made in the appropriate records of the Operating Partnership
(and the Company) indicating that the OP Units (and any Common Stock that might
be exchanged therefor) are subject to restrictions on transfer.
2.9.4 ACCREDITED INVESTOR. If the Contributor is an individual,
such individual is an "accredited investor" (as such term is defined in Rule
501(a) of Regulation D under the Act) and as such:
(i) is a director or executive officer of the Company; or
(ii) has an individual net worth, or joint net worth with his
or her spouse, in excess of $1,000,000; or
(iii) had an individual annual adjusted gross income in excess
of $200,000 in each of the two most recent years and reasonably expects to
have annual adjusted gross income in excess of $200,000 in the current
year; or
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<PAGE> 27
(iv) had a joint income with his spouse in excess of $300,000
in each of the two most recent years and reasonably expects to have an
annual adjusted gross income, with his spouse, in excess of $300,000 in the
current year.
If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).
2.9.5 LEGENDING. Each certificate representing the OP Units (and
any Common Stock that might be exchanged therefor) shall bear the following
legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY
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PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH
A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION.
2.10 LITIGATION. There are no Claims which could reasonably be
anticipated to result in damages in excess of $50,000 pending or, to Knowledge,
threatened that directly or indirectly affect the Contributor, the Partnerships,
the Properties or the Formation Transactions, nor has any such claim been
pending or, to Knowledge, threatened as of the Closing.
2.11 NO BROKERS. Neither the Contributor nor any of its respective
officers, directors or employees has employed or made any agreement with any
broker, finder or similar agent or any person or firm which will result in the
obligation of the Operating Partnership or any of its affiliates to pay any
finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.
2.12 SOLVENCY. The Contributor has been and will be solvent at all
times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.
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2.13 NO MISREPRESENTATIONS. No representation, warranty or statement
made, or information provided, by the Contributor in the Contribution Agreement
or in any other document or instrument furnished or to be furnished by or on
behalf of the Contributor pursuant hereto or as contemplated hereby (i) contains
or will contain any untrue statement of a material fact or (ii) omits or will
omit to state a material fact necessary to make the statements contained herein
or therein not misleading. For purposes of the preceding sentence, materiality
shall be determined with reference to the total portfolio of real properties and
other interests to be transferred pursuant to the Operating Partnership pursuant
to the Formation Transactions.
ARTICLE 3. INDEMNIFICATION
3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR BREACH.
(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT E or in any Schedule or certificate delivered pursuant
hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the Contribution
Agreement or this EXHIBIT E, no party hereto shall be liable under this EXHIBIT
E or the Contribution Agreement for monetary damages (or otherwise) for breach
of any of its representations and warranties contained in this EXHIBIT E or the
Contribution Agreement, or in any Schedule, certificate or affidavit delivered
by it pursuant thereto, other than pursuant to the succeeding provisions of this
ARTICLE 3.
3.2 GENERAL INDEMNIFICATION
(a) The Contributor shall indemnify and hold harmless the Operating
Partnership, the Company, and their affiliates and each of their respective
directors, officers, employees, agents, representatives and affiliates (each of
which is an "Indemnified Party") from and against any and all claims, losses,
damages, liabilities and expenses, including, without limitation, amounts paid
in settlement, reasonable attorneys' fees, costs of investigation, costs of
investigative, judicial or administrative proceedings or appeals therefrom, and
costs of attachment or similar bonds (collectively, "Losses"), asserted against,
imposed upon or incurred by the Indemnified Party in connection with or as a
result of any breach of a representation or warranty of the Contributor
contained in the Contribution Agreement or in any Schedule, certificate or
affidavit delivered by the Contributor pursuant to the Contribution Agreement.
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<PAGE> 30
(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributor in connection with
the transactions contemplated by the Contribution Agreement;
(ii) any liabilities or obligations incurred, arising from or out
of, in connection with or as a result of the failure of the Contributor to
obtain all consents required to consummate the transactions contemplated by
the Contribution Agreement; or
(iii) any breach of any representation, warranty or covenant set
forth in the Contribution Agreement.
3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy its
obligations hereunder by the prompt delivery (paid promptly as and when expenses
are incurred) to an Indemnified Party of OP Units, subject to the limits on
ownership and transfer of REIT Stock set forth in the Company's articles of
incorporation. Any OP Units delivered to an Indemnified Party hereunder shall be
valued based upon the initial public offering price of the Company's Common
Stock.
3.4 NOTICE AND DEFENSE BY CLAIMS. As soon as reasonably practicable
after receipt by the Indemnified Party of notice of any liability or claim
incurred by or asserted against the Indemnified Party that is subject to
indemnification under this ARTICLE 3, the Indemnified Party shall give notice
thereof to the Contributor. The Indemnified Party may at its option demand
indemnity under this ARTICLE 3 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not frivolous
and that the Indemnified Party may be liable for, or otherwise incur, a Loss as
a result thereof and shall give notice of such determination to the Contributor.
The Indemnified Party shall permit the Contributor, at its option and expense,
to assume the defense of any such claim by counsel selected by the Contributor
and reasonably satisfactory to the Indemnified Party, and to settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that the Indemnified Party may at all
times participate in such defense at its expense; and PROVIDED FURTHER, HOWEVER,
that the Contributor shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party in its sole and absolute
discretion, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnified Party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall have
the right to undertake the
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<PAGE> 31
defense, compromise or settlement of such liability or claim on behalf of and
for the account of the Contributor.
3.5 LIMITATIONS ON INDEMNIFICATION UNDER ARTICLE 3. Notwithstanding
anything contained herein to the contrary, the Contributor shall not be liable
or obligated to make payments under this ARTICLE 3 with respect to any Property
or Partnership Interest to the extent such payments in the aggregate would
exceed the value of the OP Units (based upon the initial public offering price
of the Common Stock) received by the Contributor at the Closing. Notwithstanding
anything contained herein to the contrary, the Indemnified Parties shall look
first to the Contributor's OP Units for indemnification under this ARTICLE 3 and
then to the Contributor's other assets.
3.6 LIMITATION PERIOD.
(a) Notwithstanding the foregoing, any claim for indemnification under
ARTICLE 3.2 hereof must be asserted in writing by the Indemnified Party, stating
the nature of the Losses and the basis for indemnification therefor within one
year after the Closing.
(b) If so asserted in writing prior to the applicable expiration date,
such claims for indemnification shall survive until resolved by mutual agreement
between the Contributor and the Indemnified Party or by judicial determination.
Any claim for indemnification not so asserted in writing prior to the applicable
expiration date shall not thereafter be asserted and shall forever be waived.
3.7 RESERVATION OF CONTRIBUTOR RIGHTS. Notwithstanding anything else in
this Contribution Agreement to the contrary, the Contributor reserves unto
itself all rights and remedies (including rights to seek contribution) against
any third party indemnitors, prior property owners or occupants, and
contributors to any contamination, for which the Partnerships have been
indemnified by the Contributor hereunder. To the extent the Contributor's rights
against any such third party owners, occupants, indemnitors or contributors may
be materially prejudiced by actions or inactions by any owner or occupant of the
Properties after the Closing, the Contributor's indemnity obligation shall be
reduced in accordance with the effect of the actions or inactions which so
prejudiced the Contributor's rights.
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ATTACHMENT 1
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
__________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
RECITALS:
(a) The Company, together with certain other limited partners,
has formed the Operating Partnership pursuant to the
Agreement of Limited Partnership of the Operating
Partnership dated __________ __, 1997 (as such agreement
may be amended or amended and restated from time to time,
the "PARTNERSHIP AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited Partners
(as defined below) directly or indirectly hold units of
limited partnership interest ("OP UNITS") in the Operating
Partnership.
(c) The Operating Partnership has agreed to provide the Limited
Partners with certain direct or indirect rights to exchange
their OP Units for cash or, at the election of the Company,
for shares of the Company's common stock, par value $0.01
per share (the "REIT STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
<PAGE> 33
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Stock in REIT
Stock or makes a distribution to all holders of its outstanding REIT Stock in
REIT Stock; (ii) subdivides its outstanding REIT Stock; or (iii) combines its
outstanding REIT Stock into a smaller number of shares of REIT Stock, the
Exchange Factor shall be adjusted by multiplying the Exchange Factor by a
fraction, the numerator of which shall be the number of shares of REIT Stock
issued and outstanding on the record date for such dividend, contribution,
subdivision or combination assuming for such purpose that such dividend,
distribution, subdivision or combination has occurred as of such time, and the
denominator of which shall be the actual number of shares of REIT Stock
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Exchange Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated
and/or the Operating Partnership
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
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<PAGE> 34
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to
the product of the number of OP Units offered for exchange by an Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company or the Operating Partnership issues to all holders
of REIT Stock rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase REIT Stock,
or any other securities or property (collectively, the "rights"), then the REIT
Stock Amount shall also include such rights that a holder of that number of
shares of REIT Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading on
the NYSE, any national securities exchange or Nasdaq, the last reported
sale price on such day or, if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by
a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
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<PAGE> 35
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"EXCHANGING PARTNER"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding
the provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging Partner
within five (5) Business Days after the receipt by the Company of such
Notice of Exchange,
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<PAGE> 36
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of the
Company,
(b) would otherwise jeopardize the REIT status of the Company, or
(c) would cause the acquisition of the REIT Stock by the Limited
Partner to be "integrated" with any other distribution of REIT Stock by
the Company for purposes of complying with the registration provisions
of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article
2, any person to whom OP Units have been pledged, in compliance with the terms
of the Lock-up Agreement, may exercise its Exchange Right prior to the date that
is one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
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<PAGE> 37
(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of
the Exchange Right, the Company shall reserve for issuance such number of shares
of REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable
upon exchange of OP Units (or the cash equivalent amount thereof if the Cash
Amount is paid) shall be computed on the basis of the aggregate amount of OP
Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
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<PAGE> 38
(A) a copy of the prospectus contained in the Registration
Statement on Form S-11 filed by the Company in connection with the
IPO, any prospectus contained in any Registration Statement
subsequently filed by the Company, and any supplement or amendment
thereto (each, a "PROSPECTUS"), and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by the
Company with the SEC pursuant to the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions
of this type that it is capable of evaluating the merits and risks
of and of making an informed investment decision with respect to
an investment in REIT Stock,
(B) is capable of protecting its own interest or has engaged
representatives or advisors to assist it in protecting its
interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited investor" as
defined in Rule 501 of the regulations promulgated under the
Securities Act.
(B) If such Exchanging Partner has retained or retains a
person to represent or advise it with respect to its investment in
REIT Stock, such Exchanging Partner will advise the Company of
such retention and, at the Company's request, such Exchanging
Partner shall, prior to or at delivery of the REIT Stock
hereunder,
(I) acknowledge in writing such representation and
(II) cause such representative or advisor to deliver
a certificate to the Company containing such representations
as may be reasonably requested by the Company.
(b) (i) Such Exchanging Partner understands that an investment in
the Company involves substantial risks.
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<PAGE> 39
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under the
Securities Act or state securities laws by reason of a specific
exemption or exemptions from registration under the Securities Act
and applicable state securities laws and, the certificates
representing such shares of REIT Stock will bear a legend to such
effect,
(B) the Company's and the Operating Partnership's reliance
on such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of such
Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging Partner
hereunder may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is
available,
(D) there may be no market for unregistered shares of REIT
Stock, and
(E) the Company has no obligation or intention to register
such REIT Stock under the Securities Act or any state securities
laws or to take any action that would make available any exemption
from the registration requirements of such laws, except as
provided in the Registration Rights Agreement entered into by the
Company and the Exchanging Partner (the "REGISTRATION RIGHTS
AGREEMENT").
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<PAGE> 40
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
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<PAGE> 41
4.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with
the consent of the Company by a vote of the Limited Partners in the same manner
as the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein, provided, however, that the Company shall vote its
limited partnership interests in proportion to the votes of the other Limited
Partners.
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<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By: ____________________________________
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By: _______________________________
Name:
Title:
LIMITED PARTNERS:
______________________________
Signature
______________________________
Name (Please Print or Type)
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<PAGE> 43
Exhibit A
Name and Address of Limited Partners
[To be attached]
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<PAGE> 44
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated: __________________________
_________________________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
(Signature of Limited Partner)
_____________________________
(Street Address)
(City) (State) (Zip Code)
If REIT Stock is to be issued, issue to:
Name:
Limited Partner's social security or tax
identification number:
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<PAGE> 45
BATTLE FOWLER LLP
DRAFT - 7/24/97
ATTACHMENT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, limited liability companies, corporations and
other entities which are Holders or in which the Holders own direct or indirect
interests (the "PROPERTY PARTNERSHIPS") pursuant to Option or Contribution
Agreements (the "OPTION AGREEMENTS") among the Operating Partnership and the
Grantors named therein, and in connection therewith the Holders will receive
units of limited partnership interest in the Operating Partnership (such units
of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
<PAGE> 46
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating to
the sale thereof shall have become effective under the Securities Act
and which have been disposed of under such Registration Statement or
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<PAGE> 47
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing fees;
(ii) all fees and expenses incurred in connection with compliance
with state securities or "blue sky" laws (including reasonable fees and
disbursements of counsel in connection with "blue sky" qualification of
any of the Registrable Securities and the preparation of a Blue Sky
Memorandum) and compliance with the rules of the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company and of
the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
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"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the date
hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective for a period
expiring on the date on which all of the Registrable Securities covered
by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement or have become eligible for sale pursuant
to Rule 144(k) and, subject to Article III hereof, further agrees to
supplement or amend the Shelf Registration Statement, if and as
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not
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<PAGE> 49
delay, suspend or withdraw a Registration Statement for such reason for
more than 60 days or more often than twice during any period of 12
consecutive months.
(iv) The Company is not required to file a separate Registration
Statement, but may file one Registration Statement covering the
Registrable Securities held by more than one Holder.
2.2 Expenses.
(i) The Company shall pay all Registration Expenses in connection
with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if any,
sales commissions, the fees and disbursements of counsel representing
such Holder and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that does
not, within 10 days after receipt of a reasonable request by the Company for
information in connection with the Shelf Registration Statement, provide such
information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
2.4 Effect of Material Breach. In the event that the Company shall
breach any of its material obligations hereunder in any material respect, any
Holder of Registrable Securities may demand that the Company file a registration
statement covering such Holder's Registrable Securities. The Company agrees to
file such registration statement within 60 days after receipt of such demand and
agrees to use its best efforts to procure the effectiveness of such registration
statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed pursuant
to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period set
forth in Section 2 hereof, a Shelf Registration Statement, which Shelf
Registration Statement
(A) shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of
distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects with
the requirements of the applicable form of registration statement
and include all financial statements required by the SEC to be
filed therewith.
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(ii) (A) Subject to Article III, Section (a)(ii)(B),
(I) prepare and file with the SEC such amendments and
post-effective amendments to each such Registration
Statement as may be necessary to keep such Registration
Statement effective for the applicable period;
(II) cause each such Prospectus to be supplemented by
any required prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 or any similar rule that
may be adopted under the Securities Act;
(III) respond as promptly as practicable to any
comments received from the SEC with respect to the Shelf
Registration Statement, or any amendment, post-effective
amendment or supplement relating thereto; and
(IV) comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by
each Registration Statement during the applicable period in
accordance with the intended method or methods of
distribution by the selling Holders thereof.
(B) (I) Each Holder shall promptly provide to the Company
such information as the Company reasonably requests in order
to identify such Holder and the method of distribution in a
post-effective amendment to the Registration Statement or a
supplement to the Prospectus.
(II) Such Holder also shall notify the Company in
writing upon completion of any offer or sale or at such time
as such Holder no longer intends to make offers or sales
under the Registration Statement.
(iii) Furnish to each Holder of Registrable Securities, without
charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other
documents as such Holder may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Securities; the
Company consents to the use of the Prospectus, including each
preliminary Prospectus, by each such Holder of Registrable Securities
in connection with the offering and sale of the Registrable Securities
covered by the Prospectus or the preliminary Prospectus.
(iv) Use its reasonable efforts to register or qualify the
Registrable Securities by the time the applicable Registration
Statement is declared effective by the SEC under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
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<PAGE> 51
Registrable Securities covered by a Registration Statement shall reasonably
request in writing, keep each such registration or qualification effective
during the period such Registration Statement is required to be kept effective,
and do any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided,
however, that the Company shall not be required to
(A) qualify generally to do business in any jurisdiction or to
register as a broker or dealer in such jurisdiction where it would not
otherwise be required to qualify but for this Article III, Section
(a)(iv),
(B) subject itself to taxation in any such jurisdiction, or
(C) submit to the general service of process in any such
jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and, if
requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become effective and when
any post-effective amendments and supplements thereto become effective,
(B) of the issuance by the SEC or any state securities authority
of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose,
(C) if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Securities for sale
in any jurisdiction or the initiation of any proceeding for such
purpose, and
(D) of the happening of any event during the period a Registration
Statement is effective which is of a type specified in Article II,
Section 2.1(iii) hereof or as a result of which such Registration
Statement or the related Prospectus contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the
Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment.
(vii) Furnish to each Holder of Registrable Securities, without charge,
at least one conformed copy of each Registration Statement and any
post-effective amendment
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thereto (without documents incorporated therein by reference or exhibits
thereto, unless requested).
(viii) (A) Cooperate with the selling Holders of Registrable Securities
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend; and
(B) enable certificates for such Registrable Securities to be
issued for such numbers of shares of Common Stock and registered in
such names as the selling Holders may reasonably request at least two
business days prior to any sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III, Section
(a)(ii)(B) hereof, upon the occurrence of any event contemplated by Article III,
Section (a)(v)(D) hereof, use its reasonable efforts promptly to prepare and
file a supplement or prepare, file and obtain effectiveness of a post-effective
amendment to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(x) Make available for inspection by representatives of the Holders of
the Registrable Securities and any counsel or accountant retained by such
Holders, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the respective officers, directors and
employees of the Company to supply all information reasonably requested by any
such representative, counsel or accountant in connection with a Registration
Statement; provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies such
representatives, counsel or accountants in writing that such records, documents
or information are confidential shall not be disclosed by such representatives,
counsel or accountants unless
(A) the disclosure of such records, documents or information is
necessary to avoid or correct a material misstatement or omission in a
Registration Statement,
(B) the release of such records, documents or information is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, or
(C) such records, documents or information have been generally
made available to the public.
-8-
<PAGE> 53
(xi) Within a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus, provide copies of such document (not
including any documents incorporated by reference therein unless requested) to
the Holders of Registrable Securities.
(xii) Use its reasonable efforts to cause all Registrable Securities to
be listed on any securities exchange on which similar securities issued by the
Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities, not later
than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering at
least 12 months which shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable Holders to consummate the
disposition of such Registrable Securities.
(b) The Company may require each Holder of Registrable Securities to furnish to
the Company in writing such information regarding the proposed distribution by
such Holder of such Registrable Securities as the Company may from time to time
reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations with
respect to the Registration Statement required to be filed pursuant to Section 2
hereof and this Section 3, each Holder agrees that
(i) it will not offer or sell its Registrable Securities under the
Registration Statement until it has received copies of the supplemental or
amended Prospectus contemplated by Article III, Section (a)(ii) hereof and
receives notice that any post-effective amendment has become effective, and
(ii) upon receipt of any notice from the Company of the happening of
any event of the kind described in Article III, Section (a)(v)(D) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to a Registration Statement until such Holder receives copies of the
supplemented or amended Prospectus contemplated by Article III, Section (a)(ix)
hereof and receives notice that any post-
-9-
<PAGE> 54
effective amendment has become effective, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
IV Indemnification; Contribution.
4.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder (within the meaning of Section 15 of the Securities
Act) as follows:
(a) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Registrable Securities were
registered under the Securities Act, including all documents
incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make
the statements therein not misleading or
(C) arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto), including all documents
incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(b) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred (including
reasonable fees and disbursements of counsel), reasonably incurred in
investigating, preparing or defending against any litigation, or
investigation or proceeding by any governmental
-10-
<PAGE> 55
agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with written
information furnished to the Company by such Holder expressly for use
in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or supplemental
Prospectus, after having been provided copies of any such amended or
supplemental Prospectus by the Company, if such loss, liability, claim,
damage or expense would not have arisen had such delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it may
have under the indemnity agreement provided in Section 4.1(a) or
4.1(b) above, unless and to the extent it did not otherwise learn
of such action and the lack of notice by the
-11-
<PAGE> 56
indemnified party results in the forfeiture by the indemnifying
party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the
indemnification obligation provided under Section 4.1(a) or 4.1(b)
above.
(ii) If the indemnifying party so elects within a reasonable time
after receipt of such notice, the indemnifying party may assume the
defense of such action or proceeding at such indemnifying party's own
expense with counsel chosen by the indemnifying party and approved by
the indemnified parties defendant in such action or proceeding, which
approval shall not be unreasonably withheld; provided, however, that,
if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume the
defense of such action or proceeding as a result of the proviso to
Section 4.1(c), such indemnifying party's counsel shall be
entitled to conduct such indemnifying party's defense, and counsel
for the indemnified party or parties shall be entitled to conduct
the defense of such indemnified party or parties, it being
understood that both such counsel will cooperate with each other
to conduct the defense of such action or proceeding as efficiently
as possible.
(B) If an indemnifying party is not so entitled to assume
the defense of such action or does not assume such defense, after
having received the notice referred to in Section 4.1(c), the
indemnifying party or parties will pay the reasonable fees and
expenses of counsel for the indemnified party or parties as
incurred.
(C) In such event, however, no indemnifying party will be
liable for any settlement effected without the written consent of
such indemnifying party, which consent may not be unreasonably
withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and assumes,
the defense of such action or proceeding in accordance with this
Section 4(c), such indemnifying party shall not be liable for any fees
and expenses of counsel for the indemnified parties incurred thereafter
in connection with such action or proceeding.
-12-
<PAGE> 57
4.4 Contribution.
(i) (A) In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement provided for
in this Section 4 is for any reason held to be unenforceable
although applicable in accordance with its terms, the Company
and the selling Holders shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by the
Company and the selling Holders, in such proportion as is
appropriate to reflect the relative fault of and benefits to
the Company on the one hand and the selling Holders on the
other (in such proportions that the selling Holders are
severally, not jointly, responsible for the balance), in
connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations.
(B) (I) The relative benefits to the indemnifying party and
indemnified parties shall be determined by reference to,
among other things, the total proceeds received by the
indemnifying party and indemnified parties in connection
with the offering to which such losses, claims, damages,
liabilities or expenses relate.
(II) The relative fault of the indemnifying party and
indemnified parties shall be determined by reference to,
among other things, whether the action in question,
including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information
supplied by, such indemnifying party or the indemnified
parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section 4.4, no
selling Holder shall be required to contribute any amount in
excess of the amount by which the total price at which the
Registrable Securities of such selling Holder were offered to
the public exceeds the amount of any damages which such selling
Holder would otherwise have been required to pay by reason of
such untrue statement or omission.
-13-
<PAGE> 58
(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any, who
controls a Holder within the meaning of Section 15 of the Securities
Act and directors and officers of a Holder shall have the same rights
to contribution as such Holder, and each director of the Company, each
officer of the Company who signed the Registration Statement and each
Person, if any, who controls the Company within the meaning of Section
15 of the Securities Act shall have the same rights to contribution as
the Company.
V Filing of Exchange Act Reports; Rule 144 Sales
5.1 The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act so as to
enable any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition by any
Holder of any Exchange Stock pursuant to Rule 144, the Company shall cooperate
with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Exchange
Stock.
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the outstanding
Registrable Securities; provided, however, that no amendment,
modification or supplement or waiver or consent to the departure with
respect to the provisions of Articles 2, 4 or 5 hereof shall be
effective as against any Holder unless consented to in writing by such
Holder.
(ii) Notice of any amendment, modification or supplement to this
Agreement adopted in accordance with this Section 6.1 shall be provided
by the Company to each Holder at least thirty (30) days prior to the
effective date of such amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex,
-14-
<PAGE> 59
telecopier, or any courier guaranteeing overnight delivery, to the parties at
their respective addresses set forth opposite their signatures below or at such
other address as a party may indicate by written notice to the other party or
parties.
(ii) All such notices and communications shall be deemed to have
been duly given:
(A) at the time delivered by hand, if personally delivered;
(B) three (3) business days after being deposited in the
mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air courier
guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder shall
acquire Registrable Securities, in any manner, whether by operation of
law or otherwise, such Registrable Securities shall be held subject to
all of the terms of this Agreement, and by taking and holding such
Registrable Securities such Person shall be entitled to receive the
benefits hereof and shall be conclusively deemed to have agreed to be
bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
-15-
<PAGE> 60
6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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<PAGE> 61
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By:
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING
New York, New York 10036-4003 PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its
general partner
By:
Name:
Title:
[Address:] HOLDERS:
_________________________________________
Signature
_________________________________________
Name (Please Print or Type)
-17-
<PAGE> 62
ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public pursuant to a public offering (the "Offering").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Company's Registration Statement on Form S-11
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that without the prior written consent of Merrill Lynch, the undersigned
will not (and, except as may be disclosed in the Prospectus, will not announce
or disclose any intention to) directly or indirectly sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition at any time in
the future) of, any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, including any units of limited
partnership interest (the "OP Units") in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership") beneficially
owned by the undersigned as of the date of the closing of the Company's initial
public offering, for a period of twenty-four (24) months after the later of (i)
date of the final Prospectus relating to the
<PAGE> 63
offering of the Shares to the public by the Underwriters and (ii) the date the
Offering is consummated and closed. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and _____________________,
its Transfer Agent, are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
letter agreement.
Very truly yours,
[INVESTOR]
By:____________________________
Name:
Title:
2
<PAGE> 64
ATTACHMENT 3
(continued)
FORM OF
LOCK-UP AGREEMENT
, 1997
Tower Realty Operating Partnership, L.P.
120 West 46th Street, 24th Floor
New York, New York 10036
Dear Sirs,
Reference is made to the Option Agreement, dated , 1997 (the
"Option Agreement"), by and between the undersigned and Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"). Capitalized terms used but not otherwise defined in this letter
agreement will have the meaning set forth in the Option Agreement.
In consideration of the execution and exercise of the Option Agreement
by the Operating Partnership, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned hereby
irrevocably agrees that without the prior written consent of the Operating
Partnership, the undersigned will not directly or indirectly sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose (or enter into any transaction or device which
is designed to, or could be expected to, result in the disposition at any time
in the future) of any units of limited partnership interest (the "OP Units") in
the Operating Partnership, or any securities convertible into or exercisable or
exchangeable for OP Units, beneficially owned by the undersigned as of the date
hereof, for a period of twenty-four (24) months after the date hereof. Prior to
the expiration of such period, the undersigned will not publicly announce or
disclose any intention to do anything after the expiration of such period which
the undersigned is prohibited, as provided in the preceding sentence, from doing
during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Operating Partnership is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:
-----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.40
PURCHASE AGREEMENT
BY AND AMONG
TOWER REALTY OPERATING PARTNERSHIP, L.P.
AND
ANTHONY DILEONARDO
Dated as of July 31, 1997
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I PURCHASE OF INTEREST AND EXCHANGE FOR CASH................................................................1
1.1 Purchase Transaction; Assignment...........................................................................1
1.2 Consideration............................................................................................. 2
1.3 Return of Retail Interests to Seller.......................................................................2
ARTICLE II CLOSING............................................................................................................2
2.1 Time and Place.............................................................................................2
2.2 Closing Deliveries.........................................................................................3
2.3 Closing Costs..............................................................................................3
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE SELLER.................................................................................................3
3.1 Title to Interests.........................................................................................3
3.2 Authority No Conflicts.....................................................................................4
3.3 Litigation.................................................................................................5
3.4 No Other Agreements........................................................................................5
3.5 No Brokers.................................................................................................5
3.6 Covenant to Remedy Breaches................................................................................6
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP...............................................................................6
4.1 Authority..................................................................................................6
4.2 No Brokers.................................................................................................7
ARTICLE V POWER OF ATTORNEY..........................................................................................7
5.1 Grant of Power of Attorney.................................................................................7
5.2 Limitation on Liability....................................................................................8
ARTICLE VI MISCELLANEOUS..............................................................................................8
6.1 Amendment..................................................................................................8
6.2 Entire Agreement; Counterparts; Applicable Law.............................................................9
6.3 Binding Effect.............................................................................................9
6.4 Titles.....................................................................................................9
6.5 Third Party Beneficiary....................................................................................9
6.6 Severability...............................................................................................9
6.7 Equitable Remedies........................................................................................10
6.8 Notices; Exercise of Option...............................................................................10
6.9 Waiver of Rights; Consents with Respect to Partnership Interests..........................................11
6.10 Releases and Waivers......................................................................................13
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
6.11 Confidentiality............................................................................................14
6.12 Computation of Time........................................................................................14
6.13 Survival...................................................................................................14
6.14 Time of the Essence........................................................................................14
6.15 Termination of Prior Agreement.............................................................................14
</TABLE>
Schedule
A. Schedule of Interests
<PAGE> 4
PURCHASE AGREEMENT
This Purchase Agreement (this "PURCHASE AGREEMENT") dated as of the
31st day of July, 1997 is entered into by and among TOWER REALTY OPERATING
PARTNERSHIP, L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"),
and Anthony DiLeonardo (the "SELLER").
R E C I T A L S:
A. The Seller owns the Interests (as defined in Section 1.1 herein) in
the limited liability companies set forth on Schedule A attached hereto.
B. The Operating Partnership desires to acquire, and the Seller desires
to sell, assign, transfer, contribute and convey to the Operating Partnership on
the terms and conditions set forth herein, all of the Seller's right, title and
interest in the Interests to the Operating Partnership in exchange for cash.
C. The Operating Partnership desires to acquire the Interests in
connection with the ongoing formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner as well as a limited
partner of the Operating Partnership.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and the Seller agree as follows:
ARTICLE I
PURCHASE OF INTEREST AND EXCHANGE FOR CASH
1.1 Purchase Transaction; Assignment. In exchange for the
consideration set forth in Section 1.2 herein, the receipt and sufficiency of
which is hereby acknowledged, Seller hereby assigns, transfers and conveys to
the Operating Partnership, his entire right, title and interest in and to all
interests directly or indirectly held by him in Smit-Lake, L.L.C., TERCO Realty,
L.L.C. and Smit-Warner, L.L.C. (collectively, the "RETAIL LLCS") and TERCO
Partners I, L.L.C. (the "COMMERCIAL LLC" and together with the Retail LLCs, the
"LLCS"), or in their respective properties, Lakeside Plaza, Mountainside Plaza
and Warner Ranch Plaza (collectively, the "RETAIL INTERESTS") and Maitland West
(the "COMMERCIAL INTEREST" and together with the Retail Interests, the
"INTERESTS"), including, without limitation, all rights to receive distributions
of money, profits and other assets from or relating to the LLCs, presently
existing or hereafter
<PAGE> 5
arising or accruing, TO HAVE AND TO HOLD the same unto the Operating
Partnership, its successors and assigns, forever. The Seller represents and
warrants that he has not transferred, sold, pledged or hypothecated, or
otherwise disposed of or encumbered, the Interests. The Seller hereby releases
the LLCs and their respective members (but only in their capacity as members of
the LLCs and in connection with the LLCs) from any and all liabilities or
obligations now or hereafter owing to the Seller, arising out of and pursuant to
the Operating Agreements of the LLCs (each, an "OPERATING AGREEMENT" and,
collectively, the "OPERATING AGREEMENTS"). The Operating Partnership hereby
assumes all obligations in respect of the Interests. Upon the execution and
delivery of this Purchase Agreement, the Seller withdraws from the LLCs for all
purposes. The parties shall take such additional actions and execute such
additional documentation as may be required in order to effect the transactions
contemplated hereby.
1.2 Consideration. The cash consideration (the "CONSIDERATION") to be
paid to the Seller in respect of the Operating Partnership's purchase of the
Retail Interests shall be $100 and in respect of the Commercial Interest shall
be $352,500.00. The consideration in respect of the Commercial Interest shall be
paid upon the consummation of the IPO (as defined in Section 5.2 herein). The
Consideration shall be paid by bank check or wire transfer as determined by the
Seller.
1.3 Return of Retail Interests to Seller. Upon the consummation of
the IPO and subject to the repayment of notes issued pursuant to the Purchase
Agreement dated as of March 31, 1997, as supplemented by the Purchase Agreement
Supplement, dated May 15, 1997, Purchase Agreement Supplement No. 2, dated as of
May 30, 1997, Purchase Agreement Supplement No. 3, dated as of May 30, 1997,
Purchase Agreement Supplement No. 4, dated as of July 9, 1997, and Purchase
Agreement Supplement No. 5, dated as of July 31, 1997, by and among the Company,
the Operating Partnership and MS Real Estate Special Situations Inc., as same
shall be supplemented and amended from time to time, the Operating Partnership
shall transfer to the Seller all of the Operating Partnership's legal and
beneficial right, title and interest in and to the Retail Interests held by the
Operating Partnership, as transferred to the Operating Partnership pursuant to
this Purchase Agreement, including without limitation, all rights to receive
distributions of money, profits and other assets from or relating to the Retail
LLCs.
ARTICLE II
CLOSING
2.1 Time and Place. The date, time and place of the closing of the
transactions contemplated hereunder (the "CLOSING") shall be the date hereof
(the "CLOSING DATE"), at 10:00 a.m. in the office of Battle Fowler LLP, 75 East
55th Street, New York, New York 10022. The transfers described in Article I of
this Purchase Agreement, and all closing deliveries, shall be deemed concurrent
for all purposes.
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2.2 Closing Deliveries. At the Closing, the parties shall make,
execute, acknowledge and deliver, or cause to be made, executed, acknowledged
and delivered through the Attorney-in-Fact (as designated in Section 5.1 below),
the legal documents and other items (collectively, the "CLOSING DOCUMENTS")
necessary to carry out the intention of this Purchase Agreement, which Closing
Documents and other items shall include, without limitation, the following:
(i) This Purchase Agreement;
(ii) any LLC books and records and securities or
other evidences of ownership held by the Seller; and
(iii) An affidavit from the Seller, stating under
penalty of perjury, the Sellers's United States Taxpayer Identification
Number and that the Seller is not a foreign person pursuant to section
1445(b)(2) of the Internal Revenue Code of 1986, as amended (the
"CODE") and a comparable affidavit satisfying New York and any other
withholding requirements.
2.3 Closing Costs. The Operating Partnership shall pay any documentary
transfer taxes, escrow charges, title charges and recording taxes or fees
incurred in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Seller hereby makes to the Operating Partnership, with respect to the Interests,
each of the representations and warranties set forth in this Article III, which
representations and warranties (unless otherwise noted) are true as of the date
hereof, as a condition to the Operating Partnership's obligation to purchase the
Interests in exchange of payment of the Consideration.
3.1 Title to Interests. (a) The Seller owns beneficially and of
record, free and clear of any claim, lien, pledge (except for pledges relating
to the debt or equity financing of any of the properties held by the LLCs (each,
a "PROPERTY")) or encumbrance arising under the respective Operating Agreements
pursuant to which the Interests were issued (any such pledge, a "PERMITTED
PLEDGE"), voting agreement, option, charge, security interest, mortgage, deed of
trust, encumbrance, right of assignment, purchase right or other rights of any
nature whatsoever (each, an "ENCUMBRANCE"), and has full power and authority to
convey free and clear of any Encumbrances, each such Interest and, upon delivery
of this Purchase Agreement by the Seller conveying each such Interest and
delivery of the Consideration by the Operating Partnership to Seller, the
Operating Partnership will acquire good and valid title thereto, free and clear
of any
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<PAGE> 7
Encumbrance, except Encumbrances created in favor of the Operating Partnership
by the transactions contemplated hereby.
(b) The Interests have been validly issued and the Seller has funded
(or will fund before the same is past due) all capital contributions and
advances to each LLC that are required to be funded or advanced prior to the
date hereof.
(c) There are no agreements, instruments or understandings with
respect to each such Interest, except as set forth in the Operating Agreement.
(d) No Permitted Pledge will be in existence as of the date hereof,
and the Seller shall provide, at the Closing, such documentary evidence of the
release of any Permitted Pledge as the Operating Partnership may reasonably
request.
(e) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Seller may assume that the consents and waivers of
rights set forth in Section 6.9 hereof have been given by all partners of the
Partnership.
3.2 Authority No Conflicts.
(a) Seller has full right, authority, power and capacity:
(i) to execute and deliver this Purchase Agreement, each
Closing Document and each other agreement, document and instrument to
be executed and delivered by or on behalf of Seller pursuant to this
Purchase Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of
Seller's Interests to the Operating Partnership in accordance with
this Purchase Agreement.
(b) This Purchase Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of
Seller pursuant to this Purchase Agreement constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligation of Seller,
each enforceable in accordance with its respective terms.
(c) The execution, delivery and performance of this Purchase
Agreement, the Closing Documents and each other agreement, document and
instrument to be executed and delivered by or on behalf of such Seller:
(i) does not and will not violate any foreign, federal,
state, local or other laws applicable to Seller or require Seller to
obtain any approval, consent or waiver of, or make any filing with,
any person or authority (governmental or otherwise) that has not been
obtained or made and which does not remain in effect; and
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<PAGE> 8
(ii) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of, any indenture, deed
of trust, mortgage, loan or credit agreement or any other agreement,
contract, instrument, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to
which Seller is a party or by which the property of Seller is bound
or affected, or result in the creation of any Encumbrance on any of
the property or assets of each such LLC.
(d) In making the representations set forth in this Section 3.2,
Seller may assume that
(i) the consents and waivers of rights set forth in Section
6.9 hereof, if any, have been given by all members of each LLC, and
(ii) for purposes of making such representation as of the
date hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Seller knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or Seller's ability to consummate
the transactions contemplated hereby.
(b) Seller knows of no outstanding order, writ, injunction or decree
of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of the Interests, which in any such case
would impair Seller's ability to enter into and perform all of its obligations
under this Purchase Agreement.
3.4 No Other Agreements. (a) The Seller has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way Seller's ability
to contribute the Interests to the capital of the Operating Partnership or to
enter into any agreement with respect to any of the Interests.
(b) In making the representations set forth in this Section 3.4, the
Seller may assume that
(i) the consents and waivers of rights set forth in Section
6.9 hereof, if any, have been given by all members of each LLC, and
(ii) for purposes of making such representations as of the
date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Seller has not entered into, and covenants that
it will not enter into, any agreement, arrangement or understanding with any
person or entity which will result in
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<PAGE> 9
the obligation of the Operating Partnership to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
3.6 Covenant to Remedy Breaches. The Seller covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty
of the Seller hereunder,
(b) to satisfy all covenants of the Seller hereunder, and
(c) to promptly clear any breach of a representation,
warranty or covenant of the Seller hereunder upon its learning of
same.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP
As a material inducement to the Seller to enter into this Purchase
Agreement and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Seller each of the representations and
warranties set forth in this Article IV.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Purchase Agreement, each
Closing Document to which it is a party and each other agreement,
document and instrument to be executed and delivered by or on behalf
of it pursuant to this Purchase Agreement; and
(ii) to perform the transactions contemplated hereby and
thereby.
(c) This Purchase Agreement, each Closing Document to which the
Operating Partnership is a party and each agreement, document and instrument
executed and delivered by the Operating Partnership pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Operating Partnership, each enforceable in
accordance with its respective terms.
(d) The execution, delivery and performance of this Purchase
Agreement, each Closing Document to which the Operating Partnership is a party
and each such agreement, document and instrument by the Operating Partnership.
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<PAGE> 10
(i) does not and will not violate the agreement of limited
partnership of the Operating Partnership dated as of March 24, 1997,
as amended (the "OP AGREEMENT");
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of, any indenture, deed
of trust, mortgage, loan or credit agreement, any other material
agreement, contract, instrument, lease, permit or authorization, or
any order, writ, judgment, injunction, decree, determination or
arbitration award to which the Operating Partnership is a party or by
which the property of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that he will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
Seller to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V
POWER OF ATTORNEY
5.1 Grant of Power of Attorney. The Seller does hereby irrevocably
appoint the Operating Partnership (or its designee) and Lawrence Feldman, Robert
Cox and Joseph Kasman, and each of them individually and any successor thereof
from time to time (such Operating Partnership or designee, each such individual
or any such successor of any of them acting in his, her or its capacity as
attorney-in-fact pursuant hereto, the "ATTORNEY-IN-FACT") as the true and lawful
attorney-in-fact and agent of the Seller, to act in the name, place and stead of
the Seller to make, execute, acknowledge and deliver all such other contracts,
orders, other writings (including without limitation the execution of any
Closing Documents or other documents relating to the acquisition by the
Operating Partnership of the Interests), to provide information to the
Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Purchase Agreement, as fully as could the Seller if personally present and
acting. Further, the Seller hereby grants to the Attorney-in-Fact a proxy (the
"PROXY") to vote the Seller's Interests on any matter related to the
Transactions contemplated hereby presented to the members of each such LLC for a
vote, including, but not limited to, the transfer of interests in each such LLC
by the other members.
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<PAGE> 11
Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of the Seller, by operation of law or by the
occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Purchase Agreement, the Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such other act or events had
not occurred and regardless of notice thereof. The Seller agrees that, at the
request of the Operating Partnership, it will promptly execute a separate power
of attorney and proxy on the same terms set forth in this ARTICLE V, such
execution to be witnessed and notarized. The Seller hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.
The Seller acknowledges that the Operating Partnership and each named
individual Attorney-in-Fact has, and any designee or successor thereof acting as
Attorney-in-Fact may have, an economic interest in the transactions contemplated
by this Purchase Agreement.
5.2 Limitation on Liability. It is understood that the
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney or Proxy granted by the Seller hereby. The
Attorney-in-Fact makes no representations with respect to and shall have no
responsibility for the transactions contemplated hereby or the Company's
contemplated initial public offering (the "IPO"), or the acquisition of the
Interest by the Operating Partnership and shall not be liable for any error or
judgment or for any act done or omitted or for any mistake of fact or law except
for its own gross negligence or bad faith. The Seller agrees to indemnify the
Attorney-in-Fact for and to hold the Attorney-in-Fact harmless against any loss,
claim, damage or liability incurred on its part arising out of or in connection
with it acting as the Attorney-in-Fact under the Power of Attorney or Proxy
created by the Seller hereby, as well as the cost and expense of investigating
and defending against any such loss, claim, damage or liability, except to the
extent such loss, claim, damage or liability is due to the gross negligence or
bad faith of the Attorney-in-Fact. The Seller agrees that the Attorney-in-Fact
may consult with counsel of its own choice (who may be counsel for the Operating
Partnership or its successors or affiliates), and it shall have full and
complete authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel. It
is understood that the Attorney-in-Fact may, without breaching any express or
implied obligation to Seller hereunder, release, amend or modify any other power
of attorney or proxy granted by any other person under any related agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Amendment. (a) This Purchase Agreement may only be amended by a
written agreement duly executed by the Seller and the Operating Partnership.
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(b) No waiver of any provisions of this Agreement shall be valid
unless in writing and signed by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Purchase
Agreement
(a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which
will be deemed an original and all of which shall constitute one and
the same instrument, and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York
without giving effect to the conflicts of law provisions thereof.
6.3 Binding Effect. This Purchase Agreement may not be assigned by
the Seller. This Purchase Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and, in the case of the
Operating Partnership, assigns.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Purchase Agreement are included for convenience of reference
only and shall have no effect on the construction or meaning of this Purchase
Agreement.
6.5 Third Party Beneficiary. No provision of this Purchase Agreement
is intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Purchase Agreement shall be enforceable by and shall inure to the
benefit of the persons described therein.
6.6 Severability. (a) If any provision of this Purchase Agreement, or
the application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Purchase Agreement and application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Purchase Agreement with a valid and enforceable provision that
will achieve, to the extent possible, the economic, business and other purposes
of the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
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6.7 Equitable Remedies. (a) The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Purchase
Agreement were not performed in accordance with their specific terms or were
otherwise breached.
(b) It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Purchase Agreement or
otherwise at law or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or
may be given under this Purchase Agreement or by law shall, except as otherwise
provided, be in writing and shall be deemed to have been given
(i) when physically received by personal delivery (which
shall include the confirmed receipt of a telecopied facsimile
transmission),
(ii) three (3) business days after being deposited in the
United States certified or registered mail, return receipt requested,
postage prepaid, or
(iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day
delivery service (such as Federal Express);
addressed and delivered or telecopied in the case of a notice to the Operating
Partnership to the following address and telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212) 768-9010
Telecopy: (212) 768-9479
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with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212) 856-6996
Telecopy: (212) 856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Seller, to the address and telecopy number set forth under the Seller's name on
the signature page hereof.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Seller acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of an additional interest in any LLC) may conflict
with, and may not have been contemplated by, any LLC Agreement or another
agreement among one or more holders of interests in any LLC or one or more of
the members of any such LLC.
(b) The Seller expressly gives all Consents (and any consent
necessary to authorize the proper parties in interest to give all Consents) and
Waivers necessary or desirable to facilitate any Conveyance Action relating to
the LLC (as such terms are defined below).
(c) The Seller further agrees that the Seller will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in any LLC.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Purchase Agreement, except as to
transactions completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any LLC,
(ii) the conveyance or agreement to convey by a member
thereof or by any holder of an indirect interest therein (whether or
not such member or holder is a seller under an agreement containing
terms similar to this Purchase Agreement) of its direct or indirect
interest in the LLC to the Operating Partnership or the Company or to
another person in connection with the formation of the Operating
Partnership or the Company, or
(iii) the entering into by any such member or holder of any
agreement relating to
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<PAGE> 15
(A) the formation of the Operating Partnership or
the Company,
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated
by the prospectus relating to the IPO, or
(iv) the taking by any such member or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken
in furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in the LLC or an undivided
tenant-in-common interest in the Property represented by
such LLC interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in the LLC,
and
(C) the giving of the Consents and Waivers
contained in this Section 6.9 or consents or waivers
similar thereto in form or purpose.
(v) As used herein, the term "CONSENTS" means, with respect
to each LLC, any consent deemed by the Operating Partnership to be
necessary or desirable under the LLC Agreement or any other agreement
among all or any of the holders of interests therein or any other
agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions
relating to each LLC or to amend the Operating Agreement
and/or other agreements so that no provision thereof
prohibits, restricts, impairs or interferes with any
Conveyance Action (such amendment to include, without
limitation, the deletion of provisions which cause a
default under such agreement if interests therein are
transferred for other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above) as a
substitute member of each LLC upon the Operating
Partnership's or any such affiliate's acquisition of a
membership interest therein, respectively, and to adopt
such amendment as is necessary or desirable to effect such
admission,
(C) to adopt any amendment as may be deemed
desirable by the Operating Partnership, either
simultaneously with or immediately prior to the
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<PAGE> 16
acquisition by the Operating Partnership or any such
affiliate of a membership interest in any of the LLC's,
provided, however, that such amendment will not result in
any increased liability on the part of the Seller or under
the Operating Agreement, and
(D) to continue each LLC following the transfer
of interests therein to the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect
to each LLC, the waiving of any and all rights that the Seller may
have with respect to, and (to the extent possible) that any other
person may have with respect to, or that may accrue to the Seller or
other person upon the occurrence of, a Conveyance Action relating to
any of the LLC's, including, but not limited to, the following
rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another member in any of the LLC's, (or the
property interests represented by such membership interest)
or to sell the Seller's or other person's direct or
indirect interest therein to another member,
(D) rights to sell the Seller's or other person's
direct or indirect interest therein at a price other than
as provided herein, or
(E) rights to prohibit, limit, invalidate,
otherwise restrict or impair any such Conveyance Action or
to cause a termination or dissolution of each such LLC
because of such Conveyance Action.
6.10 Releases and Waivers. Each of the releases and waivers
enumerated in this Section 6.10 shall become effective only upon the Closing
pursuant to ARTICLE II.
(a) As of the Closing, the Seller irrevocably waives,
releases and forever discharges the Operating Partnership and the
Operating Partnership's affiliates, partners (including Lawrence H.
Feldman), agents, attorneys, successors and assigns of and from, any
and all charges, complaints, claims, liabilities, damages, actions,
causes of action, losses and costs of any nature whatsoever
(collectively, "SELLER CLAIMS"), known or unknown, suspected or
unsuspected, arising out of or relating to the Operating Agreements,
this Purchase Agreement or any other matter which exists at the
Closing, except for Seller Claims arising from the breach of any
representation, warranty, covenant or obligation under this Purchase
Agreement.
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<PAGE> 17
(b) As of the Closing, the Operating Partnership
irrevocably waives, releases and forever discharges the Seller and
the Seller's agents, attorneys, successors and assigns of and from,
any and all charges, complaints, claims, liabilities, damages,
actions, causes of action losses and costs of any nature whatsoever
(collectively, "OPERATING PARTNERSHIP CLAIMS") known or unknown,
suspected or unsuspected, arising out of or relating to the Operating
Agreements, this Purchase Agreement or any other matter which exists
at the Closing, except for Operating Partnership Claims arising from
the breach of any representation, warranty, covenant or obligation
under this Purchase Agreement.
(c) As of the Closing, the Seller waives and relinquishes
all rights and benefits otherwise afforded to the Seller under the
Operating Agreements including, without limitation, any right to
consent to or approve of the sale or contribution by the other
members of each LLC of their membership interests to the Company or
the Operating Partnership.
6.11 Confidentiality. (a) The Seller shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed a Registration Statement
relating thereto with the Securities and Exchange Commission, and shall not
communicate at any time the terms of this Purchase Agreement to any person other
than counsel or advisors to the Seller who agree to keep such terms confidential
and any lender holding a lien on any Property Interests.
(b) The Seller shall treat all information received from the
Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate the same only to
counsel to the Seller who agree to keep such information confidential.
6.12 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.13 Survival. It is the express intention and agreement of the
parties hereto that the representations, warranties and covenants of the
Operating Partnership and the Seller set forth in this Purchase Agreement shall
survive the consummation of the transactions contemplated hereby.
6.14 Time of the Essence. Time is of the essence with respect to all
obligations of the Seller under this Agreement.
6.15 Termination of Prior Agreement. The parties agree that the
execution and delivery of this Purchase Agreement terminates ab initio the
Purchase Agreement, dated as of July 30, 1997, by and among Lawrence H. Feldman
and Anthony DiLeonardo, and none of the parties hereto or thereto shall have any
rights or obligations under such agreement.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 18
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Purchase Agreement to be duly executed on its behalf,
as of the date first above written.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP,
L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/Lawrence H. Feldman
-----------------------------------
Name: Lawrence H. Feldman
Title: Chairman, President and
Chief Executive Officer
SELLER'S ADDRESS: SELLER:
431 Kirkman Avenue
Elmont, New York 11003 /s/Anthony DiLeonardo
-----------------------------------
Anthony DiLeonardo
<PAGE> 19
SCHEDULE A
SCHEDULE OF INTERESTS
<TABLE>
<CAPTION>
Percentage
Entity Nature of Interest Interest
- ------ ------------------ --------
<S> <C> <C>
Smit-Lake, L.L.C. Membership Interest 2.35%
TERCO Realty, L.L.C. Membership Interest 2.63%
Smit-Warner, L.L.C. Membership Interest 10.00%
TERCO Partners I, L.L.C. Membership Interest 10.00%
</TABLE>
<PAGE> 20
AMENDMENT NO. 1 TO ANTHONY DILEONARDO PURCHASE AGREEMENT
This Amendment No. 1 to the Purchase Agreement (this "AMENDMENT NO.
1"), dated as of the 18th day of September, 1997, is entered into by and among
TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the
"OPERATING PARTNERSHIP"), and Anthony DiLeonardo (the "SELLER").
R E C I T A L S:
WHEREAS, a Purchase Agreement was entered into as of the 31st day of
July, 1997 by and among the Operating Partnership and the Seller (the "PURCHASE
AGREEMENT"); and
WHEREAS, the parties desire to amend certain provisions of the Purchase
Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. The first sentence of Section 1.2 of Article I of the Purchase
Agreement is hereby amended and restated to read in its entirety,
as follows:
"1.2 Consideration. The cash consideration (the
"CONSIDERATION") to be paid to the Seller in respect of the
Operating Partnership's purchase of the Retail Interests shall
be $100 and in respect of the Commercial Interest shall be
$385,532.50; provided, that, if there is a change in (a) the
range of prices for the sale of common stock, par value $.01
per share, of the Company in the IPO (as hereinafter defined)
or (b) the number of OP Units (as such term is defined in the
OP Agreement (as hereinafter defined)) issuable to the
management of the Company, each as set forth in the
preliminary prospectus of the Company, dated September 23,
1997, then the Consideration in respect of the Commercial
Interest shall be modified to an amount determined in good
faith by Lawrence H. Feldman, which determination shall be
binding upon the parties."
2. Except as amended hereby, the Purchase Agreement shall remain in
full force and effect.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 21
[SIGNATURE PAGE TO AMENDMENT NO. 1]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Amendment No.1 to the Purchase Agreement, or caused it to be duly executed on
its behalf, as of the date first above written.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
-------------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board, Chief
Executive Officer and President
SELLER:
/s/ Anthony DiLeonardo
----------------------------------------
Anthony DiLeonardo
<PAGE> 1
Exhibit 10.41
PURCHASE AGREEMENT
BY AND AMONG
TOWER REALTY OPERATING PARTNERSHIP, L.P.
AND
CARMELA CARRANO
Dated as of July 31, 1997
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I PURCHASE OF INTEREST AND EXCHANGE FOR CASH..................................1
1.1 Purchase Transaction; Assignment............................................1
1.2 Consideration...............................................................2
1.3 Return of Retail Interests to Seller........................................2
ARTICLE II CLOSING.....................................................................2
2.1 Time and Place..............................................................2
2.2 Closing Deliveries..........................................................3
2.3 Closing Costs...............................................................3
ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE SELLER...............................................................3
3.1 Title to Interests..........................................................3
3.2 Authority No Conflicts......................................................4
3.3 Litigation..................................................................5
3.4 No Other Agreements.........................................................5
3.5 No Brokers..................................................................5
3.6 Covenant to Remedy Breaches.................................................6
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP................................................6
4.1 Authority...................................................................6
4.2 No Brokers..................................................................7
ARTICLE V POWER OF ATTORNEY...........................................................7
5.1 Grant of Power of Attorney..................................................7
5.2 Limitation on Liability.....................................................8
ARTICLE VI MISCELLANEOUS...............................................................8
6.1 Amendment...................................................................8
6.2 Entire Agreement; Counterparts; Applicable Law..............................9
6.3 Binding Effect..............................................................9
6.4 Titles......................................................................9
6.5 Third Party Beneficiary.....................................................9
6.6 Severability................................................................9
6.7 Equitable Remedies.........................................................10
6.8 Notices; Exercise of Option................................................10
6.9 Waiver of Rights; Consents with Respect to Partnership Interests...........11
6.10 Releases and Waivers.......................................................13
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
6.11 Confidentiality............................................................14
6.12 Computation of Time........................................................14
6.13 Survival...................................................................14
6.14 Time of the Essence........................................................14
6.15 Termination of Prior Agreement.............................................14
</TABLE>
Schedule
A. Schedule of Interests
<PAGE> 4
PURCHASE AGREEMENT
This Purchase Agreement (this "PURCHASE AGREEMENT") dated as of the
31st day of July, 1997 is entered into by and among TOWER REALTY OPERATING
PARTNERSHIP, L.P. a Delaware limited partnership (the "OPERATING PARTNERSHIP"),
and Carmela Carrano (the "SELLER").
R E C I T A L S:
A. The Seller owns the Interests (as defined in Section 1.1 herein) in
the limited liability companies set forth on Schedule A attached hereto.
B. The Operating Partnership desires to acquire, and the Seller desires
to sell, assign, transfer, contribute and convey to the Operating Partnership on
the terms and conditions set forth herein, all of the Seller's right, title and
interest in the Interests to the Operating Partnership in exchange for cash.
C. The Operating Partnership desires to acquire the Interests in
connection with the ongoing formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner as well as a limited
partner of the Operating Partnership.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and the Seller agree as follows:
ARTICLE I
PURCHASE OF INTEREST AND EXCHANGE FOR CASH
1.1 Purchase Transaction; Assignment. In exchange for the consideration
set forth in Section 1.2 herein, the receipt and sufficiency of which is hereby
acknowledged, Seller hereby assigns, transfers and conveys to the Operating
Partnership, her entire right, title and interest in and to all interests
directly or indirectly held by her in Smit-Lake, L.L.C., TERCO Realty, L.L.C.
and Smit-Warner, L.L.C. (collectively, the "RETAIL LLCS") and TERCO Partners I,
L.L.C. (the "COMMERCIAL LLC" and together with the Retail LLCs, the "LLCS"), or
in their respective properties, Lakeside Plaza, Mountainside Plaza and Warner
Ranch Plaza (collectively, the "RETAIL INTERESTS") and Maitland West (the
"COMMERCIAL INTEREST" and together with the Retail Interests, the "INTERESTS"),
including, without limitation, all rights to receive distributions of money,
profits and other assets from or relating to the LLCs, presently existing or
hereafter arising or accruing, TO HAVE AND TO HOLD the same unto the Operating
Partnership, its
<PAGE> 5
successors and assigns, forever. The Seller represents and warrants that she has
not transferred, sold, pledged or hypothecated, or otherwise disposed of or
encumbered, the Interests. The Seller hereby releases the LLCs and their
respective members (but only in their capacity as members of the LLCs and in
connection with the LLCs) from any and all liabilities or obligations now or
hereafter owing to the Seller, arising out of and pursuant to the Operating
Agreements of the LLCs (each, an "OPERATING AGREEMENT" and, collectively, the
"OPERATING AGREEMENTS"). The Operating Partnership hereby assumes all
obligations in respect of the Interests. Upon the execution and delivery of this
Purchase Agreement, the Seller withdraws from the LLCs for all purposes. The
parties shall take such additional actions and execute such additional
documentation as may be required in order to effect the transactions
contemplated hereby.
1.2 Consideration. The cash consideration (the "CONSIDERATION") to be
paid to the Seller in respect of the Operating Partnership's purchase of the
Retail Interests shall be $100 and in respect of the Commercial Interest shall
be $177,000.00. The consideration in respect of the Commercial Interest shall be
paid upon the consummation of the IPO (as defined in Section 5.2 herein). The
Consideration shall be paid by bank check or wire transfer as determined by the
Seller.
1.3 Return of Retail Interests to Seller. Upon the consummation of the
IPO and subject to the repayment of notes issued pursuant to the Purchase
Agreement dated as of March 31, 1997, as supplemented by the Purchase Agreement
Supplement, dated May 15, 1997, Purchase Agreement Supplement No. 2, dated as of
May 30, 1997, Purchase Agreement Supplement No. 3, dated as of May 30, 1997,
Purchase Agreement Supplement No. 4, dated as of July 9, 1997, and Purchase
Agreement Supplement No. 5, dated as of July 31, 1997, by and among the Company,
the Operating Partnership and MS Real Estate Special Situations Inc., as same
shall be supplemented and amended from time to time, the Operating Partnership
shall transfer to the Seller all of the Operating Partnership's legal and
beneficial right, title and interest in and to the Retail Interests held by the
Operating Partnership, as transferred to the Operating Partnership pursuant to
this Purchase Agreement, including without limitation, all rights to receive
distributions of money, profits and other assets from or relating to the Retail
LLCs.
ARTICLE II
CLOSING
2.1 Time and Place. The date, time and place of the closing of the
transactions contemplated hereunder (the "CLOSING") shall be the date hereof
(the "CLOSING DATE"), at 10:00 a.m. in the office of Battle Fowler LLP, 75 East
55th Street, New York, New York 10022. The transfers described in Article I of
this Purchase Agreement, and all closing deliveries, shall be deemed concurrent
for all purposes.
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<PAGE> 6
2.2 Closing Deliveries. At the Closing, the parties shall make,
execute, acknowledge and deliver, or cause to be made, executed, acknowledged
and delivered through the Attorney-in-Fact (as designated in Section 5.1 below),
the legal documents and other items (collectively, the "CLOSING DOCUMENTS")
necessary to carry out the intention of this Purchase Agreement, which Closing
Documents and other items shall include, without limitation, the following:
(i) This Purchase Agreement;
(ii) any LLC books and records and securities or
other evidences of ownership held by the Seller; and
(iii) An affidavit from the Seller, stating under
penalty of perjury, the Sellers's United States Taxpayer Identification
Number and that the Seller is not a foreign person pursuant to section
1445(b)(2) of the Internal Revenue Code of 1986, as amended (the
"CODE") and a comparable affidavit satisfying New York and any other
withholding requirements.
2.3 Closing Costs. The Operating Partnership shall pay any documentary
transfer taxes, escrow charges, title charges and recording taxes or fees
incurred in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Seller hereby makes to the Operating Partnership, with respect to the Interests,
each of the representations and warranties set forth in this Article III, which
representations and warranties (unless otherwise noted) are true as of the date
hereof, as a condition to the Operating Partnership's obligation to purchase the
Interests in exchange of payment of the Consideration.
3.1 Title to Interests. (a) The Seller owns beneficially and of record,
free and clear of any claim, lien, pledge (except for pledges relating to the
debt or equity financing of any of the properties held by the LLCs (each, a
"PROPERTY")) or encumbrance arising under the respective Operating Agreements
pursuant to which the Interests were issued (any such pledge, a "PERMITTED
PLEDGE"), voting agreement, option, charge, security interest, mortgage, deed of
trust, encumbrance, right of assignment, purchase right or other rights of any
nature whatsoever (each, an "ENCUMBRANCE"), and has full power and authority to
convey free and clear of any Encumbrances, each such Interest and, upon delivery
of this Purchase Agreement by the Seller conveying each such Interest and
delivery of the Consideration by the Operating Partnership to Seller, the
Operating Partnership will acquire good and valid title thereto, free and clear
of any
-3-
<PAGE> 7
Encumbrance, except Encumbrances created in favor of the Operating Partnership
by the transactions contemplated hereby.
(b) The Interests have been validly issued and the Seller has funded
(or will fund before the same is past due) all capital contributions and
advances to each LLC that are required to be funded or advanced prior to the
date hereof.
(c) There are no agreements, instruments or understandings with respect
to each such Interest, except as set forth in the Operating Agreement.
(d) No Permitted Pledge will be in existence as of the date hereof, and
the Seller shall provide, at the Closing, such documentary evidence of the
release of any Permitted Pledge as the Operating Partnership may reasonably
request.
(e) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Seller may assume that the consents and waivers of
rights set forth in Section 6.9 hereof have been given by all partners of the
Partnership.
3.2 Authority No Conflicts.
(a) Seller has full right, authority, power and capacity:
(i) to execute and deliver this Purchase Agreement, each
Closing Document and each other agreement, document and instrument to
be executed and delivered by or on behalf of Seller pursuant to this
Purchase Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of Seller's
Interests to the Operating Partnership in accordance with this Purchase
Agreement.
(b) This Purchase Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of
Seller pursuant to this Purchase Agreement constitutes, or when executed and
delivered will constitute, the legal, valid and binding obligation of Seller,
each enforceable in accordance with its respective terms.
(c) The execution, delivery and performance of this Purchase Agreement,
the Closing Documents and each other agreement, document and instrument to be
executed and delivered by or on behalf of such Seller:
(i) does not and will not violate any foreign, federal, state,
local or other laws applicable to Seller or require Seller to obtain
any approval, consent or waiver of, or make any filing with, any person
or authority (governmental or otherwise) that has not been obtained or
made and which does not remain in effect; and
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<PAGE> 8
(ii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which Seller
is a party or by which the property of Seller is bound or affected, or
result in the creation of any Encumbrance on any of the property or
assets of each such LLC.
(d) In making the representations set forth in this Section 3.2, Seller
may assume that
(i) the consents and waivers of rights set forth in Section
6.9 hereof, if any, have been given by all members of each LLC, and
(ii) for purposes of making such representation as of the date
hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Seller knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or Seller's ability to consummate
the transactions contemplated hereby.
(b) Seller knows of no outstanding order, writ, injunction or decree of
any court, government, governmental entity or authority or arbitration against
or affecting all or any portion of the Interests, which in any such case would
impair Seller's ability to enter into and perform all of its obligations under
this Purchase Agreement.
3.4 No Other Agreements. (a) The Seller has made no agreement with, and
will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way Seller's ability
to contribute the Interests to the capital of the Operating Partnership or to
enter into any agreement with respect to any of the Interests.
(b) In making the representations set forth in this Section 3.4, the
Seller may assume that
(i) the consents and waivers of rights set forth in Section
6.9 hereof, if any, have been given by all members of each LLC, and
(ii) for purposes of making such representations as of the
date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Seller has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in
-5-
<PAGE> 9
the obligation of the Operating Partnership to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
3.6 Covenant to Remedy Breaches. The Seller covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of
the Seller hereunder,
(b) to satisfy all covenants of the Seller hereunder, and
(c) to promptly clear any breach of a representation, warranty
or covenant of the Seller hereunder upon its learning of same.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP
As a material inducement to the Seller to enter into this Purchase
Agreement and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Seller each of the representations and
warranties set forth in this Article IV.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Purchase Agreement, each
Closing Document to which it is a party and each other agreement,
document and instrument to be executed and delivered by or on behalf of
it pursuant to this Purchase Agreement; and
(ii) to perform the transactions contemplated hereby and
thereby.
(c) This Purchase Agreement, each Closing Document to which the
Operating Partnership is a party and each agreement, document and instrument
executed and delivered by the Operating Partnership pursuant to this Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Operating Partnership, each enforceable in
accordance with its respective terms.
(d) The execution, delivery and performance of this Purchase Agreement,
each Closing Document to which the Operating Partnership is a party and each
such agreement, document and instrument by the Operating Partnership.
-6-
<PAGE> 10
(i) does not and will not violate the agreement of limited
partnership of the Operating Partnership dated as of March 24, 1997, as
amended (the "OP AGREEMENT");
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that he will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
Seller to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V
POWER OF ATTORNEY
5.1 Grant of Power of Attorney. The Seller does hereby irrevocably
appoint the Operating Partnership (or its designee) and Lawrence Feldman, Robert
Cox and Joseph Kasman, and each of them individually and any successor thereof
from time to time (such Operating Partnership or designee, each such individual
or any such successor of any of them acting in his, her or its capacity as
attorney-in-fact pursuant hereto, the "ATTORNEY-IN-FACT") as the true and lawful
attorney-in-fact and agent of the Seller, to act in the name, place and stead of
the Seller to make, execute, acknowledge and deliver all such other contracts,
orders, other writings (including without limitation the execution of any
Closing Documents or other documents relating to the acquisition by the
Operating Partnership of the Interests), to provide information to the
Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Purchase Agreement, as fully as could the Seller if personally present and
acting. Further, the Seller hereby grants to the Attorney-in-Fact a proxy (the
"PROXY") to vote the Seller's Interests on any matter related to the
Transactions contemplated hereby presented to the members of each
such LLC for a vote, including, but not limited to, the transfer of interests in
each such LLC by the other members.
-7-
<PAGE> 11
Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of the Seller, by operation of law or by the
occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Purchase Agreement, the Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such other act or events had
not occurred and regardless of notice thereof. The Seller agrees that, at the
request of the Operating Partnership, it will promptly execute a separate power
of attorney and proxy on the same terms set forth in this ARTICLE V, such
execution to be witnessed and notarized. The Seller hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.
The Seller acknowledges that the Operating Partnership and each named
individual Attorney-in-Fact has, and any designee or successor thereof acting as
Attorney-in-Fact may have, an economic interest in the transactions contemplated
by this Purchase Agreement.
5.2 Limitation on Liability. It is understood that the Attorney-in-Fact
assumes no responsibility or liability to any person by virtue of the Power of
Attorney or Proxy granted by the Seller hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
transactions contemplated hereby or the Company's contemplated initial public
offering (the "IPO"), or the acquisition of the Interest by the Operating
Partnership and shall not be liable for any error or judgment or for any act
done or omitted or for any mistake of fact or law except for its own gross
negligence or bad faith. The Seller agrees to indemnify the Attorney-in-Fact for
and to hold the Attorney-in-Fact harmless against any loss, claim, damage or
liability incurred on its part arising out of or in connection with it acting as
the Attorney-in-Fact under the Power of Attorney or Proxy created by the Seller
hereby, as well as the cost and expense of investigating and defending against
any such loss, claim, damage or liability, except to the extent such loss,
claim, damage or liability is due to the gross negligence or bad faith of the
Attorney-in-Fact. The Seller agrees that the Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership or
its successors or affiliates), and it shall have full and complete authorization
and protection for any action taken or suffered by it hereunder in good faith
and in accordance with the opinion of such counsel. It is understood that the
Attorney-in-Fact may, without breaching any express or implied obligation to
Seller hereunder, release, amend or modify any other power of attorney or proxy
granted by any other person under any related agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Amendment. (a) This Purchase Agreement may only be amended by a
written agreement duly executed by the Seller and the Operating Partnership.
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<PAGE> 12
(b) No waiver of any provisions of this Agreement shall be valid unless
in writing and signed by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Purchase
Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which
will be deemed an original and all of which shall constitute one and
the same instrument, and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without
giving effect to the conflicts of law provisions thereof.
6.3 Binding Effect. This Purchase Agreement may not be assigned by the
Seller. This Purchase Agreement shall be binding upon, and shall be enforceable
by and inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and, in the case of the Operating Partnership,
assigns.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Purchase Agreement are included for convenience of reference
only and shall have no effect on the construction or meaning of this Purchase
Agreement.
6.5 Third Party Beneficiary. No provision of this Purchase Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Purchase Agreement shall be enforceable by and shall inure to the
benefit of the persons described therein.
6.6 Severability. (a) If any provision of this Purchase Agreement, or
the application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Purchase Agreement and application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Purchase Agreement with a valid and enforceable provision that
will achieve, to the extent possible, the economic, business and other purposes
of the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
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<PAGE> 13
6.7 Equitable Remedies. (a) The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Purchase
Agreement were not performed in accordance with their specific terms or were
otherwise breached.
(b) It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Purchase Agreement or
otherwise at law or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Purchase Agreement or by law shall, except as otherwise
provided, be in writing and shall be deemed to have been given
(i) when physically received by personal delivery (which shall
include the confirmed receipt of a telecopied facsimile transmission),
(ii) three (3) business days after being deposited in the
United States certified or registered mail, return receipt requested,
postage prepaid, or
(iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day
delivery service (such as Federal Express);
addressed and delivered or telecopied in the case of a notice to the Operating
Partnership to the following address and telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212) 768-9010
Telecopy: (212) 768-9479
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<PAGE> 14
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212) 856-6996
Telecopy: (212) 856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Seller, to the address and telecopy number set forth under the Seller's name on
the signature page hereof.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Seller acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of an additional interest in any LLC) may conflict
with, and may not have been contemplated by, any LLC Agreement or another
agreement among one or more holders of interests in any LLC or one or more of
the members of any such LLC.
(b) The Seller expressly gives all Consents (and any consent necessary
to authorize the proper parties in interest to give all Consents) and Waivers
necessary or desirable to facilitate any Conveyance Action relating to the LLC
(as such terms are defined below).
(c) The Seller further agrees that the Seller will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in any LLC.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Purchase Agreement, except as to
transactions completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any LLC,
(ii) the conveyance or agreement to convey by a member thereof
or by any holder of an indirect interest therein (whether or not such
member or holder is a seller under an agreement containing terms
similar to this Purchase Agreement) of its direct or indirect interest
in the LLC to the Operating Partnership or the Company or to another
person in connection with the formation of the Operating Partnership or
the Company, or
(iii) the entering into by any such member or holder of any
agreement relating to
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<PAGE> 15
(A) the formation of the Operating Partnership or the
Company,
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the prospectus relating to the IPO, or
(iv) the taking by any such member or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in the LLC or an undivided
tenant-in-common interest in the Property represented by such
LLC interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in the LLC,
and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
(v) As used herein, the term "CONSENTS" means, with respect to
each LLC, any consent deemed by the Operating Partnership to be
necessary or desirable under the LLC Agreement or any other agreement
among all or any of the holders of interests therein or any other
agreement relating thereto or referred to therein
(A) to permit any and all Conveyance Actions relating
to each LLC or to amend the Operating Agreement and/or other
agreements so that no provision thereof prohibits, restricts,
impairs or interferes with any Conveyance Action (such
amendment to include, without limitation, the deletion of
provisions which cause a default under such agreement if
interests therein are transferred for other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
member of each LLC upon the Operating Partnership's or any
such affiliate's acquisition of a membership interest therein,
respectively, and to adopt such amendment as is necessary or
desirable to effect such admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the
-12-
<PAGE> 16
acquisition by the Operating Partnership or any such affiliate
of a membership interest in any of the LLC's, provided,
however, that such amendment will not result in any increased
liability on the part of the Seller or under the Operating
Agreement, and
(D) to continue each LLC following the transfer of
interests therein to the Operating Partnership (or the Company
or any affiliate of the Operating Partnership or the Company
in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
each LLC, the waiving of any and all rights that the Seller may have
with respect to, and (to the extent possible) that any other person may
have with respect to, or that may accrue to the Seller or other person
upon the occurrence of, a Conveyance Action relating to any of the
LLC's, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another member in any of the LLC's, (or the
property interests represented by such membership interest) or
to sell the Seller's or other person's direct or indirect
interest therein to another member,
(D) rights to sell the Seller's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of each such LLC because of such
Conveyance Action.
6.10 Releases and Waivers. Each of the releases and waivers enumerated
in this Section 6.10 shall become effective only upon the Closing pursuant to
ARTICLE II.
(a) As of the Closing, the Seller irrevocably waives, releases
and forever discharges the Operating Partnership and the Operating
Partnership's affiliates, partners (including Lawrence H. Feldman),
agents, attorneys, successors and assigns of and from, any and all
charges, complaints, claims, liabilities, damages, actions, causes of
action, losses and costs of any nature whatsoever (collectively,
"SELLER CLAIMS"), known or unknown, suspected or unsuspected, arising
out of or relating to the Operating Agreements, this Purchase Agreement
or any other matter which exists at the Closing, except for Seller
Claims arising from the breach of any representation, warranty,
covenant or obligation under this Purchase Agreement.
-13-
<PAGE> 17
(b) As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Seller and the Seller's
agents, attorneys, successors and assigns of and from, any and all
charges, complaints, claims, liabilities, damages, actions, causes of
action losses and costs of any nature whatsoever (collectively,
"OPERATING PARTNERSHIP CLAIMS") known or unknown, suspected or
unsuspected, arising out of or relating to the Operating Agreements,
this Purchase Agreement or any other matter which exists at the
Closing, except for Operating Partnership Claims arising from the
breach of any representation, warranty, covenant or obligation under
this Purchase Agreement.
(c) As of the Closing, the Seller waives and relinquishes all
rights and benefits otherwise afforded to the Seller under the
Operating Agreements including, without limitation, any right to
consent to or approve of the sale or contribution by the other members
of each LLC of their membership interests to the Company or the
Operating Partnership.
6.11 Confidentiality. (a) The Seller shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed a Registration Statement
relating thereto with the Securities and Exchange Commission, and shall not
communicate at any time the terms of this Purchase Agreement to any person other
than counsel or advisors to the Seller who agree to keep such terms confidential
and any lender holding a lien on any Property Interests.
(b) The Seller shall treat all information received from the Operating
Partnership or its counsel or advisors pertaining to the Operating Partnership
or the Company confidential and shall disseminate the same only to counsel to
the Seller who agree to keep such information confidential.
6.12 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.13 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Operating
Partnership and the Seller set forth in this Purchase Agreement shall survive
the consummation of the transactions contemplated hereby.
6.14 Time of the Essence. Time is of the essence with respect to all
obligations of the Seller under this Agreement.
6.15 Termination of Prior Agreement. The parties agree that the
execution and delivery of this Purchase Agreement terminates ab initio the
Purchase Agreement, dated as of July 30, 1997, by and among Lawrence H. Feldman
and Carmela Carrano, and none of the parties hereto or thereto shall have any
rights or obligations under such agreement.
[SIGNATURE PAGE FOLLOWS]
-14-
<PAGE> 18
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Purchase Agreement to be duly executed on its behalf,
as of the date first above written.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP,
L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/Lawrence H. Feldman
-------------------------------
Name: Lawrence H. Feldman
Title: Chairman, President and
Chief Executive Officer
SELLER'S ADDRESS: SELLER:
16 Westway
Clinton, New Jersey 08809 /s/ Carmela Carrano
---------------------------------
Carmela Carrano
<PAGE> 19
SCHEDULE A
SCHEDULE OF INTERESTS
<TABLE>
<CAPTION>
Percentage
Entity Nature of Interest Interest
- ------ ------------------ --------
<S> <C> <C>
Smit-Lake, L.L.C. Membership Interest 1.18%
TERCO Realty, L.L.C. Membership Interest 1.18%
Smit-Warner, L.L.C. Membership Interest 5.90%
TERCO Partners I, L.L.C. Membership Interest 5.90%
</TABLE>
<PAGE> 20
AMENDMENT NO. 1 TO CARMELA CARRANO PURCHASE AGREEMENT
This Amendment No. 1 to the Purchase Agreement (this "AMENDMENT NO.
1"), dated as of the __ day of September, 1997, is entered into by and among
TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the
"OPERATING PARTNERSHIP"), and Carmela Carrano (the "SELLER").
R E C I T A L S:
WHEREAS, a Purchase Agreement was entered into as of the 31st day of
July, 1997 by and among the Operating Partnership and the Seller (the "PURCHASE
AGREEMENT"); and
WHEREAS, the parties desire to amend certain provisions of the Purchase
Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. The first sentence of Section 1.2 of Article I of the Purchase
Agreement is hereby amended and restated to read in its entirety,
as follows:
"1.2 Consideration. The cash consideration (the
"CONSIDERATION") to be paid to the Seller in respect of the
Operating Partnership's purchase of the Retail Interests shall
be $100 and in respect of the Commercial Interest shall be
$192,716.50; provided, that, if there is a change in (a) the
range of prices for the sale of common stock, par value $.01
per share, of the Company in the IPO (as hereinafter defined)
or (b) the number of OP Units (as such term is defined in the
OP Agreement (as hereinafter defined)) issuable to the
management of the Company, each as set forth in the
preliminary prospectus of the Company, dated September 23,
1997, then the Consideration in respect of the Commercial
Interest shall be modified to an amount determined in good
faith by Lawrence H. Feldman, which determination shall be
binding upon the parties."
2. Except as amended hereby, the Purchase Agreement shall remain in
full force and effect.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 21
[SIGNATURE PAGE TO AMENDMENT NO. 1]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Amendment No.1 to the Purchase Agreement, or caused it to be duly executed on
its behalf, as of the date first above written.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
-------------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board, Chief
Executive Officer and President
SELLER:
/s/ Carmela Carrano
----------------------------------------
Carmela Carrano
<PAGE> 1
EXHIBIT 10.42
CONTRIBUTION AGREEMENT
by and between
RICHARD WISELY
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of July 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS ............................................................. -1-
1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP
UNITS........................................................... -2-
1.1 CONTRIBUTION TRANSACTION................................. -2-
1.2 ISSUANCE OF OP UNITS..................................... -3-
1.3 ADJUSTED CONSIDERATION................................... -3-
1.4 AUTHORIZATION............................................ -3-
1.5 CONTRIBUTION OF CERTAIN RIGHTS........................... -3-
1.6 PRORATIONS............................................... -3-
1.7 TREATMENT AS CONTRIBUTION................................ -4-
2. CLOSING......................................................... -4-
2.1 CONDITIONS PRECEDENT..................................... -4-
2.2 TIME AND PLACE........................................... -5-
2.3 CLOSING DELIVERIES....................................... -6-
2.4 CLOSING COSTS............................................ -6-
3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES..................... -7-
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP.............................................. -7-
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR............ -7-
3.3 INDEMNIFICATION.......................................... -7-
4. COVENANTS....................................................... -8-
4.1 COVENANTS OF CONTRIBUTOR................................. -8-
5. RELEASES AND WAIVERS............................................ -8-
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP................. -9-
5.2 GENERAL RELEASE OF CONTRIBUTOR........................... -9-
5.3 INTENTIONALLY OMITTED.................................... -9-
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT............. -9-
6. POWER OF ATTORNEY............................................... -9-
6.1 GRANT OF POWER OF ATTORNEY............................... -9-
6.2 LIMITATION ON LIABILITY.................................. -10-
7. MISCELLANEOUS................................................... -11-
7.1 FURTHER ASSURANCES....................................... -11-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
7.2 COUNTERPARTS............................................. -11-
7.3 GOVERNING LAW............................................ -11-
7.4 NOTICES.................................................. -11-
</TABLE>
EXHIBIT LIST
<TABLE>
<CAPTION>
SECTION FIRST
EXHIBITS REFERENCED
- -------- ----------
<S> <C>
A Constituent Interests of Contributor's Partnership Interest..... Recital D
B Contribution and Assumption Agreement........................... 1.1
C Form of Quitclaim............................................... 1.1
D Calculation of Number of OP Units............................... 1.2
E Representations, Warranties and Indemnities of Contributor...... 3.2
Attachment 1.................................................... Exchange Rights Agreement
Attachment 2.................................................... Registration Rights Agreement
Attachment 3.................................................... Lock-Up Agreements
Attachment 4.................................................... List of Portfolio Agreements
</TABLE>
-ii-
<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"Contribution Agreement") is made and entered into as of July 31, 1997 by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), and Richard Wisely, an individual (the
"Contributor").
RECITALS
A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office properties (the "Participating Properties") owned or managed
by Tower Equities & Realty Corp. or its affiliates through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively,
the "Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").
B. The Formation Transactions relate to the proposed initial public
offering (the "Public Offering") of the common stock, par value $.01 per share
(the "Common Stock") of Tower Realty Trust, Inc., a Maryland corporation (the
"Company"), which will operate as a self-administered and self-managed real
estate investment trust ("REIT") and will be the sole general partner of the
Operating Partnership.
C. The owners of the Property Interests and the partners and members of
the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "Cash Participants") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP Participants").
D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT A (the "Partnerships") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT A (the "Property" or the
"Properties"). As used herein, "Partnership Agreement" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.
E. The Contributor has previously contributed certain interests in the
Partnerships to the Operating Partnership in exchange for OP Units (as defined
below).
F. The Contributor desires to, and the Operating Partnership desires
the Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, as a
<PAGE> 5
partner (or member) of the Partnerships, including, without limitation, all of
its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in the Partnerships (such right, title and interest are hereinafter
collectively referred to as the "Partnership Interest"), in exchange for
partnership units in the Operating Partnership (the "OP Units"), on the terms
and subject to the conditions set forth herein.
G. The Operating Partnership desires to make, and the Contributor
desires to receive, a return of certain contributions previously made by the
Contributor to the Operating Partnership that relate to direct or indirect
interests in certain limited partnerships, limited liability companies and
certain other entities that do not relate to the Consolidation (the "Excluded
Interests").
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR
OP UNITS
1.1 CONTRIBUTION TRANSACTION
(a) At the Closing (as defined in ARTICLE 2.2 hereof) and
subject to the terms and conditions contained in this Contribution Agreement,
the Contributor shall transfer to the Operating Partnership, absolutely and
unconditionally, all of its Partnership Interest (as such term is defined in
Recital F herein) not previously contributed to the Operating Partnership. The
contribution of the Contributor's Partnership Interest shall be evidenced by a
"Contribution and Assumption Agreement" for each of the Partnerships in
substantially the form of EXHIBIT B attached hereto. Furthermore, the
Contributor shall execute and have duly acknowledged an individual quitclaim
deed for each property in the form of EXHIBIT C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the Agreement
of Limited Partnership of the Operating Partnership (the "OP Agreement") in
order to effect the transactions contemplated hereby.
(b) At the Closing, and subject to the terms and conditions
set forth in this Contribution Agreement, the Operating Partnership shall
transfer to the Contributor, absolutely and unconditionally, all of the Excluded
Interests (as such term is defined in Recital G herein) previously contributed
by the Contributor to the Operating Partnership.
-2-
<PAGE> 6
1.2 ISSUANCE OF OP UNITS
The Operating Partnership shall, in exchange for the
Partnership Interest and after taking into account the transfer of the Excluded
Interests to the Contributor, increase or decrease the number of OP Units issued
to the Contributor in accordance with EXHIBIT D hereto. The increase or decrease
of OP Units Issued to the Contributor shall be evidenced by either an amendment
(the "Amendment") to the OP Agreement or by certificates relating to such units
(the "Certificates") in either case, as shall be acceptable to the Contributor.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the OP
Agreement in order to effect the transactions contemplated hereby.
1.3 ADJUSTED CONSIDERATION
The Operating Partnership reserves the right not to acquire
any particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the number of OP Units to be received by the Contributor pursuant to this
Contribution Agreement may be reduced by an amount determined by Lawrence H.
Feldman, in his sole discretion, to reflect the reduction in total value of the
Partnership Interest ultimately contributed by the Contributor.
1.4 AUTHORIZATION
Contributor hereby authorizes Lawrence H. Feldman to make any
and all determinations to be made by him pursuant to ARTICLE 1.3 hereof, and any
and all such determinations shall be final and binding on all parties.
1.5 CONTRIBUTION OF CERTAIN RIGHTS
Effective upon the Closing, the Contributor hereby contributes
to the Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.
1.6 PRORATIONS
At the Closing, or as promptly as practicable following the
Closing, to the extent such matters are not the right or responsibility of all
tenants of a given Property, all revenue and all charges that are customarily
prorated in transactions of this nature, including accrued rent currently due
and payable, overpaid taxes or fees, real and personal property taxes, common
area maintenance charges and other similar periodic charges payable or
-3-
<PAGE> 7
receivable with respect to such Property shall be ratably prorated between the
partners of the Partnership which holds such Property prior to the Closing and
the Operating Partnership on and after the Closing, effective as of the Closing.
After providing for such prorations, (i) if any of the Partnerships has a
resultant cash surplus, the value of the Contributor's Partnership Interest
shall be increased in proportion to Contributor's ratable share of such cash
surplus and additional OP Units (based on the Mid-Point (as such term is defined
in Exhibit D attached hereto) of the proposed offering prices per share set
forth in the final preliminary prospectus relating to the offering of shares of
Common Stock ) shall be issued to the Contributor as a valuation adjustment to
the consideration to be received by the Contributor pursuant to this
Contribution Agreement, and (ii) if any of the Partnerships has a resultant cash
deficit, the value of the Contributor's Partnership Interest shall be reduced in
proportion to Contributor's ratable share of such cash deficit, and fewer OP
Units shall be issued to the Contributor as a valuation adjustment to the
consideration to be received by the Contributor pursuant to this Contribution
Agreement, unless such deficit is cured prior to the Closing.
1.7 TREATMENT AS CONTRIBUTION
The transfer, assignment and exchange of interests effectuated
with respect to the Operating Partnership, pursuant to this Contribution
Agreement, shall constitute a "Capital Contribution" pursuant to Article IV of
the OP Agreement and is intended to be governed by Section 721(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2. CLOSING
2.1 CONDITIONS PRECEDENT
The effectiveness of the Company's registration statement
filed with the Securities and Exchange Commission on Form S-11 (the
"Registration Statement") is a condition precedent to the obligations of all
parties to this Contribution Agreement to effect the transactions contemplated
by this Contribution Agreement on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and correct in all
material respects on the date such representations and warranties were made, and
shall be true and correct in all material respects on the Closing Date as if
made at and as of such date;
(b) Each of the obligations of the Contributor to be performed
by it shall have been duly performed by it on or before the Closing Date;
-4-
<PAGE> 8
(c) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents required to be
delivered pursuant to ARTICLE 2.3 hereof;
(d) The Contributor shall have obtained all necessary consents
or approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
or regulatory authority or instrumentality that prohibits the consummation of
the transactions contemplated hereby, and no litigation or governmental
proceeding seeking such an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof and
the Closing Date any material adverse change in any of the Partnerships'
businesses;
(h) All existing management agreements with respect to the
Properties shall have been contributed to the Operating Partnership prior to or
simultaneously with the Closing; and
(i) All management functions with respect to the Properties
presently conducted by Tower Equities & Realty Corp. and its affiliates shall be
assumed by the Operating Partnership or Tower Equities Management, Inc.
2.2 TIME AND PLACE
The date, time and place of the transactions contemplated
hereunder shall be the day the Operating Partnership receives the proceeds from
the Public Offering from the underwriter(s), at 10:00 a.m. in the office of
Battle Fowler LLP, 75 East 55th Street, New York, New York 10022 (the "Closing"
or "Closing Date"). The transfers described in ARTICLE 1.1 of this Contribution
Agreement, and all closing deliveries, and the consummation of the Public
Offering, shall be deemed concurrent for all purposes.
-5-
<PAGE> 9
2.3 CLOSING DELIVERIES
At the Closing, the parties shall make, execute, acknowledge
and deliver, or cause to be made, executed, acknowledged and delivered through
the Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other
items (collectively, the "Closing Documents") necessary to carry out the
intention of this Contribution Agreement, which Closing Documents and other
items shall include, without limitation, the following:
(i) A Contribution and Assumption Agreement for each
Partnership;
(ii) An individual quitclaim deed for each Property,
fully executed and duly acknowledged from each of the individual
constituent partners and/or members of the Contributor, as required by
the Operating Partnership;
(iii) The Amendment or the Certificates evidencing
the transfer of OP Units to the Contributor;
(iv) American Land Title Assurances ("ALTA") policies
of title insurance with appropriate endorsements and levels of
reinsurance for the Properties issued as of the Closing Date or
endorsements or other assurances that the existing policy or policies
of title insurance are sufficient for purposes of this Contribution
Agreement, which the Contributor shall cause the title company to issue
to the Operating Partnership in a form acceptable to the Operating
Partnership (the "Title Policies") including satisfaction by the
Contributor of any and all title company requirements applicable to it;
(v) The Partnerships' books and records and
securities or other evidences of ownership held by the Contributor; and
(vi) An affidavit from the Contributor stating, under
penalty of perjury, the Contributor's United States Taxpayer
Identification Number and that the Contributor is not a foreign person
pursuant to section 1445(b)(2) of the Code and a comparable affidavit
satisfying California and any other withholding requirements.
(vii) The Exchange Rights Agreement, the Registration
Rights Agreement and the Lock-Up Agreements substantially in the form
attached hereto as ATTACHMENTS 1, 2, and 3, respectively.
-6-
<PAGE> 10
2.4 CLOSING COSTS
The Operating Partnership shall pay any documentary transfer
taxes, escrow charges, title charges and recording taxes or fees incurred in
connection with the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP
The Operating Partnership hereby represents and warrants to
and covenants with the Contributor that:
(a) Organization; Authority. The Operating Partnership has
been duly formed and is validly existing with requisite power to enter this
Contribution Agreement and all agreements contemplated hereby. The persons and
entities executing this Contribution Agreement and all agreements contemplated
hereby on behalf of the Operating Partnership have the power and authority to
enter into this Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and performance
by the Operating Partnership of its obligations under this Contribution
Agreement and all agreements contemplated hereby will not contravene any
provision of applicable law, the OP Agreement, charter, declaration of trust or
other constituent document of the Operating Partnership, or any agreement or
other instrument binding upon the Operating Partnership or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over the
Operating Partnership, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Operating Partnership of its obligations under this
Contribution Agreement and all other agreements contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
The Contributor represents and warrants to and covenants with
the Operating Partnership as provided in EXHIBIT E attached hereto, and
acknowledges and agrees to be bound by the indemnification provisions contained
therein.
3.3 INDEMNIFICATION
The Operating Partnership shall indemnify and hold harmless
the Contributor (the "Indemnified Contributor Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable
-7-
<PAGE> 11
attorneys' fees, costs of investigation and remediation, costs of investigative
judicial or administrative proceedings or appeals therefrom and costs of
attachment or similar bonds (collectively, "Losses") asserted against, imposed
upon or incurred by the Indemnified Contributor Party in connection with: (i)
any breach of a representation or warranty of the Operating Partnership
contained in this Contribution Agreement; and (ii) all fees, costs and expenses
of the Operating Partnership in connection with the transactions contemplated by
this Contribution Agreement, including, without limitation, any and all costs
associated with the transfers contemplated herein.
ARTICLE 4. COVENANTS
4.1 Covenants of Contributor
(a) From the date hereof through the Closing, the Contributor
shall not:
(i) Sell or transfer all or any portion of the
Partnership Interest; or
(ii) Mortgage, pledge or encumber (or permit to
become encumbered) all or any portion of the Partnership Interest.
(b) From the date hereof through the Closing, the Contributor
shall permit each of the Partnerships to conduct its business in the ordinary
course, consistent with past practice, and shall not permit any of the
Partnerships to:
(i) Enter into any material transaction not in the
ordinary course of business;
(ii) Sell or transfer any assets of the Partnerships;
(iii) Mortgage, pledge or encumber (or permit to
become encumbered) any assets of the Partnerships, except (x) liens for
taxes not due, (y) purchase money security interests and (z) mechanics'
liens being disputed by any of the Partnerships in good faith and by
appropriate proceedings;
(iv) Amend, modify or terminate any material
agreements or other instruments to which any of the Partnerships is a
party; or
(v) Materially alter the manner of keeping the
Partnerships' books, accounts or records or the accounting practices
therein reflected.
(c) The Contributor shall use its good faith diligent efforts
to obtain any approvals, waivers or other consents of third parties required to
effect the transactions contemplated by this Contribution Agreement.
-8-
<PAGE> 12
ARTICLE 5. RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this ARTICLE 5
shall become effective only upon the Closing of the contribution and exchange of
the Partnership Interest pursuant to ARTICLES 1 and 2 hereof.
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP
As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the Operating
Partnership's affiliates, partners (including Lawrence H. Feldman), agents,
attorneys, successors and assigns of and from any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "Contributor Claims"), known or unknown,
suspected or unsuspected, arising out of or relating to any of the Partnership
Agreements, this Contribution Agreement or any other matter which exists at the
Closing, except for Contributor Claims arising from the breach of any
representation, warranty, covenant or obligation under this Contribution
Agreement.
5.2 GENERAL RELEASE OF CONTRIBUTOR
As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and Contributor's
agents, attorneys, successors and assigns of and from any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses and
costs of any nature whatsoever (collectively, "Operating Partnership Claims"),
known or unknown, suspected or unsuspected, arising out of or relating to any of
the Partnership Agreements, this Contribution Agreement or any other matter
which exists at the Closing, except for Operating Partnership Claims arising
from the breach of any representation, warranty, covenant or obligation under
this Contribution Agreement or any supplemental representations and warranties
agreement entered into as of the Closing Date by and among the Contributor,
certain other continuing investors in the Operating Partnership and the
Operating Partnership.
5.3 INTENTIONALLY OMITTED
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT
As of the Closing, the Contributor waives and relinquishes all
rights and benefits otherwise afforded to Contributor under the Partnership
Agreements including, without limitation, any right to consent to or approve of
the sale or contribution by the other partners (or members) of the Partnerships
of their partnership interests to the Company or the Operating Partnership.
-9-
<PAGE> 13
ARTICLE 6. POWER OF ATTORNEY
6.1 GRANT OF POWER OF ATTORNEY
Contributor does hereby irrevocably appoint the Operating
Partnership (or its designee) and each of them individually and any successor
thereof from time to time (such Operating Partnership or designee or any such
successor of any of them acting in his, her or its capacity as attorney-in-fact
pursuant hereto, the "Attorney-in-Fact") as the true and lawful attorney-in-fact
and agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including, without limitation, the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney-in-Fact a proxy (the
"Proxy") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.
Each of the Power of Attorney and Proxy and all authority
granted hereby shall be coupled with an interest and therefore shall be
irrevocable and shall not be terminated by any act of Contributor, by operation
of law or by the occurrence of any other event or events, and if any other such
act or events shall occur before the completion of the transactions contemplated
by this Contribution Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such other act
or events had not occurred and regardless of notice thereof. Contributor agrees
that, at the request of the Operating Partnership, it will promptly execute a
separate power of attorney and proxy on the same terms set forth in this ARTICLE
6, such execution to be witnessed and notarized. Contributor hereby authorizes
the reliance of third parties on each of the Power of Attorney and Proxy.
Contributor acknowledges that the Operating Partnership has,
and any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
-10-
<PAGE> 14
6.2 LIMITATION ON LIABILITY
It is understood that the Attorney-in-Fact assumes no
responsibility or liability to any person by virtue of the Power of Attorney or
Proxy granted by Contributor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
Formation Transactions or the Public Offering, or the acquisition of the
Partnership Interest by the Operating Partnership and shall not be liable for
any error or judgment or for any act done or omitted or for any mistake of fact
or law except for its own gross negligence or bad faith. Contributor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney or Proxy created by Contributor hereby, as well as the cost and expense
of investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is due to
the gross negligence or bad faith of the Attorney-in-Fact. Contributor agrees
that the Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to Contributor hereunder, release, amend or
modify any other power of attorney or proxy granted by any other person under
any related agreement.
ARTICLE 7. MISCELLANEOUS
7.1 FURTHER ASSURANCES.
The Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
7.2 COUNTERPARTS
This Contribution Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.3 GOVERNING LAW
This Contribution Agreement shall be governed by the internal
laws of the State of New York, without regard to the conflicts of laws
provisions thereof.
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<PAGE> 15
7.4 NOTICES
Any notice to be given hereunder by any party to the other
shall be given in writing by personal delivery or by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed
communicated as of the date of personal delivery (including delivery by
overnight courier). Mailed notices shall be addressed as set forth below, but
any party may change the address set forth below by written notice to other
parties in accordance with this paragraph.
To the Contributor:
Richard Wisely
c/o Feldman Equities
120 West 45th Street
New York, NY 10022
To the Operating Partnership:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, NY 10022
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<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this
Contribution Agreement as of the date first written above.
OPERATING PARTNERSHIP:
Tower Realty Operating Partnership, L.P.
By: Tower Realty Trust, Inc.
By: /s/ Lawrence H. Feldman
--------------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board, Chief
Executive Officer and President
CONTRIBUTOR:
/s/ Richard Wisely
-----------------------------------------
Richard Wisely
<PAGE> 17
EXHIBIT A
CONSTITUENT INTERESTS OF
RICHARD WISELY'S (THE "CONTRIBUTOR") PARTNERSHIP INTEREST
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PARTNERSHIPS IN WHICH CONTRIBUTOR PARTNERSHIPS IN WHICH CONTRIBUTOR PROPERTIES HELD BY THE PARTNERSHIPS
HOLDS A DIRECT INTEREST* HOLDS AN INDIRECT INTEREST
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2800 Company, L.L.C. 2800 Associates, L.P. 2800 North Central
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------
* Corporations owned by Richard Wisely that hold interests in any of the
Properties shall contribute the partnership interests held by such
corporations to the Operating Partnership.
A-1
<PAGE> 18
EXHIBIT B
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby assigns,
transfers, contributes and conveys to Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), its entire legal
and beneficial right, title and interest in and to ____________________________,
a __________________________ (the "Partnership"), including, without limitation,
all right, title and interest, if any, of the undersigned in and to the assets
of the Partnership and the right to receive distributions of money, profits and
other assets from the Partnership, presently existing or hereafter at any time
arising or accruing (such right, title and interest are hereinafter collectively
referred to as the "Partnership Interest"), TO HAVE AND TO HOLD the same unto
the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating
Partnership assumes all obligations in respect of the Partnership Interest.
The Partnership owns certain real property as described in
Attachment 1 attached hereto.
Executed: 8-1, 1997
By:
-------------------------------------
Richard Wisely
B-1
<PAGE> 19
EXHIBIT C
FORM OF QUITCLAIM
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ ................
........... Computed on the consideration
or value of property conveyed;
OR
........... Computed on the consideration
or value less liens or
encumbrances remaining at time
of sale.
---------------------------------------------
Signature of Declarant of Agent determining
tax -- Firm name
- --------------------------------------------------------------------------------
QUITCLAIM DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to
Tower Realty Operating Partnership, L.P., a Delaware limited partnership
the real property in the City of ____________, County of _____________, State of
_____________, described as
Dated _____________ ___________________________________
___________________________________
___________________________________
C-1
<PAGE> 20
STATE OF NEW YORK )
)
COUNTY OF )
On __________________________________________________________________ before me,
_______________________________________________________________________________,
personally appeared ____________________________________________________________
_______________________________________________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature ______________________________ (This area for official notarial seal)
C-2
<PAGE> 21
EXHIBIT D
CALCULATION OF NUMBER OF OP UNITS
The number of OP units to be issued to Contributor shall be
calculated as follows:
$600,000/Mid-Point
For purposes of this Contribution Agreement, the "Mid-Point"
means the median of the proposed per share price range for the Common Stock as
set forth in the Preliminary Prospectus.
D-1
<PAGE> 22
EXHIBIT E
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
OF CONTRIBUTOR
ARTICLE 1. ADDITIONAL DEFINED TERMS
1.1 For purposes of this EXHIBIT E, the following terms have
the meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT E is attached:
ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively, "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.
CONTRIBUTION AGREEMENT: Means the Contribution Agreement to
which this EXHIBIT E is attached.
GOVERNMENTAL ENTITY: Means any government or agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
INDEMNIFYING PARTY: Means any party required to indemnify any
other party under ARTICLE 3.2 of this EXHIBIT E or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.
KNOWLEDGE: Means, with respect to any representation or
warranty so indicated, the actual knowledge, upon reasonable investigation and
inquiry in good faith, of the signatory to the Contribution Agreement.
LIENS: Means, with respect to any real and personal property,
all mortgages, pledges, liens, options, charges, security interests,
restrictions, prior assignments, encumbrances, covenants, encroachments,
assessments, rights of others, licenses, easements, liabilities or claims of any
kind or nature whatsoever, direct or indirect, including, without limitation,
interests in or claims to revenues generated by such property.
E-1
<PAGE> 23
PERMITTED LIENS: Means (a) Liens, or deposits made to secure
the release of such Liens, securing taxes, the payment of which is not
delinquent or the payment of which is actively being contested in good faith by
appropriate proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the
districts in which the Properties are located which are not violated by the
existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's
and mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not have a
material adverse effect upon, or materially interfere with the use of, the
Properties; and
(e) any exceptions contained in the Title Policies.
PERSON: Means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
PORTFOLIO AGREEMENTS: Means the agreements, including the
Contribution Agreement, listed on ATTACHMENT 1 hereto, which contemplate the
transfer of partnership and/or limited liability company membership interests in
certain of the Participating Partnerships and LLCs from any entity directly or
indirectly owned by Contributor to the Company and the Operating Partnership.
PROSPECTUS: Means the Company's Form S-11 Registration
Statement.
REIT STOCK: Shall have the meaning set forth in the OP
Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
The Contributor represents and warrants to the Operating
Partnership as set forth below in this ARTICLE 2. Notwithstanding any other
provision of the Contribution Agreement or this EXHIBIT E, the Contributor makes
representations, warranties and indemnities only with respect to: (i) the
Properties identified on EXHIBIT A to the Contribution Agreement (the "Property"
or the "Properties"), and (ii) the interests in the Partnerships to be
transferred by the Contributor.
E-2
<PAGE> 24
2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and (B)
has all requisite power and authority to own, lease or operate its property and
to carry on its business as presently conducted and, to the extent required
under applicable law, is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
2.2 DUE AUTHORIZATION. The execution, delivery and performance
of the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered by
or on behalf of the Contributor pursuant to this Contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.
2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is
the sole owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.
2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes
all of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of all
security interests, mortgages, pledges, liens, encumbrances, claims and equities
to the Operating Partnership.
E-3
<PAGE> 25
2.6 NO VIOLATION. None of the execution, delivery or
performance of the Contribution Agreement and the transactions contemplated
hereby does or will, with or without the giving of notice, lapse of time, or
both, (i) violate, conflict with, result in a breach of, or constitute a default
under or give to others any right of termination or cancellation of (A) the
organizational documents, including the charters and bylaws, if any, of the
Contributor, (B) any material agreement, document or instrument to which the
Contributor is a party or by which the Contributor or its Property is bound or
(C) any term or provision of any judgment, order, writ, injunction, or decree of
any governmental or regulatory authority binding on the Contributor or by which
the Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.
2.7 NON-FOREIGN STATUS. The Contributor is not a foreign
person, foreign corporation, foreign partnership, foreign trust or foreign
estate (as defined in the Code), and is, therefore, not subject to the
provisions of the Code relating to the withholding of sales proceeds to foreign
persons.
2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions. If Contributor fails to provide
such certificates or affidavits, the Operating Partnership may withhold a
portion of any payments otherwise to be made to the Contributor as required by
the Code or New York law.
2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her
or its understanding that the offering and sale of the OP Units to be acquired
pursuant to the Contribution Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Act"). In furtherance thereof, the
Contributor represents and warrants to the Company as follows:
2.9.1 INVESTMENT. The Contributor is acquiring the OP
Units solely for his, her or its own account for the purpose of investment and
not as a nominee or agent for any other person and not with a view to, or for
offer or sale in connection with, any distribution of any thereof. The
Contributor agrees and acknowledges that he, she or it will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (hereinafter, "Transfer") any of the OP Units unless (i) the Transfer
is pursuant to an effective registration statement under the Act and
qualification or other compliance under applicable blue sky or state securities
laws, or (ii) counsel for the Contributor (which counsel shall be reasonably
acceptable to the Operating Partnership) shall have furnished the Operating
Partnership with an opinion, reasonably satisfactory in form and substance to
the Operating Partnership to the effect that no such registration is required
because of the availability of an exemption from registration under the Act and
qualification or other compliance under applicable blue sky or state securities
laws.
E-4
<PAGE> 26
2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the Contributor
has previously invested in securities similar to the OP Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Contribution Agreement. The Contributor is able to bear
the economic risk of holding the OP Units for an indefinite period and is able
to afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.
2.9.3 HOLDING PERIOD. The Contributor acknowledges
that he, she or it has been advised that (i) the OP Units and the common stock
of the Company into which the OP Units may be exchanged in certain circumstances
(the "Common Stock") must be held indefinitely, and the Contributor must
continue to bear the economic risk of the investment in the OP Units (and any
Common Stock that might be exchanged therefor) unless they are subsequently
registered under the Act or an exemption from such registration is available,
(ii) a restrictive legend in the form hereafter set forth shall be placed on the
certificates representing the OP Units (and any Common Stock that might be
exchanged therefor), and (iii) a notation shall be made in the appropriate
records of the Operating Partnership (and the Company) indicating that the OP
Units (and any Common Stock that might be exchanged therefor) are subject to
restrictions on transfer.
2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is defined
in Rule 501(a) of Regulation D under the Act) and as such:
(i) is a director or executive officer of
the Company; or
(ii) has an individual net worth, or joint
net worth with his or her spouse, in excess of $1,000,000; or
(iii) had an individual annual adjusted
gross income in excess of $200,000 in each of the two most recent years
and reasonably expects to have annual adjusted gross income in excess
of $200,000 in the current year; or
E-5
<PAGE> 27
(iv) had a joint income with his spouse in
excess of $300,000 in each of the two most recent years and reasonably
expects to have an annual adjusted gross income, with his spouse, in
excess of $300,000 in the current year.
If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).
2.9.5 LEGENDING. Each certificate representing the OP
Units (and any Common Stock that might be exchanged therefor) shall bear the
following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY
E-6
<PAGE> 28
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH
A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION.
2.10 LITIGATION. There are no Claims which could reasonably be
anticipated to result in damages in excess of $50,000 pending or, to Knowledge,
threatened that directly or indirectly affect the Contributor, the Partnerships,
the Properties or the Formation Transactions, nor has any such claim been
pending or, to Knowledge, threatened as of the Closing.
2.11 NO BROKERS. Neither the Contributor nor any of its
respective officers, directors or employees has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in the obligation of the Operating Partnership or any of its affiliates to pay
any finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.
2.12 SOLVENCY. The Contributor has been and will be solvent at
all times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.
E-7
<PAGE> 29
2.13 NO MISREPRESENTATIONS. No representation, warranty or
statement made, or information provided, by the Contributor in the Contribution
Agreement or in any other document or instrument furnished or to be furnished by
or on behalf of the Contributor pursuant hereto or as contemplated hereby (i)
contains or will contain any untrue statement of a material fact or (ii) omits
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. For purposes of the preceding sentence,
materiality shall be determined with reference to the total portfolio of real
properties and other interests to be transferred pursuant to the Operating
Partnership pursuant to the Formation Transactions.
ARTICLE 3. INDEMNIFICATION
3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR
BREACH.
(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT E or in any Schedule or certificate delivered pursuant
hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the
Contribution Agreement or this EXHIBIT E, no party hereto shall be liable under
this EXHIBIT E or the Contribution Agreement for monetary damages (or otherwise)
for breach of any of its representations and warranties contained in this
EXHIBIT E or the Contribution Agreement, or in any Schedule, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this ARTICLE 3.
3.2 GENERAL INDEMNIFICATION
(a) The Contributor shall indemnify and hold harmless the
Operating Partnership, the Company, and their affiliates and each of their
respective directors, officers, employees, agents, representatives and
affiliates (each of which is an "Indemnified Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation, costs of investigative, judicial or administrative proceedings or
appeals therefrom, and costs of attachment or similar bonds (collectively,
"Losses"), asserted against, imposed upon or incurred by the Indemnified Party
in connection with or as a result of any breach of a representation or warranty
of the Contributor contained in the Contribution Agreement or in any Schedule,
certificate or affidavit delivered by the Contributor pursuant to the
Contribution Agreement.
E-8
<PAGE> 30
(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributor in
connection with the transactions contemplated by the Contribution
Agreement;
(ii) any liabilities or obligations incurred, arising
from or out of, in connection with or as a result of the failure of the
Contributor to obtain all consents required to consummate the
transactions contemplated by the Contribution Agreement; or
(iii) any breach of any representation, warranty or
covenant set forth in the Contribution Agreement.
3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy
its obligations hereunder by the prompt delivery (paid promptly as and when
expenses are incurred) to an Indemnified Party of OP Units, subject to the
limits on ownership and transfer of REIT Stock set forth in the Company's
articles of incorporation. Any OP Units delivered to an Indemnified Party
hereunder shall be valued based upon the initial public offering price of the
Company's Common Stock.
3.4 NOTICE AND DEFENSE BY CLAIMS. As soon as reasonably
practicable after receipt by the Indemnified Party of notice of any liability or
claim incurred by or asserted against the Indemnified Party that is subject to
indemnification under this ARTICLE 3, the Indemnified Party shall give notice
thereof to the Contributor. The Indemnified Party may at its option demand
indemnity under this ARTICLE 3 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not frivolous
and that the Indemnified Party may be liable for, or otherwise incur, a Loss as
a result thereof and shall give notice of such determination to the Contributor.
The Indemnified Party shall permit the Contributor, at its option and expense,
to assume the defense of any such claim by counsel selected by the Contributor
and reasonably satisfactory to the Indemnified Party, and to settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that the Indemnified Party may at all
times participate in such defense at its expense; and PROVIDED FURTHER, HOWEVER,
that the Contributor shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party in its sole and absolute
discretion, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnified Party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall have
the right to
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<PAGE> 31
undertake the defense, compromise or settlement of such liability or claim on
behalf of and for the account of the Contributor.
3.5 LIMITATIONS ON INDEMNIFICATION UNDER ARTICLE 3.
Notwithstanding anything contained herein to the contrary, the Contributor shall
not be liable or obligated to make payments under this ARTICLE 3 with respect to
any Property or Partnership Interest to the extent such payments in the
aggregate would exceed the value of the OP Units (based upon the initial public
offering price of the Common Stock) received by the Contributor at the Closing.
Notwithstanding anything contained herein to the contrary, the Indemnified
Parties shall look first to the Contributor's OP Units for indemnification under
this ARTICLE 3 and then to the Contributor's other assets.
3.6 LIMITATION PERIOD.
(a) Notwithstanding the foregoing, any claim for
indemnification under ARTICLE 3.2 hereof must be asserted in writing by the
Indemnified Party, stating the nature of the Losses and the basis for
indemnification therefor within one year after the Closing.
(b) If so asserted in writing prior to the applicable
expiration date, such claims for indemnification shall survive until resolved by
mutual agreement between the Contributor and the Indemnified Party or by
judicial determination. Any claim for indemnification not so asserted in writing
prior to the applicable expiration date shall not thereafter be asserted and
shall forever be waived.
3.7 RESERVATION OF CONTRIBUTOR RIGHTS. Notwithstanding
anything else in this Contribution Agreement to the contrary, the Contributor
reserves unto itself all rights and remedies (including rights to seek
contribution) against any third party indemnitors, prior property owners or
occupants, and contributors to any contamination, for which the Partnerships
have been indemnified by the Contributor hereunder. To the extent the
Contributor's rights against any such third party owners, occupants, indemnitors
or contributors may be materially prejudiced by actions or inactions by any
owner or occupant of the Properties after the Closing, the Contributor's
indemnity obligation shall be reduced in accordance with the effect of the
actions or inactions which so prejudiced the Contributor's rights.
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<PAGE> 1
EXHIBIT 10.43
- --------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
by and between
LAWRENCE STEIN
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of July 31, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
RECITALS ............................................................... -1-
1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP
UNITS.......................................................... -2-
1.1 CONTRIBUTION TRANSACTION.............................. -2-
1.2 ISSUANCE OF OP UNITS.................................. -3-
1.3 ADJUSTED CONSIDERATION................................ -3-
1.4 AUTHORIZATION......................................... -3-
1.5 CONTRIBUTION OF CERTAIN RIGHTS........................ -3-
1.6 PRORATIONS............................................ -3-
1.7 TREATMENT AS CONTRIBUTION............................. -4-
2. CLOSING........................................................ -4-
2.1 CONDITIONS PRECEDENT.................................. -4-
2.2 TIME AND PLACE........................................ -5-
2.3 CLOSING DELIVERIES.................................... -6-
2.4 CLOSING COSTS......................................... -6-
3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES.................... -7-
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP........................................... -7-
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR......... -7-
3.3 INDEMNIFICATION....................................... -7-
4. COVENANTS...................................................... -8-
4.1 COVENANTS OF CONTRIBUTOR.............................. -8-
5. RELEASES AND WAIVERS........................................... -8-
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP.............. -9-
5.2 GENERAL RELEASE OF CONTRIBUTOR........................ -9-
5.3 INTENTIONALLY OMITTED................................. -9-
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT.......... -9-
6. POWER OF ATTORNEY.............................................. -9-
6.1 GRANT OF POWER OF ATTORNEY............................ -9-
6.2 LIMITATION ON LIABILITY............................... -10-
7. MISCELLANEOUS.................................................. -11-
7.1 FURTHER ASSURANCES.................................... -11-
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<PAGE> 3
7.2 COUNTERPARTS.......................................... -11-
7.3 GOVERNING LAW......................................... -11-
7.4 NOTICES............................................... -11-
EXHIBIT LIST
SECTION FIRST
EXHIBITS REFERENCED
-------------
A Constituent Interests of Contributor's Partnership Interest.......Recital D
B Contribution and Assumption Agreement...................................1.1
C Form of Quitclaim.......................................................1.1
D Calculation of Number of OP Units.......................................1.2
E Representations, Warranties and Indemnities of Contributor..............3.2
Attachment 1......................................Exchange Rights Agreement
Attachment 2..................................Registration Rights Agreement
Attachment 3.............................................Lock-Up Agreements
Attachment 4...................................List of Portfolio Agreements
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<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"Contribution Agreement") is made and entered into as of July 31, 1997 by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), and Lawrence Stein, an individual (the
"Contributor").
RECITALS
A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office properties (the "Participating Properties") owned or managed
by Tower Equities & Realty Corp. or its affiliates through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively,
the "Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").
B. The Formation Transactions relate to the proposed initial public
offering (the "Public Offering") of the common stock, par value $.01 per share
(the "Common Stock") of Tower Realty Trust, Inc., a Maryland corporation (the
"Company"), which will operate as a self-administered and self-managed real
estate investment trust ("REIT") and will be the sole general partner of the
Operating Partnership.
C. The owners of the Property Interests and the partners and members of
the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "Cash Participants") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP Participants").
D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT A (the "Partnerships") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT A (the "Property" or the
"Properties"). As used herein, "Partnership Agreement" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.
E. The Contributor has previously contributed certain interests in the
Partnerships to the Operating Partnership in exchange for OP Units (as defined
below).
F. The Contributor desires to, and the Operating Partnership desires
the Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, as a
<PAGE> 5
partner (or member) of the Partnerships, including, without limitation, all of
its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in the Partnerships (such right, title and interest are hereinafter
collectively referred to as the "Partnership Interest"), in exchange for
partnership units in the Operating Partnership (the "OP Units"), on the terms
and subject to the conditions set forth herein.
G. The Operating Partnership desires to make, and the Contributor
desires to receive, a return of certain contributions previously made by the
Contributor to the Operating Partnership that relate to direct or indirect
interests in certain limited partnerships, limited liability companies and
certain other entities that do not relate to the Consolidation (the "Excluded
Interests").
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR
OP UNITS
1.1 CONTRIBUTION TRANSACTION
(a) At the Closing (as defined in ARTICLE 2.2 hereof) and
subject to the terms and conditions contained in this Contribution Agreement,
the Contributor shall transfer to the Operating Partnership, absolutely and
unconditionally, all of its Partnership Interest (as such term is defined in
Recital F herein) not previously contributed to the Operating Partnership. The
contribution of the Contributor's Partnership Interest shall be evidenced by a
"Contribution and Assumption Agreement" for each of the Partnerships in
substantially the form of EXHIBIT B attached hereto. Furthermore, the
Contributor shall execute and have duly acknowledged an individual quitclaim
deed for each property in the form of EXHIBIT C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the Agreement
of Limited Partnership of the Operating Partnership (the "OP Agreement") in
order to effect the transactions contemplated hereby.
(b) At the Closing, and subject to the terms and conditions
set forth in this Contribution Agreement, the Operating Partnership shall
transfer to the Contributor, absolutely and unconditionally, all of the Excluded
Interests (as such term is defined in Recital G herein) previously contributed
by the Contributor to the Operating Partnership.
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<PAGE> 6
1.2 ISSUANCE OF OP UNITS
The Operating Partnership shall, in exchange for the
Partnership Interest and after taking into account the transfer of the Excluded
Interests to the Contributor, increase or decrease the number of OP Units issued
to the Contributor in accordance with EXHIBIT D hereto. The increase or decrease
of OP Units Issued to the Contributor shall be evidenced by either an amendment
(the "Amendment") to the OP Agreement or by certificates relating to such units
(the "Certificates") in either case, as shall be acceptable to the Contributor.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the OP
Agreement in order to effect the transactions contemplated hereby.
1.3 ADJUSTED CONSIDERATION
The Operating Partnership reserves the right not to acquire
any particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the number of OP Units to be received by the Contributor pursuant to this
Contribution Agreement may be reduced by an amount determined by Lawrence H.
Feldman, in his sole discretion, to reflect the reduction in total value of the
Partnership Interest ultimately contributed by the Contributor.
1.4 AUTHORIZATION
Contributor hereby authorizes Lawrence H. Feldman to make any
and all determinations to be made by him pursuant to ARTICLE 1.3 hereof, and any
and all such determinations shall be final and binding on all parties.
1.5 CONTRIBUTION OF CERTAIN RIGHTS
Effective upon the Closing, the Contributor hereby contributes
to the Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.
1.6 PRORATIONS
At the Closing, or as promptly as practicable following the
Closing, to the extent such matters are not the right or responsibility of all
tenants of a given Property, all revenue and all charges that are customarily
prorated in transactions of this nature, including accrued rent currently due
and payable, overpaid taxes or fees, real and personal property taxes, common
area maintenance charges and other similar periodic charges payable or
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<PAGE> 7
receivable with respect to such Property shall be ratably prorated between the
partners of the Partnership which holds such Property prior to the Closing and
the Operating Partnership on and after the Closing, effective as of the Closing.
After providing for such prorations, (i) if any of the Partnerships has a
resultant cash surplus, the value of the Contributor's Partnership Interest
shall be increased in proportion to Contributor's ratable share of such cash
surplus and additional OP Units (based on the Mid-Point (as such term is defined
in Exhibit D attached hereto) of the proposed offering prices per share set
forth in the final preliminary prospectus relating to the offering of shares of
Common Stock ) shall be issued to the Contributor as a valuation adjustment to
the consideration to be received by the Contributor pursuant to this
Contribution Agreement, and (ii) if any of the Partnerships has a resultant cash
deficit, the value of the Contributor's Partnership Interest shall be reduced in
proportion to Contributor's ratable share of such cash deficit, and fewer OP
Units shall be issued to the Contributor as a valuation adjustment to the
consideration to be received by the Contributor pursuant to this Contribution
Agreement, unless such deficit is cured prior to the Closing.
1.7 TREATMENT AS CONTRIBUTION
The transfer, assignment and exchange of interests effectuated
with respect to the Operating Partnership, pursuant to this Contribution
Agreement, shall constitute a "Capital Contribution" pursuant to Article IV of
the OP Agreement and is intended to be governed by Section 721(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2. CLOSING
2.1 CONDITIONS PRECEDENT
The effectiveness of the Company's registration statement
filed with the Securities and Exchange Commission on Form S-11 (the
"Registration Statement") is a condition precedent to the obligations of all
parties to this Contribution Agreement to effect the transactions contemplated
by this Contribution Agreement on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and correct in all
material respects on the date such representations and warranties were made, and
shall be true and correct in all material respects on the Closing Date as if
made at and as of such date;
(b) Each of the obligations of the Contributor to be performed
by it shall have been duly performed by it on or before the Closing Date;
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<PAGE> 8
(c) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents required to be
delivered pursuant to ARTICLE 2.3 hereof;
(d) The Contributor shall have obtained all necessary consents
or approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
or regulatory authority or instrumentality that prohibits the consummation of
the transactions contemplated hereby, and no litigation or governmental
proceeding seeking such an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof and
the Closing Date any material adverse change in any of the Partnerships'
businesses;
(h) All existing management agreements with respect to the
Properties shall have been contributed to the Operating Partnership prior to or
simultaneously with the Closing; and (i) All management functions with respect
to the Properties presently conducted by Tower Equities & Realty Corp. and its
affiliates shall be assumed by the Operating Partnership or Tower Equities
Management, Inc.
2.2 TIME AND PLACE
The date, time and place of the transactions contemplated
hereunder shall be the day the Operating Partnership receives the proceeds from
the Public Offering from the underwriter(s), at 10:00 a.m. in the office of
Battle Fowler LLP, 75 East 55th Street, New York, New York 10022 (the "Closing"
or "Closing Date"). The transfers described in ARTICLE 1.1 of this Contribution
Agreement, and all closing deliveries, and the consummation of the Public
Offering, shall be deemed concurrent for all purposes.
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<PAGE> 9
2.3 CLOSING DELIVERIES
At the Closing, the parties shall make, execute, acknowledge
and deliver, or cause to be made, executed, acknowledged and delivered through
the Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other
items (collectively, the "Closing Documents") necessary to carry out the
intention of this Contribution Agreement, which Closing Documents and other
items shall include, without limitation, the following:
(i) A Contribution and Assumption Agreement for each
Partnership;
(ii) An individual quitclaim deed for each Property,
fully executed and duly acknowledged from each of the individual
constituent partners and/or members of the Contributor, as required by
the Operating Partnership;
(iii) The Amendment or the Certificates evidencing the
transfer of OP Units to the Contributor;
(iv) American Land Title Assurances ("ALTA") policies of
title insurance with appropriate endorsements and levels of reinsurance
for the Properties issued as of the Closing Date or endorsements or
other assurances that the existing policy or policies of title
insurance are sufficient for purposes of this Contribution Agreement,
which the Contributor shall cause the title company to issue to the
Operating Partnership in a form acceptable to the Operating Partnership
(the "Title Policies") including satisfaction by the Contributor of any
and all title company requirements applicable to it;
(v) The Partnerships' books and records and securities
or other evidences of ownership held by the Contributor; and
(vi) An affidavit from the Contributor stating, under
penalty of perjury, the Contributor's United States Taxpayer
Identification Number and that the Contributor is not a foreign person
pursuant to section 1445(b)(2) of the Code and a comparable affidavit
satisfying California and any other withholding requirements.
(vii) The Exchange Rights Agreement, the Registration
Rights Agreement and the Lock-Up Agreements substantially in the form
attached hereto as ATTACHMENTS 1, 2, and 3, respectively.
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<PAGE> 10
2.4 CLOSING COSTS
The Operating Partnership shall pay any documentary transfer
taxes, escrow charges, title charges and recording taxes or fees incurred in
connection with the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP
The Operating Partnership hereby represents and warrants to
and covenants with the Contributor that:
(a) Organization; Authority. The Operating Partnership has
been duly formed and is validly existing with requisite power to enter this
Contribution Agreement and all agreements contemplated hereby. The persons and
entities executing this Contribution Agreement and all agreements contemplated
hereby on behalf of the Operating Partnership have the power and authority to
enter into this Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and performance
by the Operating Partnership of its obligations under this Contribution
Agreement and all agreements contemplated hereby will not contravene any
provision of applicable law, the OP Agreement, charter, declaration of trust or
other constituent document of the Operating Partnership, or any agreement or
other instrument binding upon the Operating Partnership or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over the
Operating Partnership, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Operating Partnership of its obligations under this
Contribution Agreement and all other agreements contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
The Contributor represents and warrants to and covenants with
the Operating Partnership as provided in EXHIBIT E attached hereto, and
acknowledges and agrees to be bound by the indemnification provisions contained
therein.
3.3 INDEMNIFICATION
The Operating Partnership shall indemnify and hold harmless
the Contributor (the "Indemnified Contributor Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable
-7-
<PAGE> 11
attorneys' fees, costs of investigation and remediation, costs of investigative
judicial or administrative proceedings or appeals therefrom and costs of
attachment or similar bonds (collectively, "Losses") asserted against, imposed
upon or incurred by the Indemnified Contributor Party in connection with: (i)
any breach of a representation or warranty of the Operating Partnership
contained in this Contribution Agreement; and (ii) all fees, costs and expenses
of the Operating Partnership in connection with the transactions contemplated by
this Contribution Agreement, including, without limitation, any and all costs
associated with the transfers contemplated herein.
ARTICLE 4. COVENANTS
4.1 Covenants of Contributor
(a) From the date hereof through the Closing, the Contributor
shall not:
(i) Sell or transfer all or any portion of the
Partnership Interest; or
(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of the Partnership Interest.
(b) From the date hereof through the Closing, the Contributor
shall permit each of the Partnerships to conduct its business in the ordinary
course, consistent with past practice, and shall not permit any of the
Partnerships to:
(i) Enter into any material transaction not in the
ordinary course of business;
(ii) Sell or transfer any assets of the Partnerships;
(iii) Mortgage, pledge or encumber (or permit to become
encumbered) any assets of the Partnerships, except (x) liens for taxes
not due, (y) purchase money security interests and (z) mechanics' liens
being disputed by any of the Partnerships in good faith and by
appropriate proceedings;
(iv) Amend, modify or terminate any material agreements
or other instruments to which any of the Partnerships is a party; or
(v) Materially alter the manner of keeping the
Partnerships' books, accounts or records or the accounting practices
therein reflected.
(c) The Contributor shall use its good faith diligent efforts
to obtain any approvals, waivers or other consents of third parties required to
effect the transactions contemplated by this Contribution Agreement.
-8-
<PAGE> 12
ARTICLE 5. RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this ARTICLE 5
shall become effective only upon the Closing of the contribution and exchange of
the Partnership Interest pursuant to ARTICLES 1 and 2 hereof.
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP
As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the Operating
Partnership's affiliates, partners (including Lawrence H. Feldman), agents,
attorneys, successors and assigns of and from any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "Contributor Claims"), known or unknown,
suspected or unsuspected, arising out of or relating to any of the Partnership
Agreements, this Contribution Agreement or any other matter which exists at the
Closing, except for Contributor Claims arising from the breach of any
representation, warranty, covenant or obligation under this Contribution
Agreement.
5.2 GENERAL RELEASE OF CONTRIBUTOR
As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and Contributor's
agents, attorneys, successors and assigns of and from any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses and
costs of any nature whatsoever (collectively, "Operating Partnership Claims"),
known or unknown, suspected or unsuspected, arising out of or relating to any of
the Partnership Agreements, this Contribution Agreement or any other matter
which exists at the Closing, except for Operating Partnership Claims arising
from the breach of any representation, warranty, covenant or obligation under
this Contribution Agreement or any supplemental representations and warranties
agreement entered into as of the Closing Date by and among the Contributor,
certain other continuing investors in the Operating Partnership and the
Operating Partnership.
5.3 INTENTIONALLY OMITTED
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT
As of the Closing, the Contributor waives and relinquishes all
rights and benefits otherwise afforded to Contributor under the Partnership
Agreements including, without limitation, any right to consent to or approve of
the sale or contribution by the other partners (or members) of the Partnerships
of their partnership interests to the Company or the Operating Partnership.
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<PAGE> 13
ARTICLE 6. POWER OF ATTORNEY
6.1 GRANT OF POWER OF ATTORNEY
Contributor does hereby irrevocably appoint the Operating
Partnership (or its designee) and each of them individually and any successor
thereof from time to time (such Operating Partnership or designee or any such
successor of any of them acting in his, her or its capacity as attorney-in-fact
pursuant hereto, the "Attorney-in-Fact") as the true and lawful attorney-in-fact
and agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including, without limitation, the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney-in-Fact a proxy (the
"Proxy") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.
Each of the Power of Attorney and Proxy and all authority
granted hereby shall be coupled with an interest and therefore shall be
irrevocable and shall not be terminated by any act of Contributor, by operation
of law or by the occurrence of any other event or events, and if any other such
act or events shall occur before the completion of the transactions contemplated
by this Contribution Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such other act
or events had not occurred and regardless of notice thereof. Contributor agrees
that, at the request of the Operating Partnership, it will promptly execute a
separate power of attorney and proxy on the same terms set forth in this ARTICLE
6, such execution to be witnessed and notarized. Contributor hereby authorizes
the reliance of third parties on each of the Power of Attorney and Proxy.
Contributor acknowledges that the Operating Partnership has,
and any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
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<PAGE> 14
6.2 LIMITATION ON LIABILITY
It is understood that the Attorney-in-Fact assumes no
responsibility or liability to any person by virtue of the Power of Attorney or
Proxy granted by Contributor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
Formation Transactions or the Public Offering, or the acquisition of the
Partnership Interest by the Operating Partnership and shall not be liable for
any error or judgment or for any act done or omitted or for any mistake of fact
or law except for its own gross negligence or bad faith. Contributor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney or Proxy created by Contributor hereby, as well as the cost and expense
of investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is due to
the gross negligence or bad faith of the Attorney-in-Fact. Contributor agrees
that the Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to Contributor hereunder, release, amend or
modify any other power of attorney or proxy granted by any other person under
any related agreement.
ARTICLE 7. MISCELLANEOUS
7.1 FURTHER ASSURANCES.
The Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
7.2 COUNTERPARTS
This Contribution Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.3 GOVERNING LAW
This Contribution Agreement shall be governed by the internal
laws of the State of New York, without regard to the conflicts of laws
provisions thereof.
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<PAGE> 15
7.4 NOTICES
Any notice to be given hereunder by any party to the other
shall be given in writing by personal delivery or by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed
communicated as of the date of personal delivery (including delivery by
overnight courier). Mailed notices shall be addressed as set forth below, but
any party may change the address set forth below by written notice to other
parties in accordance with this paragraph.
To the Contributor:
Lawrence Stein
c/o Feldman Equities
120 West 45th Street
New York, NY 10022
To the Operating Partnership:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, NY 10022
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<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this
Contribution Agreement as of the date first written above.
OPERATING PARTNERSHIP:
Tower Realty Operating Partnership, L.P.
By: Tower Realty Trust, Inc.
By: /s/ Lawrence H. Feldman
---------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board, Chief Executive
Officer and President
CONTRIBUTOR:
/s/ Lawrence Stein
-----------------------------------------------------
Lawrence Stein
<PAGE> 17
EXHIBIT A
CONSTITUENT INTERESTS OF
LAWRENCE STEIN'S (THE "CONTRIBUTOR") PARTNERSHIP INTEREST
<TABLE>
<CAPTION>
PARTNERSHIPS IN WHICH CONTRIBUTOR PARTNERSHIPS IN WHICH CONTRIBUTOR PROPERTIES HELD BY THE PARTNERSHIPS
HOLDS A DIRECT INTEREST* HOLDS AN INDIRECT INTEREST
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
5750 Feldstein, Ltd. 5750 Major Blvd.
5750 Associates Limited Partnership
</TABLE>
- -------------------------------
* Corporations owned by Lawrence Stein that hold interests in any of the
Properties shall contribute the partnership interests held by such
corporations to the Operating Partnership.
A-1
<PAGE> 18
EXHIBIT B
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby assigns,
transfers, contributes and conveys to Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), its entire legal
and beneficial right, title and interest in and to __________________________, a
__________________________ (the "Partnership"), including, without limitation,
all right, title and interest, if any, of the undersigned in and to the assets
of the Partnership and the right to receive distributions of money, profits and
other assets from the Partnership, presently existing or hereafter at any time
arising or accruing (such right, title and interest are hereinafter collectively
referred to as the "Partnership Interest"), TO HAVE AND TO HOLD the same unto
the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating
Partnership assumes all obligations in respect of the Partnership Interest.
The Partnership owns certain real property as described in
Attachment 1 attached hereto.
Executed: ___________ ___, 1997
By: __________________________________
Lawrence Stein
B-1
<PAGE> 19
EXHIBIT C
FORM OF QUITCLAIM
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ .....................
...... Computed on the consideration or value of
property conveyed; OR
...... Computed on the consideration or value
less liens or encumbrances remaining at
time of sale.
--------------------------------------------------
Signature of Declarant of Agent determining
tax -- Firm name
- --------------------------------------------------------------------------------
QUITCLAIM DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to
Tower Realty Operating Partnership, L.P., a Delaware limited partnership
the real property in the City of ____________, County of _____________, State of
_____________, described as
Dated _______________ __________________________________
__________________________________
__________________________________
C-1
<PAGE> 20
STATE OF NEW YORK )
)
COUNTY OF )
On __________________________________________________________________ before me,
_______________________________________________________________________________,
personally appeared ____________________________________________________________
_______________________________________________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature _____________________________ (This area for official notarial seal)
C-2
<PAGE> 21
EXHIBIT D
CALCULATION OF NUMBER OF OP UNITS
The number of OP units to be issued to Contributor shall be
calculated as follows:
$318,843/Mid-Point
For purposes of this Contribution Agreement, the "Mid-Point"
means the median of the proposed per share price range for the Common Stock as
set forth in the Preliminary Prospectus.
D-1
<PAGE> 22
EXHIBIT E
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
OF CONTRIBUTOR
ARTICLE 1. ADDITIONAL DEFINED TERMS
1.1 For purposes of this EXHIBIT E, the following terms have
the meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT E is attached:
ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively, "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.
CONTRIBUTION AGREEMENT: Means the Contribution Agreement to
which this EXHIBIT E is attached.
GOVERNMENTAL ENTITY: Means any government or agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
INDEMNIFYING PARTY: Means any party required to indemnify any
other party under ARTICLE 3.2 of this EXHIBIT E or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.
KNOWLEDGE: Means, with respect to any representation or
warranty so indicated, the actual knowledge, upon reasonable investigation and
inquiry in good faith, of the signatory to the Contribution Agreement.
LIENS: Means, with respect to any real and personal property,
all mortgages, pledges, liens, options, charges, security interests,
restrictions, prior assignments, encumbrances, covenants, encroachments,
assessments, rights of others, licenses, easements, liabilities or claims of any
kind or nature whatsoever, direct or indirect, including, without limitation,
interests in or claims to revenues generated by such property.
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<PAGE> 23
PERMITTED LIENS: Means (a) Liens, or deposits made to secure
the release of such Liens, securing taxes, the payment of which is not
delinquent or the payment of which is actively being contested in good faith by
appropriate proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the
districts in which the Properties are located which are not violated by the
existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's
and mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not have a
material adverse effect upon, or materially interfere with the use of, the
Properties; and
(e) any exceptions contained in the Title Policies.
PERSON: Means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
PORTFOLIO AGREEMENTS: Means the agreements, including the
Contribution Agreement, listed on ATTACHMENT 1 hereto, which contemplate the
transfer of partnership and/or limited liability company membership interests in
certain of the Participating Partnerships and LLCs from any entity directly or
indirectly owned by Contributor to the Company and the Operating Partnership.
PROSPECTUS: Means the Company's Form S-11 Registration
Statement.
REIT STOCK: Shall have the meaning set forth in the OP
Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
The Contributor represents and warrants to the Operating
Partnership as set forth below in this ARTICLE 2. Notwithstanding any other
provision of the Contribution Agreement or this EXHIBIT E, the Contributor makes
representations, warranties and indemnities only with respect to: (i) the
Properties identified on EXHIBIT A to the Contribution Agreement (the "Property"
or the "Properties"), and (ii) the interests in the Partnerships to be
transferred by the Contributor.
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<PAGE> 24
2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and (B)
has all requisite power and authority to own, lease or operate its property and
to carry on its business as presently conducted and, to the extent required
under applicable law, is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
2.2 DUE AUTHORIZATION. The execution, delivery and performance
of the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered by
or on behalf of the Contributor pursuant to this Contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.
2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is
the sole owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.
2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes
all of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of all
security interests, mortgages, pledges, liens, encumbrances, claims and equities
to the Operating Partnership.
E-3
<PAGE> 25
2.6 NO VIOLATION. None of the execution, delivery or
performance of the Contribution Agreement and the transactions contemplated
hereby does or will, with or without the giving of notice, lapse of time, or
both, (i) violate, conflict with, result in a breach of, or constitute a default
under or give to others any right of termination or cancellation of (A) the
organizational documents, including the charters and bylaws, if any, of the
Contributor, (B) any material agreement, document or instrument to which the
Contributor is a party or by which the Contributor or its Property is bound or
(C) any term or provision of any judgment, order, writ, injunction, or decree of
any governmental or regulatory authority binding on the Contributor or by which
the Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.
2.7 NON-FOREIGN STATUS. The Contributor is not a foreign
person, foreign corporation, foreign partnership, foreign trust or foreign
estate (as defined in the Code), and is, therefore, not subject to the
provisions of the Code relating to the withholding of sales proceeds to foreign
persons.
2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions. If Contributor fails to provide
such certificates or affidavits, the Operating Partnership may withhold a
portion of any payments otherwise to be made to the Contributor as required by
the Code or New York law.
2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her
or its understanding that the offering and sale of the OP Units to be acquired
pursuant to the Contribution Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Act"). In furtherance thereof, the
Contributor represents and warrants to the Company as follows:
2.9.1 INVESTMENT. The Contributor is acquiring the OP
Units solely for his, her or its own account for the purpose of investment and
not as a nominee or agent for any other person and not with a view to, or for
offer or sale in connection with, any distribution of any thereof. The
Contributor agrees and acknowledges that he, she or it will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (hereinafter, "Transfer") any of the OP Units unless (i) the Transfer
is pursuant to an effective registration statement under the Act and
qualification or other compliance under applicable blue sky or state securities
laws, or (ii) counsel for the Contributor (which counsel shall be reasonably
acceptable to the Operating Partnership) shall have furnished the Operating
Partnership with an opinion, reasonably satisfactory in form and substance to
the Operating Partnership to the effect that no such registration is required
because of the availability of an exemption from registration under the Act and
qualification or other compliance under applicable blue sky or state securities
laws.
E-4
<PAGE> 26
2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the Contributor
has previously invested in securities similar to the OP Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Contribution Agreement. The Contributor is able to bear
the economic risk of holding the OP Units for an indefinite period and is able
to afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.
2.9.3 HOLDING PERIOD. The Contributor acknowledges that
he, she or it has been advised that (i) the OP Units and the common stock of the
Company into which the OP Units may be exchanged in certain circumstances (the
"Common Stock") must be held indefinitely, and the Contributor must continue to
bear the economic risk of the investment in the OP Units (and any Common Stock
that might be exchanged therefor) unless they are subsequently registered under
the Act or an exemption from such registration is available, (ii) a restrictive
legend in the form hereafter set forth shall be placed on the certificates
representing the OP Units (and any Common Stock that might be exchanged
therefor), and (iii) a notation shall be made in the appropriate records of the
Operating Partnership (and the Company) indicating that the OP Units (and any
Common Stock that might be exchanged therefor) are subject to restrictions on
transfer.
2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is defined
in Rule 501(a) of Regulation D under the Act) and as such:
(i) is a director or executive officer of the Company;
or
(ii) has an individual net worth, or joint net worth
with his or her spouse, in excess of $1,000,000; or
(iii) had an individual annual adjusted gross income in
excess of $200,000 in each of the two most recent years and reasonably
expects to have annual adjusted gross income in excess of $200,000 in
the current year; or
E-5
<PAGE> 27
(iv) had a joint income with his spouse in excess of
$300,000 in each of the two most recent years and reasonably expects to
have an annual adjusted gross income, with his spouse, in excess of
$300,000 in the current year.
If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).
2.9.5 LEGENDING. Each certificate representing the OP
Units (and any Common Stock that might be exchanged therefor) shall bear the
following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY
E-6
<PAGE> 28
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH
A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION.
2.10 LITIGATION. There are no Claims which could reasonably be
anticipated to result in damages in excess of $50,000 pending or, to Knowledge,
threatened that directly or indirectly affect the Contributor, the Partnerships,
the Properties or the Formation Transactions, nor has any such claim been
pending or, to Knowledge, threatened as of the Closing.
2.11 NO BROKERS. Neither the Contributor nor any of its
respective officers, directors or employees has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in the obligation of the Operating Partnership or any of its affiliates to pay
any finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.
2.12 SOLVENCY. The Contributor has been and will be solvent at
all times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.
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<PAGE> 29
2.13 NO MISREPRESENTATIONS. No representation, warranty or
statement made, or information provided, by the Contributor in the Contribution
Agreement or in any other document or instrument furnished or to be furnished by
or on behalf of the Contributor pursuant hereto or as contemplated hereby (i)
contains or will contain any untrue statement of a material fact or (ii) omits
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. For purposes of the preceding sentence,
materiality shall be determined with reference to the total portfolio of real
properties and other interests to be transferred pursuant to the Operating
Partnership pursuant to the Formation Transactions.
ARTICLE 3. INDEMNIFICATION
3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR
BREACH.
(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT E or in any Schedule or certificate delivered pursuant
hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the
Contribution Agreement or this EXHIBIT E, no party hereto shall be liable under
this EXHIBIT E or the Contribution Agreement for monetary damages (or otherwise)
for breach of any of its representations and warranties contained in this
EXHIBIT E or the Contribution Agreement, or in any Schedule, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this ARTICLE 3.
3.2 GENERAL INDEMNIFICATION
(a) The Contributor shall indemnify and hold harmless the
Operating Partnership, the Company, and their affiliates and each of their
respective directors, officers, employees, agents, representatives and
affiliates (each of which is an "Indemnified Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation, costs of investigative, judicial or administrative proceedings or
appeals therefrom, and costs of attachment or similar bonds (collectively,
"Losses"), asserted against, imposed upon or incurred by the Indemnified Party
in connection with or as a result of any breach of a representation or warranty
of the Contributor contained in the Contribution Agreement or in any Schedule,
certificate or affidavit delivered by the Contributor pursuant to the
Contribution Agreement.
E-8
<PAGE> 30
(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributor in connection
with the transactions contemplated by the Contribution Agreement;
(ii) any liabilities or obligations incurred, arising from
or out of, in connection with or as a result of the failure of the
Contributor to obtain all consents required to consummate the
transactions contemplated by the Contribution Agreement; or
(iii) any breach of any representation, warranty or
covenant set forth in the Contribution Agreement.
3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy
its obligations hereunder by the prompt delivery (paid promptly as and when
expenses are incurred) to an Indemnified Party of OP Units, subject to the
limits on ownership and transfer of REIT Stock set forth in the Company's
articles of incorporation. Any OP Units delivered to an Indemnified Party
hereunder shall be valued based upon the initial public offering price of the
Company's Common Stock.
3.4 NOTICE AND DEFENSE BY CLAIMS. As soon as reasonably
practicable after receipt by the Indemnified Party of notice of any liability or
claim incurred by or asserted against the Indemnified Party that is subject to
indemnification under this ARTICLE 3, the Indemnified Party shall give notice
thereof to the Contributor. The Indemnified Party may at its option demand
indemnity under this ARTICLE 3 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not frivolous
and that the Indemnified Party may be liable for, or otherwise incur, a Loss as
a result thereof and shall give notice of such determination to the Contributor.
The Indemnified Party shall permit the Contributor, at its option and expense,
to assume the defense of any such claim by counsel selected by the Contributor
and reasonably satisfactory to the Indemnified Party, and to settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that the Indemnified Party may at all
times participate in such defense at its expense; and PROVIDED FURTHER, HOWEVER,
that the Contributor shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party in its sole and absolute
discretion, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnified Party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall have
the right to
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<PAGE> 31
undertake the defense, compromise or settlement of such liability or claim on
behalf of and for the account of the Contributor.
3.5 LIMITATIONS ON INDEMNIFICATION UNDER ARTICLE 3.
Notwithstanding anything contained herein to the contrary, the Contributor shall
not be liable or obligated to make payments under this ARTICLE 3 with respect to
any Property or Partnership Interest to the extent such payments in the
aggregate would exceed the value of the OP Units (based upon the initial public
offering price of the Common Stock) received by the Contributor at the Closing.
Notwithstanding anything contained herein to the contrary, the Indemnified
Parties shall look first to the Contributor's OP Units for indemnification under
this ARTICLE 3 and then to the Contributor's other assets.
3.6 LIMITATION PERIOD.
(a) Notwithstanding the foregoing, any claim for
indemnification under ARTICLE 3.2 hereof must be asserted in writing by the
Indemnified Party, stating the nature of the Losses and the basis for
indemnification therefor within one year after the Closing.
(b) If so asserted in writing prior to the applicable
expiration date, such claims for indemnification shall survive until resolved by
mutual agreement between the Contributor and the Indemnified Party or by
judicial determination. Any claim for indemnification not so asserted in writing
prior to the applicable expiration date shall not thereafter be asserted and
shall forever be waived.
3.7 RESERVATION OF CONTRIBUTOR RIGHTS. Notwithstanding
anything else in this Contribution Agreement to the contrary, the Contributor
reserves unto itself all rights and remedies (including rights to seek
contribution) against any third party indemnitors, prior property owners or
occupants, and contributors to any contamination, for which the Partnerships
have been indemnified by the Contributor hereunder. To the extent the
Contributor's rights against any such third party owners, occupants, indemnitors
or contributors may be materially prejudiced by actions or inactions by any
owner or occupant of the Properties after the Closing, the Contributor's
indemnity obligation shall be reduced in accordance with the effect of the
actions or inactions which so prejudiced the Contributor's rights.
E-10
<PAGE> 32
ATTACHMENT 1
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
__________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, together with certain other limited
partners, has formed the Operating Partnership
pursuant to the Agreement of Limited Partnership of
the Operating Partnership dated __________ __, 1997
(as such agreement may be amended or amended and
restated from time to time, the "PARTNERSHIP
AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited
Partners (as defined below) directly or indirectly
hold units of limited partnership interest ("OP
UNITS") in the Operating Partnership.
(c) The Operating Partnership has agreed to provide the
Limited Partners with certain direct or indirect
rights to exchange their OP Units for cash or, at the
election of the Company, for shares of the Company's
common stock, par value $0.01 per share (the "REIT
STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
<PAGE> 33
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Stock in REIT
Stock or makes a distribution to all holders of its outstanding REIT Stock in
REIT Stock; (ii) subdivides its outstanding REIT Stock; or (iii) combines its
outstanding REIT Stock into a smaller number of shares of REIT Stock, the
Exchange Factor shall be adjusted by multiplying the Exchange Factor by a
fraction, the numerator of which shall be the number of shares of REIT Stock
issued and outstanding on the record date for such dividend, contribution,
subdivision or combination assuming for such purpose that such dividend,
distribution, subdivision or combination has occurred as of such time, and the
denominator of which shall be the actual number of shares of REIT Stock
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Exchange Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated
and/or the Operating Partnership
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
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<PAGE> 34
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to
the product of the number of OP Units offered for exchange by an Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company or the Operating Partnership issues to all holders
of REIT Stock rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase REIT Stock,
or any other securities or property (collectively, the "rights"), then the REIT
Stock Amount shall also include such rights that a holder of that number of
shares of REIT Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading
on the NYSE, any national securities exchange or Nasdaq, the last
reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
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<PAGE> 35
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"EXCHANGING PARTNER"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding
the provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging
Partner within five (5) Business Days after the receipt by the Company
of such Notice of Exchange,
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<PAGE> 36
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of
the Company,
(b) would otherwise jeopardize the REIT status of the Company,
or
(c) would cause the acquisition of the REIT Stock by the
Limited Partner to be "integrated" with any other distribution of REIT
Stock by the Company for purposes of complying with the registration
provisions of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article
2, any person to whom OP Units have been pledged, in compliance with the terms
of the Lock-up Agreement, may exercise its Exchange Right prior to the date that
is one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
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<PAGE> 37
(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of
the Exchange Right, the Company shall reserve for issuance such number of shares
of REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable
upon exchange of OP Units (or the cash equivalent amount thereof if the Cash
Amount is paid) shall be computed on the basis of the aggregate amount of OP
Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
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<PAGE> 38
(A) a copy of the prospectus contained in the
Registration Statement on Form S-11 filed by the Company in
connection with the IPO, any prospectus contained in any
Registration Statement subsequently filed by the Company, and
any supplement or amendment thereto (each, a "PROSPECTUS"),
and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by
the Company with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited
investor" as defined in Rule 501 of the regulations
promulgated under the Securities Act.
(B) If such Exchanging Partner has retained or
retains a person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
(b) (i) Such Exchanging Partner understands that an investment in
the Company involves substantial risks.
-7-
<PAGE> 39
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of such Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws, except as provided in the Registration Rights
Agreement entered into by the Company and the Exchanging
Partner (the "REGISTRATION RIGHTS AGREEMENT").
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<PAGE> 40
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
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<PAGE> 41
4.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with
the consent of the Company by a vote of the Limited Partners in the same manner
as the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein, provided, however, that the Company shall vote its
limited partnership interests in proportion to the votes of the other Limited
Partners.
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<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By:
------------------------------------
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By:
--------------------------------
Name:
Title:
LIMITED PARTNERS:
----------------------------------------
Signature
----------------------------------------
Name (Please Print or Type)
-11-
<PAGE> 43
Exhibit A
Name and Address of Limited Partners
[To be attached]
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<PAGE> 44
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated: __________________________
________________________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
(Signature of Limited Partner)
______________________________
(Street Address)
(City) (State) (Zip Code)
If REIT Stock is to be issued, issue to:
Name:
Limited Partner's social security or tax
identification number:
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<PAGE> 45
BATTLE FOWLER LLP
DRAFT - 7/24/97
ATTACHMENT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, limited liability companies, corporations and
other entities which are Holders or in which the Holders own direct or indirect
interests (the "PROPERTY PARTNERSHIPS") pursuant to Option or Contribution
Agreements (the "OPTION AGREEMENTS") among the Operating Partnership and the
Grantors named therein, and in connection therewith the Holders will receive
units of limited partnership interest in the Operating Partnership (such units
of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
<PAGE> 46
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating
to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement
or
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<PAGE> 47
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
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"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not
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delay, suspend or withdraw a Registration Statement for such reason for
more than 60 days or more often than twice during any period of 12
consecutive months.
(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration Statement
covering the Registrable Securities held by more than one Holder.
2.2 Expenses.
(i) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if any,
sales commissions, the fees and disbursements of counsel representing
such Holder and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that
does not, within 10 days after receipt of a reasonable request by the Company
for information in connection with the Shelf Registration Statement, provide
such information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
2.4 Effect of Material Breach. In the event that the Company
shall breach any of its material obligations hereunder in any material respect,
any Holder of Registrable Securities may demand that the Company file a
registration statement covering such Holder's Registrable Securities. The
Company agrees to file such registration statement within 60 days after receipt
of such demand and agrees to use its best efforts to procure the effectiveness
of such registration statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed pursuant
to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period set
forth in Section 2 hereof, a Shelf Registration Statement, which Shelf
Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects
with the requirements of the applicable form of registration
statement and include all financial statements required by the
SEC to be filed therewith.
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<PAGE> 50
(ii) (A) Subject to Article III, Section (a)(ii)(B),
(I) prepare and file with the SEC such
amendments and post-effective amendments to each such
Registration Statement as may be necessary to keep
such Registration Statement effective for the
applicable period;
(II) cause each such Prospectus to be
supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule
424 or any similar rule that may be adopted under the
Securities Act;
(III) respond as promptly as practicable to
any comments received from the SEC with respect to
the Shelf Registration Statement, or any amendment,
post-effective amendment or supplement relating
thereto; and
(IV) comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by each Registration Statement
during the applicable period in accordance with the
intended method or methods of distribution by the
selling Holders thereof.
(B) (I) Each Holder shall promptly provide to
the Company such information as the Company
reasonably requests in order to identify such Holder
and the method of distribution in a post-effective
amendment to the Registration Statement or a
supplement to the Prospectus.
(II) Such Holder also shall notify the
Company in writing upon completion of any offer or
sale or at such time as such Holder no longer intends
to make offers or sales under the Registration
Statement.
(iii) Furnish to each Holder of Registrable Securities,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable
Securities; the Company consents to the use of the Prospectus,
including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary
Prospectus.
(iv) Use its reasonable efforts to register or qualify the
Registrable Securities by the time the applicable Registration
Statement is declared effective by the SEC under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
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Registrable Securities covered by a Registration Statement shall
reasonably request in writing, keep each such registration or
qualification effective during the period such Registration Statement
is required to be kept effective, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that
the Company shall not be required to
(A) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to
qualify but for this Article III, Section (a)(iv),
(B) subject itself to taxation in any such
jurisdiction, or
(C) submit to the general service of process in any
such jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and,
if requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become
effective and when any post-effective amendments and
supplements thereto become effective,
(B) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose,
(C) if the Company receives any notification with
respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and
(D) of the happening of any event during the period a
Registration Statement is effective which is of a type
specified in Article II, Section 2.1(iii) hereof or as a
result of which such Registration Statement or the related
Prospectus contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the
Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment.
(vii) Furnish to each Holder of Registrable Securities,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment
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thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested).
(viii) (A) Cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any Securities Act legend; and
(B) enable certificates for such Registrable
Securities to be issued for such numbers of shares of Common
Stock and registered in such names as the selling Holders may
reasonably request at least two business days prior to any
sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III,
Section (a)(ii)(B) hereof, upon the occurrence of any event
contemplated by Article III, Section (a)(v)(D) hereof, use its
reasonable efforts promptly to prepare and file a supplement or
prepare, file and obtain effectiveness of a post-effective amendment to
a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(x) Make available for inspection by representatives of the
Holders of the Registrable Securities and any counsel or accountant
retained by such Holders, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply
all information reasonably requested by any such representative,
counsel or accountant in connection with a Registration Statement;
provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies
such representatives, counsel or accountants in writing that such
records, documents or information are confidential shall not be
disclosed by such representatives, counsel or accountants unless
(A) the disclosure of such records, documents or
information is necessary to avoid or correct a material
misstatement or omission in a Registration Statement,
(B) the release of such records, documents or
information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, or
(C) such records, documents or information have been
generally made available to the public.
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(xi) Within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of
such document (not including any documents incorporated by reference
therein unless requested) to the Holders of Registrable Securities.
(xii) Use its reasonable efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar
securities issued by the Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities,
not later than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable Holders to consummate the disposition of such Registrable
Securities.
(b) The Company may require each Holder of Registrable Securities to
furnish to the Company in writing such information regarding the
proposed distribution by such Holder of such Registrable Securities as
the Company may from time to time reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations
with respect to the Registration Statement required to be filed
pursuant to Section 2 hereof and this Section 3, each Holder agrees
that
(i) it will not offer or sell its Registrable Securities under
the Registration Statement until it has received copies of the
supplemental or amended Prospectus contemplated by Article III, Section
(a)(ii) hereof and receives notice that any post-effective amendment
has become effective, and
(ii) upon receipt of any notice from the Company of the
happening of any event of the kind described in Article III, Section
(a)(v)(D) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such
Holder receives copies of the supplemented or amended Prospectus
contemplated by Article III, Section (a)(ix) hereof and receives notice
that any post-
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<PAGE> 54
effective amendment has become effective, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
IV Indemnification; Contribution.
4.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder (within the meaning of Section 15 of the Securities
Act) as follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading or
(C) arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental
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agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of any such
amended or supplemental Prospectus by the Company, if such loss,
liability, claim, damage or expense would not have arisen had such
delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it
may have under the indemnity agreement provided in Section
4.1(a) or 4.1(b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the
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indemnified party results in the forfeiture by the
indemnifying party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than
the indemnification obligation provided under Section 4.1(a)
or 4.1(b) above.
(ii) If the indemnifying party so elects within a reasonable
time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved
by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however,
that, if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the
proviso to Section 4.1(c), such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's
defense, and counsel for the indemnified party or parties
shall be entitled to conduct the defense of such indemnified
party or parties, it being understood that both such counsel
will cooperate with each other to conduct the defense of such
action or proceeding as efficiently as possible.
(B) If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such
defense, after having received the notice referred to in
Section 4.1(c), the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified
party or parties as incurred.
(C) In such event, however, no indemnifying party
will be liable for any settlement effected without the written
consent of such indemnifying party, which consent may not be
unreasonably withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with
this Section 4(c), such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
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4.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 4 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one hand and the
selling Holders on the other (in such proportions that the
selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations.
(B) (I) The relative benefits to the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, the total proceeds
received by the indemnifying party and indemnified
parties in connection with the offering to which such
losses, claims, damages, liabilities or expenses
relate.
(II) The relative fault of the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether the action
in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact, has been made by,
or relates to information supplied by, such
indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section
4.4, no selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities of such selling Holder were
offered to the public exceeds the amount of any damages which
such selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
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(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any,
who controls a Holder within the meaning of Section 15 of the
Securities Act and directors and officers of a Holder shall have the
same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration
Statement and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act shall have the same rights
to contribution as the Company.
V Filing of Exchange Act Reports; Rule 144 Sales
5.1 The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act so as to
enable any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition by any
Holder of any Exchange Stock pursuant to Rule 144, the Company shall cooperate
with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Exchange
Stock.
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the
outstanding Registrable Securities; provided, however, that no
amendment, modification or supplement or waiver or consent to the
departure with respect to the provisions of Articles 2, 4 or 5 hereof
shall be effective as against any Holder unless consented to in writing
by such Holder.
(ii) Notice of any amendment, modification or supplement to
this Agreement adopted in accordance with this Section 6.1 shall be
provided by the Company to each Holder at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex,
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telecopier, or any courier guaranteeing overnight delivery, to the parties at
their respective addresses set forth opposite their signatures below or at such
other address as a party may indicate by written notice to the other party or
parties.
(ii) All such notices and communications shall be deemed to
have been duly given:
(A) at the time delivered by hand, if personally
delivered;
(B) three (3) business days after being deposited in
the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By:
-------------------------------------
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING
New York, New York 10036-4003 PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By:
-------------------------------------
Name:
Title:
HOLDERS:
[Address:]
-----------------------------------------
Signature
-----------------------------------------
Name (Please Print or Type)
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<PAGE> 62
ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public pursuant to a public offering (the "Offering").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Company's Registration Statement on Form S-11
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that without the prior written consent of Merrill Lynch, the undersigned
will not (and, except as may be disclosed in the Prospectus, will not announce
or disclose any intention to) directly or indirectly sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition at any time in
the future) of, any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, including any units of limited
partnership interest (the "OP Units") in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership") beneficially
owned by the undersigned as of the date of the closing of the Company's initial
public offering, for a period of twenty-four (24) months after the later of (i)
date of the final Prospectus relating to the
<PAGE> 63
offering of the Shares to the public by the Underwriters and (ii) the date the
Offering is consummated and closed. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and _____________________,
its Transfer Agent, are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
letter agreement.
Very truly yours,
[INVESTOR]
By:____________________________
Name:
Title:
2--
<PAGE> 64
ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Tower Realty Operating Partnership, L.P.
120 West 46th Street, 24th Floor
New York, New York 10036
Dear Sirs,
Reference is made to the Option Agreement, dated _________, 1997 (the
"Option Agreement"), by and between the undersigned and Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Option Agreement.
In consideration of the execution and exercise of the Option Agreement
by the Operating Partnership, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned hereby
irrevocably agrees that without the prior written consent of the Operating
Partnership, the undersigned will not directly or indirectly sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose (or enter into any transaction or device which
is designed to, or could be expected to, result in the disposition at any time
in the future) of any any units of limited partnership interest (the "OP Units")
in the Operating Partnership, or any securities convertible into or exercisable
or exchangeable for OP Units, beneficially owned by the undersigned as of the
date hereof, for a period of twenty-four (24) months after the date hereof.
Prior to the expiration of such period, the undersigned will not publicly
announce or disclose any intention to do anything after the expiration of such
period which the undersigned is prohibited, as provided in the preceding
sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Operating Partnership is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.44
- --------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
by and between
LAWRENCE H. FELDMAN
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of July 31, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
RECITALS ................................................................. -1-
1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP
UNITS................................................................. -2-
1.1 CONTRIBUTION TRANSACTION........................................ -2-
1.2 ISSUANCE OF OP UNITS............................................ -3-
1.3 ADJUSTED CONSIDERATION.......................................... -3-
1.4 INTENTIONALLY OMITTED........................................... -3-
1.5 CONTRIBUTION OF CERTAIN RIGHTS.................................. -3-
1.6 PRORATIONS...................................................... -3-
1.7 TREATMENT AS CONTRIBUTION....................................... -4-
2. CLOSING............................................................... -4-
2.1 CONDITIONS PRECEDENT............................................ -4-
2.2 TIME AND PLACE.................................................. -5-
2.3 CLOSING DELIVERIES.............................................. -6-
2.4 CLOSING COSTS................................................... -6-
3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES........................... -7-
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP..................................................... -7-
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR................... -7-
3.3 INDEMNIFICATION................................................. -7-
4. COVENANTS............................................................. -8-
4.1 COVENANTS OF CONTRIBUTOR........................................ -8-
5. RELEASES AND WAIVERS.................................................. -8-
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP........................ -9-
5.2 GENERAL RELEASE OF CONTRIBUTOR.................................. -9-
5.3 INTENTIONALLY OMITTED........................................... -9-
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT.................... -9-
6. POWER OF ATTORNEY..................................................... -9-
6.1 GRANT OF POWER OF ATTORNEY...................................... -9-
6.2 LIMITATION ON LIABILITY.........................................-10-
7. MISCELLANEOUS.........................................................-11-
7.1 FURTHER ASSURANCES..............................................-11-
-i-
<PAGE> 3
7.2 COUNTERPARTS....................................................-11-
7.3 GOVERNING LAW...................................................-11-
7.4 NOTICES.........................................................-11-
EXHIBIT LIST
<TABLE>
<CAPTION>
SECTION FIRST
EXHIBITS REFERENCED
<S> <C>
A Constituent Interests of Contributor's Partnership Interest...........Recital D
B Contribution and Assumption Agreement.......................................1.1
C Form of Quitclaim...........................................................1.1
D Calculation of Number of OP Units...........................................1.2
E Representations, Warranties and Indemnities of Contributor..................3.2
Attachment 1..........................................Exchange Rights Agreement
Attachment 2......................................Registration Rights Agreement
Attachment 3.................................................Lock-Up Agreements
Attachment 4.......................................List of Portfolio Agreements
</TABLE>
-ii-
<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"Contribution Agreement") is made and entered into as of July 31, 1997 by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), and Lawrence H. Feldman, an individual (the
"Contributor").
RECITALS
A. The Operating Partnership desires to consolidate the ownership
of a portfolio of office properties (the "Participating Properties") owned or
managed by Tower Equities & Realty Corp. or its affiliates through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively,
the "Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").
B. The Formation Transactions relate to the proposed initial
public offering (the "Public Offering") of the common stock, par value $.01 per
share (the "Common Stock") of Tower Realty Trust, Inc., a Maryland corporation
(the "Company"), which will operate as a self-administered and self-managed real
estate investment trust ("REIT") and will be the sole general partner of the
Operating Partnership.
C. The owners of the Property Interests and the partners and
members of the Participating Partnerships and LLCs will either transfer their
Property Interests and interests in the Participating Partnerships and LLCs to
the Company in exchange for cash (the "Cash Participants") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP Participants").
D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT A (the "Partnerships") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT A (the "Property" or the
"Properties"). As used herein, "Partnership Agreement" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.
E. The Contributor has previously contributed certain interests
in the Partnerships to the Operating Partnership in exchange for OP Units (as
defined below).
F. The Contributor desires to, and the Operating Partnership
desires the Contributor to, contribute to the Operating Partnership, all of its
right, title and interest, as a
<PAGE> 5
partner (or member) of the Partnerships, including, without limitation, all of
its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in the Partnerships (such right, title and interest are hereinafter
collectively referred to as the "Partnership Interest"), in exchange for
partnership units in the Operating Partnership (the "OP Units"), on the terms
and subject to the conditions set forth herein.
G. The Operating Partnership desires to make, and the
Contributor desires to receive, a return of certain contributions previously
made by the Contributor to the Operating Partnership that relate to direct or
indirect interests in certain limited partnerships, limited liability companies
and certain other entities that do not relate to the Consolidation (the
"Excluded Interests").
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR
OP UNITS
1.1 CONTRIBUTION TRANSACTION
(a) At the Closing (as defined in ARTICLE 2.2 hereof) and
subject to the terms and conditions contained in this Contribution Agreement,
the Contributor shall transfer to the Operating Partnership, absolutely and
unconditionally, all of its Partnership Interest (as such term is defined in
Recital F herein) not previously contributed to the Operating Partnership. The
contribution of the Contributor's Partnership Interest shall be evidenced by a
"Contribution and Assumption Agreement" for each of the Partnerships in
substantially the form of EXHIBIT B attached hereto. Furthermore, the
Contributor shall execute and have duly acknowledged an individual quitclaim
deed for each property in the form of EXHIBIT C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the Agreement
of Limited Partnership of the Operating Partnership (the "OP Agreement") in
order to effect the transactions contemplated hereby.
(b) At the Closing, and subject to the terms and
conditions set forth in this Contribution Agreement, the Operating Partnership
shall transfer to the Contributor, absolutely and unconditionally, all of the
Excluded Interests (as such term is defined in Recital G herein) previously
contributed by the Contributor to the Operating Partnership.
-2-
<PAGE> 6
1.2 ISSUANCE OF OP UNITS
The Operating Partnership shall, in exchange for the
Partnership Interest and after taking into account the transfer of the Excluded
Interests to the Contibutor, increase or decrease the number of OP Units issued
to the Contributor in accordance with EXHIBIT D hereto. The increase or decrease
of OP Units Issued to the Contributor shall be evidenced by either an amendment
(the "Amendment") to the OP Agreement or by certificates relating to such units
(the "Certificates") in either case, as shall be acceptable to the Contributor.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the OP
Agreement in order to effect the transactions contemplated hereby.
1.3 ADJUSTED CONSIDERATION
The Operating Partnership reserves the right not to acquire
any particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the number of OP Units to be received by the Contributor pursuant to this
Contribution Agreement may be reduced by an amount to be agreed upon between the
Operating Partnership and Lawrence H. Feldman to reflect the reduction in total
value of the Partnership Interest ultimately contributed by the Contributor.
1.4 INTENTIONALLY OMITTED
1.5 CONTRIBUTION OF CERTAIN RIGHTS
Effective upon the Closing, the Contributor hereby contributes
to the Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.
1.6 PRORATIONS
At the Closing, or as promptly as practicable following the
Closing, to the extent such matters are not the right or responsibility of all
tenants of a given Property, all revenue and all charges that are customarily
prorated in transactions of this nature, including accrued rent currently due
and payable, overpaid taxes or fees, real and personal property taxes, common
area maintenance charges and other similar periodic charges payable or
receivable with respect to such Property shall be ratably prorated between the
partners of the Partnership which holds such Property prior to the Closing and
the Operating Partnership on and after the Closing, effective as of the Closing.
After providing for such prorations, (i) if any of the Partnerships has a
resultant cash surplus, the value of the Contributor's Partnership
-3-
<PAGE> 7
Interest shall be increased in proportion to Contributor's ratable share of such
cash surplus and additional OP Units (based on the Mid-Point (as such term is
defined in Exhibit D attached hereto) of the proposed offering prices per share
set forth in the final preliminary prospectus relating to the offering of shares
of Common Stock ) shall be issued to the Contributor as a valuation adjustment
to the consideration to be received by the Contributor pursuant to this
Contribution Agreement, and (ii) if any of the Partnerships has a resultant cash
deficit, the value of the Contributor's Partnership Interest shall be reduced in
proportion to Contributor's ratable share of such cash deficit, and fewer OP
Units shall be issued to the Contributor as a valuation adjustment to the
consideration to be received by the Contributor pursuant to this Contribution
Agreement, unless such deficit is cured prior to the Closing.
1.7 TREATMENT AS CONTRIBUTION
The transfer, assignment and exchange of interests effectuated
with respect to the Operating Partnership, pursuant to this Contribution
Agreement, shall constitute a "Capital Contribution" pursuant to Article IV of
the OP Agreement and is intended to be governed by Section 721(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2. CLOSING
2.1 CONDITIONS PRECEDENT
The effectiveness of the Company's registration statement
filed with the Securities and Exchange Commission on Form S-11 (the
"Registration Statement") is a condition precedent to the obligations of all
parties to this Contribution Agreement to effect the transactions contemplated
by this Contribution Agreement on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and correct in all
material respects on the date such representations and warranties were made, and
shall be true and correct in all material respects on the Closing Date as if
made at and as of such date;
(b) Each of the obligations of the Contributor to be
performed by it shall have been duly performed by it on or before the Closing
Date;
(c) Concurrently with the Closing, the Contributor shall
have executed and delivered to the Operating Partnership the documents required
to be delivered pursuant to ARTICLE 2.3 hereof;
-4-
<PAGE> 8
(d) The Contributor shall have obtained all necessary
consents or approvals of governmental authorities or third parties to the
consummation of the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
or regulatory authority or instrumentality that prohibits the consummation of
the transactions contemplated hereby, and no litigation or governmental
proceeding seeking such an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof
and the Closing Date any material adverse change in any of the Partnerships'
businesses;
(h) All existing management agreements with respect to
the Properties shall have been contributed to the Operating Partnership prior to
or simultaneously with the Closing; and
(i) All management functions with respect to the
Properties presently conducted by Tower Equities & Realty Corp. and its
affiliates shall be assumed by the Operating Partnership or Tower Equities
Management, Inc.
2.2 TIME AND PLACE
The date, time and place of the transactions contemplated
hereunder shall be the day the Operating Partnership receives the proceeds from
the Public Offering from the underwriter(s), at 10:00 a.m. in the office of
Battle Fowler LLP, 75 East 55th Street, New York, New York 10022 (the "Closing"
or "Closing Date"). The transfers described in ARTICLE 1.1 of this Contribution
Agreement, and all closing deliveries, and the consummation of the Public
Offering, shall be deemed concurrent for all purposes.
-5-
<PAGE> 9
2.3 CLOSING DELIVERIES
At the Closing, the parties shall make, execute, acknowledge
and deliver, or cause to be made, executed, acknowledged and delivered through
the Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other
items (collectively, the "Closing Documents") necessary to carry out the
intention of this Contribution Agreement, which Closing Documents and other
items shall include, without limitation, the following:
(i) A Contribution and Assumption Agreement for each
Partnership;
(ii) An individual quitclaim deed for each Property,
fully executed and duly acknowledged from each of the
individual constituent partners and/or members of the
Contributor, as required by the Operating Partnership;
(iii) The Amendment or the Certificates evidencing
the transfer of OP Units to the Contributor;
(iv) American Land Title Assurances ("ALTA") policies
of title insurance with appropriate endorsements and levels of
reinsurance for the Properties issued as of the Closing Date
or endorsements or other assurances that the existing policy
or policies of title insurance are sufficient for purposes of
this Contribution Agreement, which the Contributor shall cause
the title company to issue to the Operating Partnership in a
form acceptable to the Operating Partnership (the "Title
Policies") including satisfaction by the Contributor of any
and all title company requirements applicable to it;
(v) The Partnerships' books and records and
securities or other evidences of ownership held by the
Contributor; and
(vi) An affidavit from the Contributor stating, under
penalty of perjury, the Contributor's United States Taxpayer
Identification Number and that the Contributor is not a
foreign person pursuant to section 1445(b)(2) of the Code and
a comparable affidavit satisfying California and any other
withholding requirements.
(vii) The Exchange Rights Agreement, the Registration
Rights Agreement and the Lock-Up Agreements substantially in
the form attached hereto as ATTACHMENTS 1, 2, and 3,
respectively.
-6-
<PAGE> 10
2.4 CLOSING COSTS
The Operating Partnership shall pay any documentary transfer
taxes, escrow charges, title charges and recording taxes or fees incurred in
connection with the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP
The Operating Partnership hereby represents and warrants to
and covenants with the Contributor that:
(a) Organization; Authority. The Operating Partnership
has been duly formed and is validly existing with requisite power to enter this
Contribution Agreement and all agreements contemplated hereby. The persons and
entities executing this Contribution Agreement and all agreements contemplated
hereby on behalf of the Operating Partnership have the power and authority to
enter into this Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and
performance by the Operating Partnership of its obligations under this
Contribution Agreement and all agreements contemplated hereby will not
contravene any provision of applicable law, the OP Agreement, charter,
declaration of trust or other constituent document of the Operating Partnership,
or any agreement or other instrument binding upon the Operating Partnership or
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Operating Partnership, and no consent, approval,
authorization or order of or qualification with any governmental body or agency
is required for the performance by the Operating Partnership of its obligations
under this Contribution Agreement and all other agreements contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
The Contributor represents and warrants to and covenants with
the Operating Partnership as provided in EXHIBIT E attached hereto, and
acknowledges and agrees to be bound by the indemnification provisions contained
therein.
3.3 INDEMNIFICATION
The Operating Partnership shall indemnify and hold harmless
the Contributor (the "Indemnified Contributor Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable
-7-
<PAGE> 11
attorneys' fees, costs of investigation and remediation, costs of investigative
judicial or administrative proceedings or appeals therefrom and costs of
attachment or similar bonds (collectively, "Losses") asserted against, imposed
upon or incurred by the Indemnified Contributor Party in connection with: (i)
any breach of a representation or warranty of the Operating Partnership
contained in this Contribution Agreement; and (ii) all fees, costs and expenses
of the Operating Partnership in connection with the transactions contemplated by
this Contribution Agreement, including, without limitation, any and all costs
associated with the transfers contemplated herein.
ARTICLE 4. COVENANTS
4.1 Covenants of Contributor
(a) From the date hereof through the Closing, the
Contributor shall not:
(i) Sell or transfer all or any portion of the
Partnership Interest; or
(ii) Mortgage, pledge or encumber (or permit to
become encumbered) all or any portion of the Partnership
Interest.
(b) From the date hereof through the Closing, the
Contributor shall permit each of the Partnerships to conduct its business in the
ordinary course, consistent with past practice, and shall not permit any of the
Partnerships to:
(i) Enter into any material transaction not in the
ordinary course of business;
(ii) Sell or transfer any assets of the Partnerships;
(iii) Mortgage, pledge or encumber (or permit to
become encumbered) any assets of the Partnerships, except (x)
liens for taxes not due, (y) purchase money security interests
and (z) mechanics' liens being disputed by any of the
Partnerships in good faith and by appropriate proceedings;
(iv) Amend, modify or terminate any material
agreements or other instruments to which any of the
Partnerships is a party; or
(v) Materially alter the manner of keeping the
Partnerships' books, accounts or records or the accounting
practices therein reflected.
(c) The Contributor shall use its good faith diligent
efforts to obtain any approvals, waivers or other consents of third parties
required to effect the transactions contemplated by this Contribution Agreement.
-8-
<PAGE> 12
ARTICLE 5. RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this ARTICLE 5
shall become effective only upon the Closing of the contribution and exchange of
the Partnership Interest pursuant to ARTICLES 1 and 2 hereof.
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP
As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the Operating
Partnership's affiliates, partners, agents, attorneys, successors and assigns of
and from any and all charges, complaints, claims, liabilities, damages, actions,
causes of action, losses and costs of any nature whatsoever (collectively,
"Contributor Claims"), known or unknown, suspected or unsuspected, arising out
of or relating to any of the Partnership Agreements, this Contribution Agreement
or any other matter which exists at the Closing, except for Contributor Claims
arising from the breach of any representation, warranty, covenant or obligation
under this Contribution Agreement.
5.2 GENERAL RELEASE OF CONTRIBUTOR
As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and Contributor's
agents, attorneys, successors and assigns of and from any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses and
costs of any nature whatsoever (collectively, "Operating Partnership Claims"),
known or unknown, suspected or unsuspected, arising out of or relating to any of
the Partnership Agreements, this Contribution Agreement or any other matter
which exists at the Closing, except for Operating Partnership Claims arising
from the breach of any representation, warranty, covenant or obligation under
this Contribution Agreement or any supplemental representations and warranties
agreement entered into as of the Closing Date by and among the Contributor,
certain other continuing investors in the Operating Partnership and the
Operating Partnership.
5.3 INTENTIONALLY OMITTED
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT
As of the Closing, the Contributor waives and relinquishes all
rights and benefits otherwise afforded to Contributor under the Partnership
Agreements including, without limitation, any right to consent to or approve of
the sale or contribution by the other partners (or members) of the Partnerships
of their partnership interests to the Company or the Operating Partnership.
-9-
<PAGE> 13
ARTICLE 6. POWER OF ATTORNEY
6.1 GRANT OF POWER OF ATTORNEY
Contributor does hereby irrevocably appoint the Operating
Partnership (or its designee) and each of them individually and any successor
thereof from time to time (such Operating Partnership or designee or any such
successor of any of them acting in his, her or its capacity as attorney-in-fact
pursuant hereto, the "Attorney-in-Fact") as the true and lawful attorney-in-fact
and agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including, without limitation, the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney-in-Fact a proxy (the
"Proxy") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.
Each of the Power of Attorney and Proxy and all authority
granted hereby shall be coupled with an interest and therefore shall be
irrevocable and shall not be terminated by any act of Contributor, by operation
of law or by the occurrence of any other event or events, and if any other such
act or events shall occur before the completion of the transactions contemplated
by this Contribution Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such other act
or events had not occurred and regardless of notice thereof. Contributor agrees
that, at the request of the Operating Partnership, it will promptly execute a
separate power of attorney and proxy on the same terms set forth in this ARTICLE
6, such execution to be witnessed and notarized. Contributor hereby authorizes
the reliance of third parties on each of the Power of Attorney and Proxy.
Contributor acknowledges that the Operating Partnership has,
and any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
-10-
<PAGE> 14
6.2 LIMITATION ON LIABILITY
It is understood that the Attorney-in-Fact assumes no
responsibility or liability to any person by virtue of the Power of Attorney or
Proxy granted by Contributor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
Formation Transactions or the Public Offering, or the acquisition of the
Partnership Interest by the Operating Partnership and shall not be liable for
any error or judgment or for any act done or omitted or for any mistake of fact
or law except for its own gross negligence or bad faith. Contributor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney or Proxy created by Contributor hereby, as well as the cost and expense
of investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is due to
the gross negligence or bad faith of the Attorney-in-Fact. Contributor agrees
that the Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to Contributor hereunder, release, amend or
modify any other power of attorney or proxy granted by any other person under
any related agreement.
ARTICLE 7. MISCELLANEOUS
7.1 FURTHER ASSURANCES.
The Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
7.2 COUNTERPARTS
This Contribution Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.3 GOVERNING LAW
This Contribution Agreement shall be governed by the internal
laws of the State of New York, without regard to the conflicts of laws
provisions thereof.
-11-
<PAGE> 15
7.4 NOTICES
Any notice to be given hereunder by any party to the other
shall be given in writing by personal delivery or by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed
communicated as of the date of personal delivery (including delivery by
overnight courier). Mailed notices shall be addressed as set forth below, but
any party may change the address set forth below by written notice to other
parties in accordance with this paragraph.
To the Contributor:
Lawrence H. Feldman
c/o Feldman Equities
120 West 45th Street
New York, NY 10022
To the Operating Partnership:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, NY 10022
-12-
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this
Contribution Agreement as of the date first written above.
OPERATING PARTNERSHIP:
Tower Realty Operating Partnership, L.P.
By: Tower Realty Trust, Inc.
By: /s/Robert L. Cox
------------------------------------
Name: Robert L. Cox
Title: Chief Operating Officer and
Executive Vice President
CONTRIBUTOR:
/s/Lawrence H. Feldman
-----------------------------------------------
Lawrence H. Feldman
<PAGE> 17
EXHIBIT A
CONSTITUENT INTERESTS OF
LAWRENCE H. FELDMAN'S (THE "CONTRIBUTOR") PARTNERSHIP INTEREST
<TABLE>
<CAPTION>
PARTNERSHIPS IN WHICH CONTRIBUTOR PARTNERSHIPS IN WHICH CONTRIBUTOR PROPERTIES HELD BY THE PARTNERSHIPS
HOLDS A DIRECT INTEREST* HOLDS AN INDIRECT INTEREST
<S> <C> <C>
Tower 45 Associates Limited Tower 45 Associates Limited Tower 45
Partnership Partnership
Maitland Property Investors, Ltd. Maitland Property Investors, Ltd. Maitland Forum
Maitland Associates, Ltd. Maitland Forum ground lease
Feldman FSA Corp. FSA Associates, L.P. 286 Madison Ave.
Feldman MOT Portfolio Corp. D/F Portfolio Associates Limited
FSA Associates, L.P. Partnership
286 Madison, L.P.
FSA Associates, L.P. 290 Madison Ave.
D/F Portfolio Associates Limited
Partnership
290 Madison, L.P.
FSA Associates, L.P. 292 Madison Ave.
D/F Portfolio Associates Limited
Partnership
292 Madison, L.P.
FSA Associates, L.P. 5151 East Broadway
D/F Portfolio Associates Limited
East Broadway 5151, L.P.
FSA Associates, L.P. One Orlando Center
D/F Portfolio Associates Limited
Magnolia Associates Limited
Partnership
2800 Company, L.L.C. 2800 Associates, L.P. 2800 North Central
5750 Feldman, Ltd. 5750 Feldman, Ltd. 5750 Major Blvd.
5750 Feldstein, Ltd.
5750 Associates Limited Partnership
Terco Partners I, L.L.C. Maitland West Associates Limited Maitland West
Terco Partners II, L.L.C. Partnership
Corporate-Partners, L.L.C. Corporate Center, L.L.C. Corporate Center
Corporate-Feldman, L.L.C. Corporate Center Associates, Limited
Partnership
</TABLE>
- -------------------------------
* Corporations owned by Lawrence Feldman that hold interests in any of the
Properties shall contribute the partnership interests held by such
corporations to the Operating Partnership.
A-1
<PAGE> 18
EXHIBIT B
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby assigns,
transfers, contributes and conveys to Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), its entire legal
and beneficial right, title and interest in and to
______________________________, a __________________________ (the
"Partnership"), including, without limitation, all right, title and interest, if
any, of the undersigned in and to the assets of the Partnership and the right to
receive distributions of money, profits and other assets from the Partnership,
presently existing or hereafter at any time arising or accruing (such right,
title and interest are hereinafter collectively referred to as the "Partnership
Interest"), TO HAVE AND TO HOLD the same unto the Operating Partnership, its
successors and assigns, forever.
Upon the execution and delivery hereof, the Operating
Partnership assumes all obligations in respect of the Partnership Interest.
The Partnership owns certain real property as described in
ATTACHMENT 4 attached hereto.
Executed: ___________ ___, 1997
By: -------------------------------
Lawrence H. Feldman
B-1
<PAGE> 19
EXHIBIT C
FORM OF QUITCLAIM
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ ....................
........Computed on the consideration or value of
property conveyed; OR
........Computed on the consideration or value
less liens or encumbrances remaining at
time of sale.
-------------------------------------------------
Signature of Declarant of Agent determining
tax -- Firm name
- --------------------------------------------------------------------------------
QUITCLAIM DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to
Tower Realty Operating Partnership, L.P., a Delaware limited partnership
the real property in the City of ____________, County of _____________, State of
_____________, described as
Dated _______________________ ___________________________________
___________________________________
___________________________________
C-1
<PAGE> 20
STATE OF NEW YORK )
)
COUNTY OF )
On _________________________________________________________________ before me,
_______________________________________________________________________________,
personally appeared ___________________________________________________________,
_______________________________________________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature ___________________________ (This area for official notarial seal)
C-2
<PAGE> 21
EXHIBIT D
CALCULATION OF NUMBER OF OP UNITS
The number of OP Units to be issued to Contributor shall be
calculated as follows:
IAD 1
(AP x ( ------- - TNSU ) - MCU) x -------
IADPS MP
Where:
AP = 1.0 - the sum of (i) AP (expressed as a decimal fraction)
as set forth in Exhibit D of the Contribution Agreements of Reuben
Friedberg, Joseph Kasman and Robert Adams and (ii) the actual
percentage (expressed as a decimal fraction) of SRSE to be received by
Robert Cox and Eric Reimer as set forth in Exhibit D of their
Contribution Agreements (expressed as a decimal fraction).
IAD = Total estimated annual distributions to be made by the
Operating Partnership as set forth in the final preliminary prospectus
included in the Registration Statement on Form S-11 filed by the
Company with the Securities and Exchange Commission in connection with
the proposed public offering of shares of Common Stock (the
"Preliminary Prospectus").
IADPS = Estimated initial annual distribution per share of
Common Stock or OP Unit as set forth in the Preliminary Prospectus.
TNSU = The total number of shares of Common Stock and OP Units
to be issued in the IPO to persons other than Lawrence H. Feldman,
Robert Cox, Joseph D. Kasman, Eric Reimer, Reuben Friedberg and Robert
Adams as set forth in the Preliminary Prospectus, other than the number
of OP Units to be issued to Robert Cox, Joseph D. Kasman, Eric Reimer
and Robert Adams in respect of the minimum contribution consideration
to be received by each of them in respect of their individual
Contribution Agreements (assuming all shares of Common Stock are issued
at the MidPoint (as defined below)).
MCU = The total number of OP Units to be issued to Contributor
directly or indirectly under the Omnibus Management Company Option Agreement
(assuming all shares of Common Stock and OP Units are issued at the Mid-Point
(as defined below)).
D-1
<PAGE> 22
MP or "Mid-Point" = The median of the proposed per share price
range for the Common Stock as set forth in the Preliminary Prospectus.
D-2
<PAGE> 23
EXHIBIT E
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
OF CONTRIBUTOR
ARTICLE 1. ADDITIONAL DEFINED TERMS
1.1 For purposes of this EXHIBIT E, the following terms have the
meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT E is attached:
ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively, "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.
CONTRIBUTION AGREEMENT: Means the Contribution Agreement to which this
EXHIBIT E is attached.
GOVERNMENTAL ENTITY: Means any government or agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign.
INDEMNIFYING PARTY: Means any party required to indemnify any other
party under ARTICLE 3.2 of this EXHIBIT E or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.
KNOWLEDGE: Means, with respect to any representation or warranty so
indicated, the actual knowledge, upon reasonable investigation and inquiry in
good faith, of the signatory to the Contribution Agreement.
LIENS: Means, with respect to any real and personal property, all
mortgages, pledges, liens, options, charges, security interests, restrictions,
prior assignments, encumbrances, covenants, encroachments, assessments, rights
of others, licenses, easements, liabilities or claims of any kind or nature
whatsoever, direct or indirect, including, without limitation, interests in or
claims to revenues generated by such property.
E-1
<PAGE> 24
PERMITTED LIENS: Means (a) Liens, or deposits made to secure the
release of such Liens, securing taxes, the payment of which is not delinquent or
the payment of which is actively being contested in good faith by appropriate
proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the
districts in which the Properties are located which are not violated by the
existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's and
mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not have a
material adverse effect upon, or materially interfere with the use of, the
Properties; and
(e) any exceptions contained in the Title Policies.
PERSON: Means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
PORTFOLIO AGREEMENTS: Means the agreements, including the Contribution
Agreement, listed on ATTACHMENT 4 hereto, which contemplate the transfer of
partnership and/or limited liability company membership interests in certain of
the Participating Partnerships and LLCs from any entity directly or indirectly
owned by Contributor to the Company and the Operating Partnership.
PROSPECTUS: Means the Company's Form S-11 Registration Statement.
REIT STOCK: Shall have the meaning set forth in the OP Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
The Contributor represents and warrants to the Operating Partnership as
set forth below in this ARTICLE 2. Notwithstanding any other provision of the
Contribution Agreement or this EXHIBIT E, the Contributor makes representations,
warranties and indemnities only with respect to: (i) the Properties identified
on EXHIBIT A to the Contribution Agreement (the "Property" or the "Properties"),
and (ii) the interests in the Partnerships to be transferred by the Contributor.
E-2
<PAGE> 25
2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and (B)
has all requisite power and authority to own, lease or operate its property and
to carry on its business as presently conducted and, to the extent required
under applicable law, is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
2.2 DUE AUTHORIZATION. The execution, delivery and performance of
the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered by
or on behalf of the Contributor pursuant to this Contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.
2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is the
sole owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.
2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes all
of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of all
security interests, mortgages, pledges, liens, encumbrances, claims and equities
to the Operating Partnership.
E-3
<PAGE> 26
2.6 NO VIOLATION. None of the execution, delivery or performance
of the Contribution Agreement and the transactions contemplated hereby does or
will, with or without the giving of notice, lapse of time, or both, (i) violate,
conflict with, result in a breach of, or constitute a default under or give to
others any right of termination or cancellation of (A) the organizational
documents, including the charters and bylaws, if any, of the Contributor, (B)
any material agreement, document or instrument to which the Contributor is a
party or by which the Contributor or its Property is bound or (C) any term or
provision of any judgment, order, writ, injunction, or decree of any
governmental or regulatory authority binding on the Contributor or by which the
Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.
2.7 NON-FOREIGN STATUS. The Contributor is not a foreign person,
foreign corporation, foreign partnership, foreign trust or foreign estate (as
defined in the Code), and is, therefore, not subject to the provisions of the
Code relating to the withholding of sales proceeds to foreign persons.
2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions. If Contributor fails to provide
such certificates or affidavits, the Operating Partnership may withhold a
portion of any payments otherwise to be made to the Contributor as required by
the Code or New York law.
2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her or
its understanding that the offering and sale of the OP Units to be acquired
pursuant to the Contribution Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Act"). In furtherance thereof, the
Contributor represents and warrants to the Company as follows:
2.9.1 INVESTMENT. The Contributor is acquiring the OP Units
solely for his, her or its own account for the purpose of investment and not as
a nominee or agent for any other person and not with a view to, or for offer or
sale in connection with, any distribution of any thereof. The Contributor agrees
and acknowledges that he, she or it will not, directly or indirectly, offer,
transfer, sell, assign, pledge, hypothecate or otherwise dispose of
(hereinafter, "Transfer") any of the OP Units unless (i) the Transfer is
pursuant to an effective registration statement under the Act and qualification
or other compliance under applicable blue sky or state securities laws, or (ii)
counsel for the Contributor (which counsel shall be reasonably acceptable to the
Operating Partnership) shall have furnished the Operating Partnership with an
opinion, reasonably satisfactory in form and substance to the Operating
Partnership to the effect that no such registration is required because of the
availability of an exemption from registration under the Act and qualification
or other compliance under applicable blue sky or state securities laws.
E-4
<PAGE> 27
2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the Contributor
has previously invested in securities similar to the OP Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Contribution Agreement. The Contributor is able to bear
the economic risk of holding the OP Units for an indefinite period and is able
to afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.
2.9.3 HOLDING PERIOD. The Contributor acknowledges that he,
she or it has been advised that (i) the OP Units and the common stock of the
Company into which the OP Units may be exchanged in certain circumstances (the
"Common Stock") must be held indefinitely, and the Contributor must continue to
bear the economic risk of the investment in the OP Units (and any Common Stock
that might be exchanged therefor) unless they are subsequently registered under
the Act or an exemption from such registration is available, (ii) a restrictive
legend in the form hereafter set forth shall be placed on the certificates
representing the OP Units (and any Common Stock that might be exchanged
therefor), and (iii) a notation shall be made in the appropriate records of the
Operating Partnership (and the Company) indicating that the OP Units (and any
Common Stock that might be exchanged therefor) are subject to restrictions on
transfer.
2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is defined
in Rule 501(a) of Regulation D under the Act) and as such:
(i) is a director or executive officer of the
Company; or
(ii) has an individual net worth, or joint net
worth with his or her spouse, in excess of $1,000,000; or
(iii) had an individual annual adjusted gross
income in excess of $200,000 in each of the two most recent years and reasonably
expects to have annual adjusted gross income in excess of $200,000 in the
current year; or
E-5
<PAGE> 28
(iv) had a joint income with his spouse in excess
of $300,000 in each of the two most recent years and reasonably expects to have
an annual adjusted gross income, with his spouse, in excess of $300,000 in the
current year.
If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).
2.9.5 LEGENDING. Each certificate representing the OP Units
(and any Common Stock that might be exchanged therefor) shall bear the following
legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY
E-6
<PAGE> 29
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH
A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION.
2.10 LITIGATION. There are no Claims which could
reasonably be anticipated to result in damages in excess of $50,000 pending or,
to Knowledge, threatened that directly or indirectly affect the Contributor, the
Partnerships, the Properties or the Formation Transactions, nor has any such
claim been pending or, to Knowledge, threatened as of the Closing.
2.11 NO BROKERS. Neither the Contributor nor any of its
respective officers, directors or employees has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in the obligation of the Operating Partnership or any of its affiliates to pay
any finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.
2.12 SOLVENCY. The Contributor has been and will be
solvent at all times prior to and immediately following the transfer of the
Partnership Interest to the Operating Partnership.
E-7
<PAGE> 30
2.13 NO MISREPRESENTATIONS. No representation, warranty or
statement made, or information provided, by the Contributor in the Contribution
Agreement or in any other document or instrument furnished or to be furnished by
or on behalf of the Contributor pursuant hereto or as contemplated hereby (i)
contains or will contain any untrue statement of a material fact or (ii) omits
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. For purposes of the preceding sentence,
materiality shall be determined with reference to the total portfolio of real
properties and other interests to be transferred pursuant to the Operating
Partnership pursuant to the Formation Transactions.
ARTICLE 3. INDEMNIFICATION
3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY
FOR BREACH.
(a) Subject to ARTICLE 3.6, all representations and
warranties contained in this EXHIBIT E or in any Schedule or certificate
delivered pursuant hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the
Contribution Agreement or this EXHIBIT E, no party hereto shall be liable under
this EXHIBIT E or the Contribution Agreement for monetary damages (or otherwise)
for breach of any of its representations and warranties contained in this
EXHIBIT E or the Contribution Agreement, or in any Schedule, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this ARTICLE 3.
3.2 GENERAL INDEMNIFICATION
(a) The Contributor shall indemnify and hold harmless the
Operating Partnership, the Company, and their affiliates and each of their
respective directors, officers, employees, agents, representatives and
affiliates (each of which is an "Indemnified Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation, costs of investigative, judicial or administrative proceedings or
appeals therefrom, and costs of attachment or similar bonds (collectively,
"Losses"), asserted against, imposed upon or incurred by the Indemnified Party
in connection with or as a result of any breach of a representation or warranty
of the Contributor contained in the Contribution Agreement or in any Schedule,
certificate or affidavit delivered by the Contributor pursuant to the
Contribution Agreement.
E-8
<PAGE> 31
(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributor in
connection with the transactions contemplated by the Contribution
Agreement;
(ii) any liabilities or obligations incurred, arising
from or out of, in connection with or as a result of the failure of the
Contributor to obtain all consents required to consummate the
transactions contemplated by the Contribution Agreement; or
(iii) any breach of any representation, warranty or
covenant set forth in the Contribution Agreement.
3.3 PAYMENT OF INDEMNIFICATION. The Contributor may
satisfy its obligations hereunder by the prompt delivery (paid promptly as and
when expenses are incurred) to an Indemnified Party of OP Units, subject to the
limits on ownership and transfer of REIT Stock set forth in the Company's
articles of incorporation. Any OP Units delivered to an Indemnified Party
hereunder shall be valued based upon the initial public offering price of the
Company's Common Stock.
3.4 NOTICE AND DEFENSE BY CLAIMS. As soon as reasonably
practicable after receipt by the Indemnified Party of notice of any liability or
claim incurred by or asserted against the Indemnified Party that is subject to
indemnification under this ARTICLE 3, the Indemnified Party shall give notice
thereof to the Contributor. The Indemnified Party may at its option demand
indemnity under this ARTICLE 3 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not frivolous
and that the Indemnified Party may be liable for, or otherwise incur, a Loss as
a result thereof and shall give notice of such determination to the Contributor.
The Indemnified Party shall permit the Contributor, at its option and expense,
to assume the defense of any such claim by counsel selected by the Contributor
and reasonably satisfactory to the Indemnified Party, and to settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that the Indemnified Party may at all
times participate in such defense at its expense; and PROVIDED FURTHER, HOWEVER,
that the Contributor shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party in its sole and absolute
discretion, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnified Party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall have
the right to undertake the
E-9
<PAGE> 32
defense, compromise or settlement of such liability or claim on behalf of and
for the account of the Contributor.
3.5 LIMITATIONS ON INDEMNIFICATION UNDER ARTICLE 3.
Notwithstanding anything contained herein to the contrary, the Contributor shall
not be liable or obligated to make payments under this ARTICLE 3 with respect to
any Property or Partnership Interest to the extent such payments in the
aggregate would exceed the value of the OP Units (based upon the initial public
offering price of the Common Stock) received by the Contributor at the Closing.
Notwithstanding anything contained herein to the contrary, the Indemnified
Parties shall look first to the Contributor's OP Units for indemnification under
this ARTICLE 3 and then to the Contributor's other assets.
3.6 LIMITATION PERIOD.
(a) Notwithstanding the foregoing, any claim for
indemnification under ARTICLE 3.2 hereof must be asserted in writing by the
Indemnified Party, stating the nature of the Losses and the basis for
indemnification therefor within one year after the Closing.
(b) If so asserted in writing prior to the applicable
expiration date, such claims for indemnification shall survive until resolved by
mutual agreement between the Contributor and the Indemnified Party or by
judicial determination. Any claim for indemnification not so asserted in writing
prior to the applicable expiration date shall not thereafter be asserted and
shall forever be waived.
3.7 RESERVATION OF CONTRIBUTOR RIGHTS. Notwithstanding
anything else in this Contribution Agreement to the contrary, the Contributor
reserves unto itself all rights and remedies (including rights to seek
contribution) against any third party indemnitors, prior property owners or
occupants, and contributors to any contamination, for which the Partnerships
have been indemnified by the Contributor hereunder. To the extent the
Contributor's rights against any such third party owners, occupants, indemnitors
or contributors may be materially prejudiced by actions or inactions by any
owner or occupant of the Properties after the Closing, the Contributor's
indemnity obligation shall be reduced in accordance with the effect of the
actions or inactions which so prejudiced the Contributor's rights.
E-10
<PAGE> 33
ATTACHMENT 1
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of __________
__, 1997, is entered into by and among Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P., a
Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, together with certain other limited
partners, has formed the Operating Partnership
pursuant to the Agreement of Limited Partnership of
the Operating Partnership dated __________ __, 1997
(as such agreement may be amended or amended and
restated from time to time, the "PARTNERSHIP
AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited
Partners (as defined below) directly or indirectly
hold units of limited partnership interest ("OP
UNITS") in the Operating Partnership.
(c) The Operating Partnership has agreed to provide the
Limited Partners with certain direct or indirect
rights to exchange their OP Units for cash or, at the
election of the Company, for shares of the Company's
common stock, par value $0.01 per share (the "REIT
STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
<PAGE> 34
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the Company
(i) declares or pays a dividend on its outstanding REIT Stock in REIT Stock or
makes a distribution to all holders of its outstanding REIT Stock in REIT Stock;
(ii) subdivides its outstanding REIT Stock; or (iii) combines its outstanding
REIT Stock into a smaller number of shares of REIT Stock, the Exchange Factor
shall be adjusted by multiplying the Exchange Factor by a fraction, the
numerator of which shall be the number of shares of REIT Stock issued and
outstanding on the record date for such dividend, contribution, subdivision or
combination assuming for such purpose that such dividend, distribution,
subdivision or combination has occurred as of such time, and the denominator of
which shall be the actual number of shares of REIT Stock (determined without the
above assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Exchange Factor
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust, charge,
claim, encumbrance, pledge, option, right of first offer or first refusal and
any other right or interest of others of any kind or nature, actual or
contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated
and/or the Operating Partnership
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
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<PAGE> 35
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to the
product of the number of OP Units offered for exchange by an Exchanging Partner,
multiplied by the Exchange Factor as of the Valuation Date, provided, that in
the event the Company or the Operating Partnership issues to all holders of REIT
Stock rights, options, warrants or convertible or exchangeable securities
entitling the stockholders to subscribe for or purchase REIT Stock, or any other
securities or property (collectively, the "rights"), then the REIT Stock Amount
shall also include such rights that a holder of that number of shares of REIT
Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading
on the NYSE, any national securities exchange or Nasdaq, the last
reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
-3-
<PAGE> 36
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"EXCHANGING PARTNER"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less
than one thousand (1,000) OP Units or, if such Limited Partner holds less than
one thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of
such Limited Partner pursuant to this Article 2, and such Limited Partner shall
be deemed to have assigned such rights to such Assignee and shall be bound by
the exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee
on behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a)
Notwithstanding the provisions of Section 2.1, the Company may, on behalf of the
Operating Partnership, in its sole and absolute discretion, elect to satisfy an
Exchanging Partner's Exchange Right by exchanging REIT Stock and rights equal to
the REIT Stock Amount on the Specified Exchange Date for the OP Units offered
for exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of
the Operating Partnership, an Exchanging Partner's Exchange Right by exchanging
REIT Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging
Partner within five (5) Business Days after the receipt by the Company
of such Notice of Exchange,
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<PAGE> 37
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding
anything herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of
the Company,
(b) would otherwise jeopardize the REIT status of the Company,
or
(c) would cause the acquisition of the REIT Stock by the
Limited Partner to be "integrated" with any other distribution of REIT
Stock by the Company for purposes of complying with the registration
provisions of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging
Partner shall be paid on the Specified Exchange Date; provided, however, that
the Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this
Article 2, any person to whom OP Units have been pledged, in compliance with the
terms of the Lock-up Agreement, may exercise its Exchange Right prior to the
date that is one (1) year after the closing of the IPO, provided, however, such
OP Units shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire
with respect to any OP Units for which an Exchange Notice has not been delivered
to the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to
this Article 2 shall be deemed to have occurred as of the Specified Exchange
Date for all purposes, including without limitation the payment of distributions
or dividends in respect of OP Units or REIT Stock, as applicable.
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<PAGE> 38
(b) Any OP Units acquired by the Company pursuant to an exercise
by any Limited Partner of an Exchange Right shall be deemed to be acquired by
and reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership,
shall amend the Partnership Agreement to reflect each such exchange and
reallocation or reissuance of OP Units and each corresponding recalculation of
the OP Units of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency
of the Exchange Right, the Company shall reserve for issuance such number of
shares of REIT Stock as may be necessary to enable the Company to issue such
shares in full payment of the REIT Stock Amount in regard to all OP Units held
by Limited Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request,
of the then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock
shall be issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be
issuable upon exchange of OP Units (or the cash equivalent amount thereof if the
Cash Amount is paid) shall be computed on the basis of the aggregate amount of
OP Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to
the Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
-6-
<PAGE> 39
(A) a copy of the prospectus contained in the
Registration Statement on Form S-11 filed by the Company in
connection with the IPO, any prospectus contained in any
Registration Statement subsequently filed by the Company, and
any supplement or amendment thereto (each, a "PROSPECTUS"),
and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by
the Company with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited
investor" as defined in Rule 501 of the regulations promulgated under
the Securities Act.
(B) If such Exchanging Partner has retained or
retains a person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
(b) (i) Such Exchanging Partner understands that an investment in
the Company involves substantial risks.
-7-
<PAGE> 40
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of such Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws, except as provided in the Registration Rights
Agreement entered into by the Company and the Exchanging
Partner (the "REGISTRATION RIGHTS AGREEMENT").
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<PAGE> 41
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions
in this Agreement are for convenience only. They shall not be deemed part of
this Agreement and in no way define, limit, extend or describe the scope or
intent of any provisions hereof. Except as specifically provided otherwise,
references to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
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<PAGE> 42
4.5 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts,
all of which together shall constitute one agreement binding on all of the
parties hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement
is or becomes invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not be affected thereby.
4.10 Entire Agreement. This Agreement contains the entire
understanding and agreement among the Limited Partners, the Operating
Partnership and the Company with respect to the subject matter hereof and
supersedes any other prior written or oral understandings or agreements among
them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time
with the consent of the Company by a vote of the Limited Partners in the same
manner as the Partnership Agreement (in accordance with Section 14.1(a) thereof)
may be amended as provided therein, provided, however, that the Company shall
vote its limited partnership interests in proportion to the votes of the other
Limited Partners.
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By:
------------------------------------
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By:
--------------------------------
Name:
Title:
LIMITED PARTNERS:
----------------------------------------
Signature
----------------------------------------
Name (Please Print or Type)
-11-
<PAGE> 44
Exhibit A
Name and Address of Limited Partners
[To be attached]
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<PAGE> 45
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties contained
in Section 3.3 of the Exchange Rights Agreement as if such representations and
warranties had been set forth in full in this Notice of Exchange.
Dated: __________________________
______________________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
(Signature of Limited Partner)
__________________________________
(Street Address)
(City) (State) (Zip Code)
If REIT Stock is to be issued, issue to:
Name:
Limited Partner's social security or tax
identification number:
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<PAGE> 46
BATTLE FOWLER LLP
DRAFT - 7/24/97
ATTACHMENT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and entered
into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a Maryland
corporation, which operates as a real estate investment trust (the "COMPANY"),
Tower Realty Operating Partnership, L.P., a Delaware limited partnership (the
"OPERATING PARTNERSHIP"), and the other parties which are signatories hereto
(together with their respective successors, transferees and assigns, each a
"HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring, among
other things, certain partnership interests or assets of various partnerships,
joint ventures, limited liability companies, corporations and other entities
which are Holders or in which the Holders own direct or indirect interests (the
"PROPERTY PARTNERSHIPS") pursuant to Option or Contribution Agreements (the
"OPTION AGREEMENTS") among the Operating Partnership and the Grantors named
therein, and in connection therewith the Holders will receive units of limited
partnership interest in the Operating Partnership (such units of limited
partnership interest being referred to hereinafter as the "OP UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders to
consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing, the
mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
<PAGE> 47
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also shall
include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to the
Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the Preamble
and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating
to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement
or
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<PAGE> 48
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
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"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not
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delay, suspend or withdraw a Registration Statement for such reason for
more than 60 days or more often than twice during any period of 12
consecutive months.
(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration Statement
covering the Registrable Securities held by more than one Holder.
2.2 Expenses.
(i) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if any,
sales commissions, the fees and disbursements of counsel representing
such Holder and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that
does not, within 10 days after receipt of a reasonable request by the Company
for information in connection with the Shelf Registration Statement, provide
such information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
2.4 Effect of Material Breach. In the event that the Company shall
breach any of its material obligations hereunder in any material respect, any
Holder of Registrable Securities may demand that the Company file a registration
statement covering such Holder's Registrable Securities. The Company agrees to
file such registration statement within 60 days after receipt of such demand and
agrees to use its best efforts to procure the effectiveness of such registration
statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed pursuant
to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period set
forth in Section 2 hereof, a Shelf Registration Statement, which Shelf
Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects
with the requirements of the applicable form of registration
statement and include all financial statements required by the
SEC to be filed therewith.
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(ii) (A) Subject to Article III, Section (a)(ii)(B),
(I) prepare and file with the SEC such amendments and
post-effective amendments to each such Registration Statement
as may be necessary to keep such Registration Statement
effective for the applicable period;
(II) cause each such Prospectus to be supplemented by
any required prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 or any similar rule that may be
adopted under the Securities Act;
(III) respond as promptly as practicable to any
comments received from the SEC with respect to the Shelf
Registration Statement, or any amendment, post-effective
amendment or supplement relating thereto; and
(IV) comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by
each Registration Statement during the applicable period in
accordance with the intended method or methods of distribution
by the selling Holders thereof.
(B) (I) Each Holder shall promptly provide to the Company
such information as the Company reasonably requests in order
to identify such Holder and the method of distribution in a
post-effective amendment to the Registration Statement or a
supplement to the Prospectus.
(II) Such Holder also shall notify the Company in
writing upon completion of any offer or sale or at such time
as such Holder no longer intends to make offers or sales under
the Registration Statement.
(iii) Furnish to each Holder of Registrable Securities, without charge,
as many copies of each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto and such other documents as such Holder may
reasonably request, in order to facilitate the public sale or other disposition
of the Registrable Securities; the Company consents to the use of the
Prospectus, including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary Prospectus.
(iv) Use its reasonable efforts to register or qualify the Registrable
Securities by the time the applicable Registration Statement is declared
effective by the SEC under all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder of
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Registrable Securities covered by a Registration Statement shall reasonably
request in writing, keep each such registration or qualification effective
during the period such Registration Statement is required to be kept effective,
and do any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided,
however, that the Company shall not be required to
(A) qualify generally to do business in any jurisdiction or to
register as a broker or dealer in such jurisdiction where it would not
otherwise be required to qualify but for this Article III, Section
(a)(iv),
(B) subject itself to taxation in any such jurisdiction, or
(C) submit to the general service of process in any such
jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and, if
requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become effective and
when any post-effective amendments and supplements thereto become
effective,
(B) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose,
(C) if the Company receives any notification with respect to
the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation of any proceeding for such
purpose, and
(D) of the happening of any event during the period a
Registration Statement is effective which is of a type specified in
Article II, Section 2.1(iii) hereof or as a result of which such
Registration Statement or the related Prospectus contains any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made (in
the case of the Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment.
(vii) Furnish to each Holder of Registrable Securities, without charge,
at least one conformed copy of each Registration Statement and any
post-effective amendment
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thereto (without documents incorporated therein by reference or exhibits
thereto, unless requested).
(viii) (A) Cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any Securities
Act legend; and
(B) enable certificates for such Registrable Securities to be
issued for such numbers of shares of Common Stock and registered in
such names as the selling Holders may reasonably request at least two
business days prior to any sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III, Section
(a)(ii)(B) hereof, upon the occurrence of any event contemplated by Article III,
Section (a)(v)(D) hereof, use its reasonable efforts promptly to prepare and
file a supplement or prepare, file and obtain effectiveness of a post-effective
amendment to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(x) Make available for inspection by representatives of the Holders of
the Registrable Securities and any counsel or accountant retained by such
Holders, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the respective officers, directors and
employees of the Company to supply all information reasonably requested by any
such representative, counsel or accountant in connection with a Registration
Statement; provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies such
representatives, counsel or accountants in writing that such records, documents
or information are confidential shall not be disclosed by such representatives,
counsel or accountants unless
(A) the disclosure of such records, documents or information
is necessary to avoid or correct a material misstatement or omission in
a Registration Statement,
(B) the release of such records, documents or information is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, or
(C) such records, documents or information have been generally
made available to the public.
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(xi) Within a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus, provide copies of such document (not
including any documents incorporated by reference therein unless requested) to
the Holders of Registrable Securities.
(xii) Use its reasonable efforts to cause all Registrable Securities to
be listed on any securities exchange on which similar securities issued by the
Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities, not later
than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering at
least 12 months which shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable Holders to consummate the
disposition of such Registrable Securities.
(b) The Company may require each Holder of Registrable Securities to furnish to
the Company in writing such information regarding the proposed distribution by
such Holder of such Registrable Securities as the Company may from time to time
reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations with
respect to the Registration Statement required to be filed pursuant to Section 2
hereof and this Section 3, each Holder agrees that
(i) it will not offer or sell its Registrable Securities under the
Registration Statement until it has received copies of the supplemental or
amended Prospectus contemplated by Article III, Section (a)(ii) hereof and
receives notice that any post-effective amendment has become effective, and
(ii) upon receipt of any notice from the Company of the happening of
any event of the kind described in Article III, Section (a)(v)(D) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to a Registration Statement until such Holder receives copies of the
supplemented or amended Prospectus contemplated by Article III, Section (a)(ix)
hereof and receives notice that any post-
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effective amendment has become effective, and, if so directed by the Company,
such Holder will deliver to the Company (at the expense of the Company) all
copies in its possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice.
IV Indemnification; Contribution.
4.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder and its officers and directors and each
Person, if any, who controls any Holder (within the meaning of Section 15 of the
Securities Act) as follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading or
(C) arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental
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agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of any such
amended or supplemental Prospectus by the Company, if such loss,
liability, claim, damage or expense would not have arisen had such
delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each indemnified
party shall give reasonably prompt notice to each indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it
may have under the indemnity agreement provided in Section
4.1(a) or 4.1(b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the
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indemnified party results in the forfeiture by the
indemnifying party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than
the indemnification obligation provided under Section 4.1(a)
or 4.1(b) above.
(ii) If the indemnifying party so elects within a reasonable
time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved
by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however,
that, if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the
proviso to Section 4.1(c), such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's
defense, and counsel for the indemnified party or parties
shall be entitled to conduct the defense of such indemnified
party or parties, it being understood that both such counsel
will cooperate with each other to conduct the defense of such
action or proceeding as efficiently as possible.
(B) If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such
defense, after having received the notice referred to in
Section 4.1(c), the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified
party or parties as incurred.
(C) In such event, however, no indemnifying party
will be liable for any settlement effected without the written
consent of such indemnifying party, which consent may not be
unreasonably withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with
this Section 4(c), such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
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4.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 4 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one hand and the
selling Holders on the other (in such proportions that the
selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations.
(B) (I) The relative benefits to the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, the total proceeds
received by the indemnifying party and indemnified
parties in connection with the offering to which such
losses, claims, damages, liabilities or expenses
relate.
(II) The relative fault of the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether the action
in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact, has been made by,
or relates to information supplied by, such
indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section
4.4, no selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities of such selling Holder were
offered to the public exceeds the amount of any damages which
such selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
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(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any,
who controls a Holder within the meaning of Section 15 of the
Securities Act and directors and officers of a Holder shall have the
same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration
Statement and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act shall have the same rights
to contribution as the Company.
V Filing of Exchange Act Reports; Rule 144 Sales
5.1 The Company covenants that it will file the reports required
to be filed by the Company under the Securities Act and the Exchange Act so as
to enable any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition by
any Holder of any Exchange Stock pursuant to Rule 144, the Company shall
cooperate with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Exchange
Stock.
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the outstanding
Registrable Securities; provided, however, that no amendment,
modification or supplement or waiver or consent to the departure with
respect to the provisions of Articles 2, 4 or 5 hereof shall be
effective as against any Holder unless consented to in writing by such
Holder.
(ii) Notice of any amendment, modification or supplement to
this Agreement adopted in accordance with this Section 6.1 shall be
provided by the Company to each Holder at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex,
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telecopier, or any courier guaranteeing overnight delivery, to the parties at
their respective addresses set forth opposite their signatures below or at such
other address as a party may indicate by written notice to the other party or
parties.
(ii) All such notices and communications shall be deemed to
have been duly given:
(A) at the time delivered by hand, if personally
delivered;
(B) three (3) business days after being deposited in
the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement shall
inure to the benefit of and be binding upon the successors, assigns and
transferees of each of the parties, including, without limitation and without
the need for an express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.5 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
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6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that
there would be no adequate remedy at law if any party fails to perform any of
its obligations hereunder, and accordingly agree that each party, in addition to
any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other party
under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By:
---------------------------------
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING
New York, New York 10036-4003 PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its
general partner
By:
---------------------------------
Name:
Title:
HOLDERS:
[Address:]
--------------------------------------
Signature
--------------------------------------
Name (Please Print or Type)
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ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public pursuant to a public offering (the "Offering").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Company's Registration Statement on Form S-11
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that without the prior written consent of Merrill Lynch, the undersigned
will not (and, except as may be disclosed in the Prospectus, will not announce
or disclose any intention to) directly or indirectly sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition at any time in
the future) of, any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, including any units of limited
partnership interest (the "OP Units") in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership") beneficially
owned by the undersigned as of the date of the closing of the Company's initial
public offering, for a period of twenty-four (24) months after the later of (i)
date of the final Prospectus relating to the
<PAGE> 64
offering of the Shares to the public by the Underwriters and (ii) the date the
Offering is consummated and closed. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also be
binding upon the successors, assigns, heirs and personal representatives of the
undersigned.
In furtherance of the foregoing, the Company and ________________________,
its Transfer Agent, are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
letter agreement.
Very truly yours,
[INVESTOR]
By:____________________________
Name:
Title:
-2-
<PAGE> 65
ATTACHMENT 3
(CONTINUED)
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Tower Realty Operating Partnership, L.P.
120 West 46th Street, 24th Floor
New York, New York 10036
Dear Sirs,
Reference is made to the Option Agreement, dated _________, 1997 (the
"Option Agreement"), by and between the undersigned and Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Option Agreement.
In consideration of the execution and exercise of the Option Agreement by
the Operating Partnership, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned hereby
irrevocably agrees that without the prior written consent of the Operating
Partnership, the undersigned will not directly or indirectly sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose (or enter into any transaction or device which
is designed to, or could be expected to, result in the disposition at any time
in the future) of any any units of limited partnership interest (the "OP Units")
in the Operating Partnership, or any securities convertible into or exercisable
or exchangeable for OP Units, beneficially owned by the undersigned as of the
date hereof, for a period of twenty-four (24) months after the date hereof.
Prior to the expiration of such period, the undersigned will not publicly
announce or disclose any intention to do anything after the expiration of such
period which the undersigned is prohibited, as provided in the preceding
sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also be
binding upon the successors, assigns, heirs and personal representatives of the
undersigned.
In furtherance of the foregoing, the Operating Partnership is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.45
CONTRIBUTION AGREEMENT
by and between
CLIFFORD L. STEIN
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of July 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS ................................................................ -1-
1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP
UNITS............................................................... -2-
1.1 CONTRIBUTION TRANSACTION...................................... -2-
1.2 ISSUANCE OF OP UNITS.......................................... -3-
1.3 ADJUSTED CONSIDERATION........................................ -3-
1.4 AUTHORIZATION................................................. -3-
1.5 CONTRIBUTION OF CERTAIN RIGHTS................................ -3-
1.6 PRORATIONS.................................................... -3-
1.7 TREATMENT AS CONTRIBUTION..................................... -4-
2. CLOSING............................................................. -4-
2.1 CONDITIONS PRECEDENT.......................................... -4-
2.2 TIME AND PLACE................................................ -5-
2.3 CLOSING DELIVERIES............................................ -6-
2.4 CLOSING COSTS................................................. -6-
3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES......................... -7-
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP................................................... -7-
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR................. -7-
3.3 INDEMNIFICATION............................................... -7-
4. COVENANTS........................................................... -8-
4.1 COVENANTS OF CONTRIBUTOR...................................... -8-
5. RELEASES AND WAIVERS................................................ -8-
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP...................... -9-
5.2 GENERAL RELEASE OF CONTRIBUTOR................................ -9-
5.3 INTENTIONALLY OMITTED......................................... -9-
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT.................. -9-
6. POWER OF ATTORNEY................................................... -9-
6.1 GRANT OF POWER OF ATTORNEY.................................... -9-
6.2 LIMITATION ON LIABILITY....................................... -10-
7. MISCELLANEOUS....................................................... -11-
7.1 FURTHER ASSURANCES............................................ -11-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
7.2 COUNTERPARTS.................................................. -11-
7.3 GOVERNING LAW................................................. -11-
7.4 NOTICES....................................................... -11-
</TABLE>
EXHIBIT LIST
<TABLE>
<CAPTION>
SECTION FIRST
EXHIBITS REFERENCED
-------------
<S> <C>
A Constituent Interests of Contributor's Partnership Interest......... Recital D
B Contribution and Assumption Agreement............................... 1.1
C Form of Quitclaim................................................... 1.1
D Calculation of Number of OP Units................................... 1.2
E Representations, Warranties and Indemnities of Contributor.......... 3.2
Attachment 1........................................................ Exchange Rights Agreement
Attachment 2........................................................ Registration Rights Agreement
Attachment 3........................................................ Lock-Up Agreements
Attachment 4........................................................ List of Portfolio Agreements
</TABLE>
-ii-
<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"Contribution Agreement") is made and entered into as of July 31, 1997 by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), and Clifford L. Stein, an individual (the
"Contributor").
RECITALS
A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office properties (the "Participating Properties") owned or managed
by Tower Equities & Realty Corp. or its affiliates through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively,
the "Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").
B. The Formation Transactions relate to the proposed initial public
offering (the "Public Offering") of the common stock, par value $.01 per share
(the "Common Stock") of Tower Realty Trust, Inc., a Maryland corporation (the
"Company"), which will operate as a self-administered and self-managed real
estate investment trust ("REIT") and will be the sole general partner of the
Operating Partnership.
C. The owners of the Property Interests and the partners and members
of the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "Cash Participants") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP Participants").
D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT A (the "Partnerships") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT A (the "Property" or the
"Properties"). As used herein, "Partnership Agreement" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.
E. The Contributor has previously contributed certain interests in the
Partnerships to the Operating Partnership in exchange for OP Units (as defined
below).
F. The Contributor desires to, and the Operating Partnership desires
the Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, as a
<PAGE> 5
partner (or member) of the Partnerships, including, without limitation, all of
its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in the Partnerships (such right, title and interest are hereinafter
collectively referred to as the "Partnership Interest"), in exchange for
partnership units in the Operating Partnership (the "OP Units"), on the terms
and subject to the conditions set forth herein.
G. The Operating Partnership desires to make, and the Contributor
desires to receive, a return of certain contributions previously made by the
Contributor to the Operating Partnership that relate to direct or indirect
interests in certain limited partnerships, limited liability companies and
certain other entities that do not relate to the Consolidation (the "Excluded
Interests").
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR
OP UNITS
1.1 CONTRIBUTION TRANSACTION
(a) At the Closing (as defined in ARTICLE 2.2 hereof) and subject to
the terms and conditions contained in this Contribution Agreement, the
Contributor shall transfer to the Operating Partnership, absolutely and
unconditionally, all of its Partnership Interest (as such term is defined in
Recital F herein) not previously contributed to the Operating Partnership. The
contribution of the Contributor's Partnership Interest shall be evidenced by a
"Contribution and Assumption Agreement" for each of the Partnerships in
substantially the form of EXHIBIT B attached hereto. Furthermore, the
Contributor shall execute and have duly acknowledged an individual quitclaim
deed for each property in the form of EXHIBIT C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the Agreement
of Limited Partnership of the Operating Partnership (the "OP Agreement") in
order to effect the transactions contemplated hereby.
(b) At the Closing, and subject to the terms and conditions set forth
in this Contribution Agreement, the Operating Partnership shall transfer to the
Contributor, absolutely and unconditionally, all of the Excluded Interests (as
such term is defined in Recital G herein) previously contributed by the
Contributor to the Operating Partnership.
-2-
<PAGE> 6
1.2 ISSUANCE OF OP UNITS
The Operating Partnership shall, in exchange for the Partnership
Interest and after taking into account the transfer of the Excluded Interests to
the Contributor, increase or decrease the number of OP Units issued to the
Contributor in accordance with EXHIBIT D hereto. The increase or decrease of OP
Units Issued to the Contributor shall be evidenced by either an amendment (the
"Amendment") to the OP Agreement or by certificates relating to such units (the
"Certificates") in either case, as shall be acceptable to the Contributor. The
parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the OP
Agreement in order to effect the transactions contemplated hereby.
1.3 ADJUSTED CONSIDERATION
The Operating Partnership reserves the right not to acquire any
particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the number of OP Units to be received by the Contributor pursuant to this
Contribution Agreement may be reduced by an amount determined by Lawrence H.
Feldman, in his sole discretion, to reflect the reduction in total value of the
Partnership Interest ultimately contributed by the Contributor.
1.4 AUTHORIZATION
Contributor hereby authorizes Lawrence H. Feldman to make any and all
determinations to be made by him pursuant to ARTICLE 1.3 hereof, and any and all
such determinations shall be final and binding on all parties.
1.5 CONTRIBUTION OF CERTAIN RIGHTS
Effective upon the Closing, the Contributor hereby contributes to the
Operating Partnership all of its rights and interests, if any, including rights
to indemnification in favor of the Contributor, if any, under the agreements
pursuant to which the Contributor or its affiliates initially acquired the
Partnership Interest transferred pursuant to this Contribution Agreement.
1.6 PRORATIONS
At the Closing, or as promptly as practicable following the Closing, to
the extent such matters are not the right or responsibility of all tenants of a
given Property, all revenue and all charges that are customarily prorated in
transactions of this nature, including accrued rent currently due and payable,
overpaid taxes or fees, real and personal property taxes, common area
maintenance charges and other similar periodic charges payable or
-3-
<PAGE> 7
receivable with respect to such Property shall be ratably prorated between the
partners of the Partnership which holds such Property prior to the Closing and
the Operating Partnership on and after the Closing, effective as of the Closing.
After providing for such prorations, (i) if any of the Partnerships has a
resultant cash surplus, the value of the Contributor's Partnership Interest
shall be increased in proportion to Contributor's ratable share of such cash
surplus and additional OP Units (based on the Mid-Point (as such term is defined
in Exhibit D attached hereto) of the proposed offering prices per share set
forth in the final preliminary prospectus relating to the offering of shares of
Common Stock ) shall be issued to the Contributor as a valuation adjustment to
the consideration to be received by the Contributor pursuant to this
Contribution Agreement, and (ii) if any of the Partnerships has a resultant cash
deficit, the value of the Contributor's Partnership Interest shall be reduced in
proportion to Contributor's ratable share of such cash deficit, and fewer OP
Units shall be issued to the Contributor as a valuation adjustment to the
consideration to be received by the Contributor pursuant to this Contribution
Agreement, unless such deficit is cured prior to the Closing.
1.7 TREATMENT AS CONTRIBUTION
The transfer, assignment and exchange of interests effectuated with
respect to the Operating Partnership, pursuant to this Contribution Agreement,
shall constitute a "Capital Contribution" pursuant to Article IV of the OP
Agreement and is intended to be governed by Section 721(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
ARTICLE 2. CLOSING
2.1 CONDITIONS PRECEDENT
The effectiveness of the Company's registration statement filed with
the Securities and Exchange Commission on Form S-11 (the "Registration
Statement") is a condition precedent to the obligations of all parties to this
Contribution Agreement to effect the transactions contemplated by this
Contribution Agreement on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the transactions
contemplated hereby shall be subject to the following additional conditions:
(a) The representations and warranties of the Contributor contained in
this Contribution Agreement shall have been true and correct in all material
respects on the date such representations and warranties were made, and shall be
true and correct in all material respects on the Closing Date as if made at and
as of such date;
(b) Each of the obligations of the Contributor to be performed by it
shall have been duly performed by it on or before the Closing Date;
-4-
<PAGE> 8
(c) Concurrently with the Closing, the Contributor shall have executed
and delivered to the Operating Partnership the documents required to be
delivered pursuant to ARTICLE 2.3 hereof;
(d) The Contributor shall have obtained all necessary consents or
approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its covenants
contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order, injunction,
stay, decree or restraining order shall have been enacted, entered, promulgated
or enforced by any court of competent jurisdiction or governmental or regulatory
authority or instrumentality that prohibits the consummation of the transactions
contemplated hereby, and no litigation or governmental proceeding seeking such
an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof and the
Closing Date any material adverse change in any of the Partnerships' businesses;
(h) All existing management agreements with respect to the Properties
shall have been contributed to the Operating Partnership prior to or
simultaneously with the Closing; and (i) All management functions with respect
to the Properties presently conducted by Tower Equities & Realty Corp. and its
affiliates shall be assumed by the Operating Partnership or Tower Equities
Management, Inc.
2.2 TIME AND PLACE
The date, time and place of the transactions contemplated hereunder
shall be the day the Operating Partnership receives the proceeds from the Public
Offering from the underwriter(s), at 10:00 a.m. in the office of Battle Fowler
LLP, 75 East 55th Street, New York, New York 10022 (the "Closing" or "Closing
Date"). The transfers described in ARTICLE 1.1 of this Contribution Agreement,
and all closing deliveries, and the consummation of the Public Offering, shall
be deemed concurrent for all purposes.
-5-
<PAGE> 9
2.3 CLOSING DELIVERIES
At the Closing, the parties shall make, execute, acknowledge and
deliver, or cause to be made, executed, acknowledged and delivered through the
Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other items
(collectively, the "Closing Documents") necessary to carry out the intention of
this Contribution Agreement, which Closing Documents and other items shall
include, without limitation, the following:
(i) A Contribution and Assumption Agreement for each
Partnership;
(ii) An individual quitclaim deed for each Property, fully
executed and duly acknowledged from each of the individual constituent
partners and/or members of the Contributor, as required by the
Operating Partnership;
(iii) The Amendment or the Certificates evidencing the transfer of
OP Units to the Contributor;
(iv) American Land Title Assurances ("ALTA") policies of title
insurance with appropriate endorsements and levels of reinsurance for
the Properties issued as of the Closing Date or endorsements or other
assurances that the existing policy or policies of title insurance are
sufficient for purposes of this Contribution Agreement, which the
Contributor shall cause the title company to issue to the Operating
Partnership in a form acceptable to the Operating Partnership (the
"Title Policies") including satisfaction by the Contributor of any and
all title company requirements applicable to it;
(v) The Partnerships' books and records and securities or other
evidences of ownership held by the Contributor; and
(vi) An affidavit from the Contributor stating, under penalty of
perjury, the Contributor's United States Taxpayer Identification Number
and that the Contributor is not a foreign person pursuant to section
1445(b)(2) of the Code and a comparable affidavit satisfying California
and any other withholding requirements.
(vii) The Exchange Rights Agreement, the Registration Rights
Agreement and the Lock-Up Agreements substantially in the form attached
hereto as ATTACHMENTS 1, 2, and 3, respectively.
-6-
<PAGE> 10
2.4 CLOSING COSTS
The Operating Partnership shall pay any documentary transfer taxes,
escrow charges, title charges and recording taxes or fees incurred in connection
with the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP
The Operating Partnership hereby represents and warrants to and
covenants with the Contributor that:
(a) Organization; Authority. The Operating Partnership has been duly
formed and is validly existing with requisite power to enter this Contribution
Agreement and all agreements contemplated hereby. The persons and entities
executing this Contribution Agreement and all agreements contemplated hereby on
behalf of the Operating Partnership have the power and authority to enter into
this Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and performance by the
Operating Partnership of its obligations under this Contribution Agreement and
all agreements contemplated hereby will not contravene any provision of
applicable law, the OP Agreement, charter, declaration of trust or other
constituent document of the Operating Partnership, or any agreement or other
instrument binding upon the Operating Partnership or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over the
Operating Partnership, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Operating Partnership of its obligations under this
Contribution Agreement and all other agreements contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
The Contributor represents and warrants to and covenants with the
Operating Partnership as provided in EXHIBIT E attached hereto, and acknowledges
and agrees to be bound by the indemnification provisions contained therein.
3.3 INDEMNIFICATION
The Operating Partnership shall indemnify and hold harmless the
Contributor (the "Indemnified Contributor Party") from and against any and all
claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable
-7-
<PAGE> 11
attorneys' fees, costs of investigation and remediation, costs of investigative
judicial or administrative proceedings or appeals therefrom and costs of
attachment or similar bonds (collectively, "Losses") asserted against, imposed
upon or incurred by the Indemnified Contributor Party in connection with: (i)
any breach of a representation or warranty of the Operating Partnership
contained in this Contribution Agreement; and (ii) all fees, costs and expenses
of the Operating Partnership in connection with the transactions contemplated by
this Contribution Agreement, including, without limitation, any and all costs
associated with the transfers contemplated herein.
ARTICLE 4. COVENANTS
4.1 Covenants of Contributor
(a) From the date hereof through the Closing, the Contributor shall
not:
(i) Sell or transfer all or any portion of the Partnership
Interest; or
(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of the Partnership Interest.
(b) From the date hereof through the Closing, the Contributor shall
permit each of the Partnerships to conduct its business in the ordinary course,
consistent with past practice, and shall not permit any of the Partnerships to:
(i) Enter into any material transaction not in the ordinary
course of business;
(ii) Sell or transfer any assets of the Partnerships;
(iii) Mortgage, pledge or encumber (or permit to become
encumbered) any assets of the Partnerships, except (x) liens for taxes not
due, (y) purchase money security interests and (z) mechanics' liens being
disputed by any of the Partnerships in good faith and by appropriate
proceedings;
(iv) Amend, modify or terminate any material agreements or other
instruments to which any of the Partnerships is a party; or
(v) Materially alter the manner of keeping the Partnerships'
books, accounts or records or the accounting practices therein reflected.
(c) The Contributor shall use its good faith diligent efforts to
obtain any approvals, waivers or other consents of third parties required to
effect the transactions contemplated by this Contribution Agreement.
-8-
<PAGE> 12
ARTICLE 5. RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this ARTICLE 5 shall
become effective only upon the Closing of the contribution and exchange of the
Partnership Interest pursuant to ARTICLES 1 and 2 hereof.
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP
As of the Closing, the Contributor irrevocably waives, releases and
forever discharges the Operating Partnership and the Operating Partnership's
affiliates, partners (including Lawrence H. Feldman), agents, attorneys,
successors and assigns of and from any and all charges, complaints, claims,
liabilities, damages, actions, causes of action, losses and costs of any nature
whatsoever (collectively, "Contributor Claims"), known or unknown, suspected or
unsuspected, arising out of or relating to any of the Partnership Agreements,
this Contribution Agreement or any other matter which exists at the Closing,
except for Contributor Claims arising from the breach of any representation,
warranty, covenant or obligation under this Contribution Agreement.
5.2 GENERAL RELEASE OF CONTRIBUTOR
As of the Closing, the Operating Partnership irrevocably waives,
releases and forever discharges the Contributor and Contributor's agents,
attorneys, successors and assigns of and from any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "Operating Partnership Claims"), known or
unknown, suspected or unsuspected, arising out of or relating to any of the
Partnership Agreements, this Contribution Agreement or any other matter which
exists at the Closing, except for Operating Partnership Claims arising from the
breach of any representation, warranty, covenant or obligation under this
Contribution Agreement or any supplemental representations and warranties
agreement entered into as of the Closing Date by and among the Contributor,
certain other continuing investors in the Operating Partnership and the
Operating Partnership.
5.3 INTENTIONALLY OMITTED
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT
As of the Closing, the Contributor waives and relinquishes all rights
and benefits otherwise afforded to Contributor under the Partnership Agreements
including, without limitation, any right to consent to or approve of the sale or
contribution by the other partners (or members) of the Partnerships of their
partnership interests to the Company or the Operating Partnership.
-9-
<PAGE> 13
ARTICLE 6. POWER OF ATTORNEY
6.1 GRANT OF POWER OF ATTORNEY
Contributor does hereby irrevocably appoint the Operating Partnership
(or its designee) and each of them individually and any successor thereof from
time to time (such Operating Partnership or designee or any such successor of
any of them acting in his, her or its capacity as attorney-in-fact pursuant
hereto, the "Attorney-in-Fact") as the true and lawful attorney-in-fact and
agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including, without limitation, the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney- in-Fact a proxy (the
"Proxy") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.
Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of Contributor, by operation of law or by the
occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Contribution Agreement, the Attorney-in-Fact shall nevertheless be authorized
and directed to complete all such transactions as if such other act or events
had not occurred and regardless of notice thereof. Contributor agrees that, at
the request of the Operating Partnership, it will promptly execute a separate
power of attorney and proxy on the same terms set forth in this ARTICLE 6, such
execution to be witnessed and notarized. Contributor hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.
Contributor acknowledges that the Operating Partnership has, and any
designee or successor thereof acting as Attorney-in-Fact may have, an economic
interest in the transactions contemplated by this Contribution Agreement.
-10-
<PAGE> 14
6.2 LIMITATION ON LIABILITY
It is understood that the Attorney-in-Fact assumes no responsibility or
liability to any person by virtue of the Power of Attorney or Proxy granted by
Contributor hereby. The Attorney-in-Fact makes no representations with respect
to and shall have no responsibility for the Formation Transactions or the Public
Offering, or the acquisition of the Partnership Interest by the Operating
Partnership and shall not be liable for any error or judgment or for any act
done or omitted or for any mistake of fact or law except for its own gross
negligence or bad faith. Contributor agrees to indemnify the Attorney-in-Fact
for and to hold the Attorney-in-Fact harmless against any loss, claim, damage or
liability incurred on its part arising out of or in connection with it acting as
the Attorney-in-Fact under the Power of Attorney or Proxy created by Contributor
hereby, as well as the cost and expense of investigating and defending against
any such loss, claim, damage or liability, except to the extent such loss,
claim, damage or liability is due to the gross negligence or bad faith of the
Attorney-in-Fact. Contributor agrees that the Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for Operating Partnership or its
successors or affiliates), and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel. It is understood that the
Attorney-in-Fact may, without breaching any express or implied obligation to
Contributor hereunder, release, amend or modify any other power of attorney or
proxy granted by any other person under any related agreement.
ARTICLE 7. MISCELLANEOUS
7.1 FURTHER ASSURANCES.
The Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
7.2 COUNTERPARTS
This Contribution Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.3 GOVERNING LAW
This Contribution Agreement shall be governed by the internal laws of
the State of New York, without regard to the conflicts of laws provisions
thereof.
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<PAGE> 15
7.4 NOTICES
Any notice to be given hereunder by any party to the other shall be
given in writing by personal delivery or by registered or certified mail,
postage prepaid, return receipt requested, and shall be deemed communicated as
of the date of personal delivery (including delivery by overnight courier).
Mailed notices shall be addressed as set forth below, but any party may change
the address set forth below by written notice to other parties in accordance
with this paragraph.
To the Contributor:
Clifford L. Stein
c/o Feldman Equities
120 West 45th Street
New York, NY 10022
To the Operating Partnership:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, NY 10022
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<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this Contribution
Agreement as of the date first written above.
OPERATING PARTNERSHIP:
Tower Realty Operating Partnership, L.P.
By: Tower Realty Trust, Inc.
By: /s/ Lawrence H. Feldman
--------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board,
Chief Executive Officer
and President
CONTRIBUTOR:
/s/ Clifford L. Stein
-----------------------------------------
Clifford L. Stein
<PAGE> 17
EXHIBIT B
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby assigns,
transfers, contributes and conveys to Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), its entire legal
and beneficial right, title and interest in and to ____________________________,
a __________________________ (the "Partnership"), including, without limitation,
all right, title and interest, if any, of the undersigned in and to the assets
of the Partnership and the right to receive distributions of money, profits and
other assets from the Partnership, presently existing or hereafter at any time
arising or accruing (such right, title and interest are hereinafter collectively
referred to as the "Partnership Interest"), TO HAVE AND TO HOLD the same unto
the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating
Partnership assumes all obligations in respect of the Partnership Interest.
The Partnership owns certain real property as described in
Attachment 1 attached hereto.
Executed: ___________ ___, 1997
By:_____________________________________
Clifford L. Stein
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<PAGE> 18
EXHIBIT C
FORM OF QUITCLAIM
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ ................
........ Computed on the consideration or
value of property conveyed; OR
........ Computed on the consideration or
value less liens or encumbrances
remaining at time of sale.
---------------------------------------------
Signature of Declarant of Agent determining
tax -- Firm name
- --------------------------------------------------------------------------------
QUITCLAIM DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to
Tower Realty Operating Partnership, L.P., a Delaware limited partnership
the real property in the City of ____________, County of _____________, State of
_____________, described as
Dated_____________ ___________________________________
___________________________________
___________________________________
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<PAGE> 19
STATE OF NEW YORK )
)
COUNTY OF )
On __________________________________________________________________ before me,
_______________________________________________________________________________,
personally appeared ____________________________________________________________
_______________________________________________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature _________________________ (This area for official notarial seal)
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<PAGE> 20
EXHIBIT D
CALCULATION OF NUMBER OF OP UNITS
The number of OP units to be issued to Contributor shall be
calculated as follows:
$1,765,779/Mid-Point
For purposes of this Contribution Agreement, the "Mid-Point"
means the median of the proposed per share price range for the Common Stock as
set forth in the Preliminary Prospectus.
D-1
<PAGE> 21
EXHIBIT E
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
OF CONTRIBUTOR
ARTICLE 1. ADDITIONAL DEFINED TERMS
1.1 For purposes of this EXHIBIT E, the following terms have
the meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT E is attached:
ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively, "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.
CONTRIBUTION AGREEMENT: Means the Contribution Agreement to
which this EXHIBIT E is attached.
GOVERNMENTAL ENTITY: Means any government or agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
INDEMNIFYING PARTY: Means any party required to indemnify any
other party under ARTICLE 3.2 of this EXHIBIT E or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.
KNOWLEDGE: Means, with respect to any representation or
warranty so indicated, the actual knowledge, upon reasonable investigation and
inquiry in good faith, of the signatory to the Contribution Agreement.
LIENS: Means, with respect to any real and personal property,
all mortgages, pledges, liens, options, charges, security interests,
restrictions, prior assignments, encumbrances, covenants, encroachments,
assessments, rights of others, licenses, easements, liabilities or claims of any
kind or nature whatsoever, direct or indirect, including, without limitation,
interests in or claims to revenues generated by such property.
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PERMITTED LIENS: Means (a) Liens, or deposits made to secure
the release of such Liens, securing taxes, the payment of which is not
delinquent or the payment of which is actively being contested in good faith by
appropriate proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the
districts in which the Properties are located which are not violated by the
existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's
and mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not have a
material adverse effect upon, or materially interfere with the use of, the
Properties; and
(e) any exceptions contained in the Title Policies.
PERSON: Means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
PORTFOLIO AGREEMENTS: Means the agreements, including the
Contribution Agreement, listed on ATTACHMENT 1 hereto, which contemplate the
transfer of partnership and/or limited liability company membership interests in
certain of the Participating Partnerships and LLCs from any entity directly or
indirectly owned by Contributor to the Company and the Operating Partnership.
PROSPECTUS: Means the Company's Form S-11 Registration
Statement.
REIT STOCK: Shall have the meaning set forth in the OP
Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
The Contributor represents and warrants to the Operating
Partnership as set forth below in this ARTICLE 2. Notwithstanding any other
provision of the Contribution Agreement or this EXHIBIT E, the Contributor makes
representations, warranties and indemnities only with respect to: (i) the
Properties identified on EXHIBIT A to the Contribution Agreement (the "Property"
or the "Properties"), and (ii) the interests in the Partnerships to be
transferred by the Contributor.
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2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and (B)
has all requisite power and authority to own, lease or operate its property and
to carry on its business as presently conducted and, to the extent required
under applicable law, is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
2.2 DUE AUTHORIZATION. The execution, delivery and performance
of the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered by
or on behalf of the Contributor pursuant to this Contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.
2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is
the sole owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.
2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes
all of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of all
security interests, mortgages, pledges, liens, encumbrances, claims and equities
to the Operating Partnership.
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<PAGE> 24
2.6 NO VIOLATION. None of the execution, delivery or
performance of the Contribution Agreement and the transactions contemplated
hereby does or will, with or without the giving of notice, lapse of time, or
both, (i) violate, conflict with, result in a breach of, or constitute a default
under or give to others any right of termination or cancellation of (A) the
organizational documents, including the charters and bylaws, if any, of the
Contributor, (B) any material agreement, document or instrument to which the
Contributor is a party or by which the Contributor or its Property is bound or
(C) any term or provision of any judgment, order, writ, injunction, or decree of
any governmental or regulatory authority binding on the Contributor or by which
the Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.
2.7 NON-FOREIGN STATUS. The Contributor is not a foreign
person, foreign corporation, foreign partnership, foreign trust or foreign
estate (as defined in the Code), and is, therefore, not subject to the
provisions of the Code relating to the withholding of sales proceeds to foreign
persons.
2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions. If Contributor fails to provide
such certificates or affidavits, the Operating Partnership may withhold a
portion of any payments otherwise to be made to the Contributor as required by
the Code or New York law.
2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her
or its understanding that the offering and sale of the OP Units to be acquired
pursuant to the Contribution Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Act"). In furtherance thereof, the
Contributor represents and warrants to the Company as follows:
2.9.1 INVESTMENT. The Contributor is acquiring the OP
Units solely for his, her or its own account for the purpose of investment and
not as a nominee or agent for any other person and not with a view to, or for
offer or sale in connection with, any distribution of any thereof. The
Contributor agrees and acknowledges that he, she or it will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (hereinafter, "Transfer") any of the OP Units unless (i) the Transfer
is pursuant to an effective registration statement under the Act and
qualification or other compliance under applicable blue sky or state securities
laws, or (ii) counsel for the Contributor (which counsel shall be reasonably
acceptable to the Operating Partnership) shall have furnished the Operating
Partnership with an opinion, reasonably satisfactory in form and substance to
the Operating Partnership to the effect that no such registration is required
because of the availability of an exemption from registration under the Act and
qualification or other compliance under applicable blue sky or state securities
laws.
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<PAGE> 25
2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the Contributor
has previously invested in securities similar to the OP Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Contribution Agreement. The Contributor is able to bear
the economic risk of holding the OP Units for an indefinite period and is able
to afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.
2.9.3 HOLDING PERIOD. The Contributor acknowledges
that he, she or it has been advised that (i) the OP Units and the common stock
of the Company into which the OP Units may be exchanged in certain circumstances
(the "Common Stock") must be held indefinitely, and the Contributor must
continue to bear the economic risk of the investment in the OP Units (and any
Common Stock that might be exchanged therefor) unless they are subsequently
registered under the Act or an exemption from such registration is available,
(ii) a restrictive legend in the form hereafter set forth shall be placed on the
certificates representing the OP Units (and any Common Stock that might be
exchanged therefor), and (iii) a notation shall be made in the appropriate
records of the Operating Partnership (and the Company) indicating that the OP
Units (and any Common Stock that might be exchanged therefor) are subject to
restrictions on transfer.
2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is defined
in Rule 501(a) of Regulation D under the Act) and as such:
(i) is a director or executive officer of
the Company; or
(ii) has an individual net worth, or joint
net worth with his or her spouse, in excess of $1,000,000; or
(iii) had an individual annual adjusted
gross income in excess of $200,000 in each of the two most recent years
and reasonably expects to have annual adjusted gross income in excess
of $200,000 in the current year; or
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<PAGE> 26
(iv) had a joint income with his spouse in
excess of $300,000 in each of the two most recent years and reasonably
expects to have an annual adjusted gross income, with his spouse, in
excess of $300,000 in the current year.
If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).
2.9.5 LEGENDING. Each certificate representing the OP
Units (and any Common Stock that might be exchanged therefor) shall bear the
following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY
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<PAGE> 27
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH
A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION.
2.10 LITIGATION. There are no Claims which could reasonably be
anticipated to result in damages in excess of $50,000 pending or, to Knowledge,
threatened that directly or indirectly affect the Contributor, the Partnerships,
the Properties or the Formation Transactions, nor has any such claim been
pending or, to Knowledge, threatened as of the Closing.
2.11 NO BROKERS. Neither the Contributor nor any of its
respective officers, directors or employees has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in the obligation of the Operating Partnership or any of its affiliates to pay
any finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.
2.12 SOLVENCY. The Contributor has been and will be solvent at
all times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.
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<PAGE> 28
2.13 NO MISREPRESENTATIONS. No representation, warranty or
statement made, or information provided, by the Contributor in the Contribution
Agreement or in any other document or instrument furnished or to be furnished by
or on behalf of the Contributor pursuant hereto or as contemplated hereby (i)
contains or will contain any untrue statement of a material fact or (ii) omits
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. For purposes of the preceding sentence,
materiality shall be determined with reference to the total portfolio of real
properties and other interests to be transferred pursuant to the Operating
Partnership pursuant to the Formation Transactions.
ARTICLE 3. INDEMNIFICATION
3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR
BREACH.
(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT E or in any Schedule or certificate delivered pursuant
hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the
Contribution Agreement or this EXHIBIT E, no party hereto shall be liable under
this EXHIBIT E or the Contribution Agreement for monetary damages (or otherwise)
for breach of any of its representations and warranties contained in this
EXHIBIT E or the Contribution Agreement, or in any Schedule, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this ARTICLE 3.
3.2 GENERAL INDEMNIFICATION
(a) The Contributor shall indemnify and hold harmless the
Operating Partnership, the Company, and their affiliates and each of their
respective directors, officers, employees, agents, representatives and
affiliates (each of which is an "Indemnified Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation, costs of investigative, judicial or administrative proceedings or
appeals therefrom, and costs of attachment or similar bonds (collectively,
"Losses"), asserted against, imposed upon or incurred by the Indemnified Party
in connection with or as a result of any breach of a representation or warranty
of the Contributor contained in the Contribution Agreement or in any Schedule,
certificate or affidavit delivered by the Contributor pursuant to the
Contribution Agreement.
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<PAGE> 29
(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributor in
connection with the transactions contemplated by the Contribution
Agreement;
(ii) any liabilities or obligations incurred, arising
from or out of, in connection with or as a result of the failure of the
Contributor to obtain all consents required to consummate the
transactions contemplated by the Contribution Agreement; or
(iii) any breach of any representation, warranty or
covenant set forth in the Contribution Agreement.
3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy
its obligations hereunder by the prompt delivery (paid promptly as and when
expenses are incurred) to an Indemnified Party of OP Units, subject to the
limits on ownership and transfer of REIT Stock set forth in the Company's
articles of incorporation. Any OP Units delivered to an Indemnified Party
hereunder shall be valued based upon the initial public offering price of the
Company's Common Stock.
3.4 NOTICE AND DEFENSE BY CLAIMS. As soon as reasonably
practicable after receipt by the Indemnified Party of notice of any liability or
claim incurred by or asserted against the Indemnified Party that is subject to
indemnification under this ARTICLE 3, the Indemnified Party shall give notice
thereof to the Contributor. The Indemnified Party may at its option demand
indemnity under this ARTICLE 3 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not frivolous
and that the Indemnified Party may be liable for, or otherwise incur, a Loss as
a result thereof and shall give notice of such determination to the Contributor.
The Indemnified Party shall permit the Contributor, at its option and expense,
to assume the defense of any such claim by counsel selected by the Contributor
and reasonably satisfactory to the Indemnified Party, and to settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that the Indemnified Party may at all
times participate in such defense at its expense; and PROVIDED FURTHER, HOWEVER,
that the Contributor shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party in its sole and absolute
discretion, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnified Party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall have
the right to
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<PAGE> 30
undertake the defense, compromise or settlement of such liability or claim on
behalf of and for the account of the Contributor.
3.5 LIMITATIONS ON INDEMNIFICATION UNDER ARTICLE 3.
Notwithstanding anything contained herein to the contrary, the Contributor shall
not be liable or obligated to make payments under this ARTICLE 3 with respect to
any Property or Partnership Interest to the extent such payments in the
aggregate would exceed the value of the OP Units (based upon the initial public
offering price of the Common Stock) received by the Contributor at the Closing.
Notwithstanding anything contained herein to the contrary, the Indemnified
Parties shall look first to the Contributor's OP Units for indemnification under
this ARTICLE 3 and then to the Contributor's other assets.
3.6 LIMITATION PERIOD.
(a) Notwithstanding the foregoing, any claim for
indemnification under ARTICLE 3.2 hereof must be asserted in writing by the
Indemnified Party, stating the nature of the Losses and the basis for
indemnification therefor within one year after the Closing.
(b) If so asserted in writing prior to the applicable
expiration date, such claims for indemnification shall survive until resolved by
mutual agreement between the Contributor and the Indemnified Party or by
judicial determination. Any claim for indemnification not so asserted in writing
prior to the applicable expiration date shall not thereafter be asserted and
shall forever be waived.
3.7 RESERVATION OF CONTRIBUTOR RIGHTS. Notwithstanding
anything else in this Contribution Agreement to the contrary, the Contributor
reserves unto itself all rights and remedies (including rights to seek
contribution) against any third party indemnitors, prior property owners or
occupants, and contributors to any contamination, for which the Partnerships
have been indemnified by the Contributor hereunder. To the extent the
Contributor's rights against any such third party owners, occupants, indemnitors
or contributors may be materially prejudiced by actions or inactions by any
owner or occupant of the Properties after the Closing, the Contributor's
indemnity obligation shall be reduced in accordance with the effect of the
actions or inactions which so prejudiced the Contributor's rights.
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ATTACHMENT 1
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
__________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, together with certain other limited
partners, has formed the Operating Partnership
pursuant to the Agreement of Limited Partnership of
the Operating Partnership dated __________ __, 1997
(as such agreement may be amended or amended and
restated from time to time, the "PARTNERSHIP
AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited
Partners (as defined below) directly or indirectly
hold units of limited partnership interest ("OP
UNITS") in the Operating Partnership.
(c) The Operating Partnership has agreed to provide the
Limited Partners with certain direct or indirect
rights to exchange their OP Units for cash or, at the
election of the Company, for shares of the Company's
common stock, par value $0.01 per share (the "REIT
STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
<PAGE> 32
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Stock in REIT
Stock or makes a distribution to all holders of its outstanding REIT Stock in
REIT Stock; (ii) subdivides its outstanding REIT Stock; or (iii) combines its
outstanding REIT Stock into a smaller number of shares of REIT Stock, the
Exchange Factor shall be adjusted by multiplying the Exchange Factor by a
fraction, the numerator of which shall be the number of shares of REIT Stock
issued and outstanding on the record date for such dividend, contribution,
subdivision or combination assuming for such purpose that such dividend,
distribution, subdivision or combination has occurred as of such time, and the
denominator of which shall be the actual number of shares of REIT Stock
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Exchange Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated
and/or the Operating Partnership
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
-2-
<PAGE> 33
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to
the product of the number of OP Units offered for exchange by an Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company or the Operating Partnership issues to all holders
of REIT Stock rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase REIT Stock,
or any other securities or property (collectively, the "rights"), then the REIT
Stock Amount shall also include such rights that a holder of that number of
shares of REIT Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading
on the NYSE, any national securities exchange or Nasdaq, the last
reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
-3-
<PAGE> 34
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"EXCHANGING PARTNER"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding
the provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging
Partner within five (5) Business Days after the receipt by the Company
of such Notice of Exchange,
-4-
<PAGE> 35
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of
the Company,
(b) would otherwise jeopardize the REIT status of the Company,
or
(c) would cause the acquisition of the REIT Stock by the
Limited Partner to be "integrated" with any other distribution of REIT
Stock by the Company for purposes of complying with the registration
provisions of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article
2, any person to whom OP Units have been pledged, in compliance with the terms
of the Lock-up Agreement, may exercise its Exchange Right prior to the date that
is one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
-5-
<PAGE> 36
(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of
the Exchange Right, the Company shall reserve for issuance such number of shares
of REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable
upon exchange of OP Units (or the cash equivalent amount thereof if the Cash
Amount is paid) shall be computed on the basis of the aggregate amount of OP
Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
-6-
<PAGE> 37
(A) a copy of the prospectus contained in the
Registration Statement on Form S-11 filed by the Company in
connection with the IPO, any prospectus contained in any
Registration Statement subsequently filed by the Company, and
any supplement or amendment thereto (each, a "PROSPECTUS"),
and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by
the Company with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited investor"
as defined in Rule 501 of the regulations promulgated under
the Securities Act.
(B) If such Exchanging Partner has retained or
retains a person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
(b) (i) Such Exchanging Partner understands that an investment in the
Company involves substantial risks.
-7-
<PAGE> 38
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of such Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws, except as provided in the Registration Rights
Agreement entered into by the Company and the Exchanging
Partner (the "REGISTRATION RIGHTS AGREEMENT").
-8-
<PAGE> 39
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
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<PAGE> 40
4.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with
the consent of the Company by a vote of the Limited Partners in the same manner
as the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein, provided, however, that the Company shall vote its
limited partnership interests in proportion to the votes of the other Limited
Partners.
-10-
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By:
-----------------------------------
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By:
------------------------------
Name:
Title:
LIMITED PARTNERS:
---------------------------
Signature
---------------------------
Name (Please Print or Type)
-11-
<PAGE> 42
Exhibit A
Name and Address of Limited Partners
[To be attached]
-12-
<PAGE> 43
EXHIBIT A
CONSTITUENT INTERESTS OF
CLIFFORD L. STEIN'S (THE "CONTRIBUTOR") PARTNERSHIP INTEREST*
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PARTNERSHIPS IN WHICH CONTRIBUTOR PARTNERSHIPS IN WHICH CONTRIBUTOR PROPERTIES HELD BY THE PARTNERSHIPS
HOLDS A DIRECT INTEREST** HOLDS AN INDIRECT INTEREST
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FSA Associates, L.P. 286 Madison Ave.
D/F Portfolio Associates Limited
Partnership
286 Madison, L.P.
- --------------------------------------------------------------------------------------------------------------
FSA Associates, L.P. 290 Madison Ave.
D/F Portfolio Associates Limited
Partnership
290 Madison, L.P.
- --------------------------------------------------------------------------------------------------------------
FSA Associates, L.P. 292 Madison Ave.
D/F Portfolio Associates Limited
Partnership
292 Madison, L.P.
- --------------------------------------------------------------------------------------------------------------
FSA Associates, L.P. 5151 East Broadway
D/F Portfolio Associates Limited
East Broadway 5151, L.P.
- --------------------------------------------------------------------------------------------------------------
FSA Associates, L.P. One Orlando Center
D/F Portfolio Associates Limited
Magnolia Associates Limited
Partnership
- --------------------------------------------------------------------------------------------------------------
5750 Feldstein, Ltd. 5750 Major Blvd.
5750 Associates Limited Partnership
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------
* 50% of Clifford Stein's loan to Lawrence Feldman will be converted to an
equity interest in 2800 Company LLC or another entity that holds an interest
in 2800 Associates, L.P. (which, in turn, owns the 2800 N. Central Property)
which property interest will be contributed to the Operating Partnership.
** Corporations owned by Clifford L. Stein that hold interests in any of the
Properties shall contribute the partnership interests held by such
corporations to the Operating Partnership.
Clifford L. Stein contributed his interest in FSA Associates to the
Operating Partnership on March 31, 1997.
A-1
<PAGE> 44
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated: __________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
(Signature of Limited Partner)
_____________________________
(Street Address)
(City) (State) (Zip Code)
If REIT Stock is to be issued, issue to:
Name:
Limited Partner's social security or tax
identification number:
-13-
<PAGE> 45
BATTLE FOWLER LLP
DRAFT - 7/24/97
ATTACHMENT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, limited liability companies, corporations and
other entities which are Holders or in which the Holders own direct or indirect
interests (the "PROPERTY PARTNERSHIPS") pursuant to Option or Contribution
Agreements (the "OPTION AGREEMENTS") among the Operating Partnership and the
Grantors named therein, and in connection therewith the Holders will receive
units of limited partnership interest in the Operating Partnership (such units
of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
<PAGE> 46
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating
to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement
or
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<PAGE> 47
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
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"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not
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delay, suspend or withdraw a Registration Statement for such reason for
more than 60 days or more often than twice during any period of 12
consecutive months.
(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration Statement
covering the Registrable Securities held by more than one Holder.
2.2 Expenses.
(i) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if any,
sales commissions, the fees and disbursements of counsel representing
such Holder and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that does
not, within 10 days after receipt of a reasonable request by the Company for
information in connection with the Shelf Registration Statement, provide such
information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
2.4 Effect of Material Breach. In the event that the Company shall
breach any of its material obligations hereunder in any material respect, any
Holder of Registrable Securities may demand that the Company file a registration
statement covering such Holder's Registrable Securities. The Company agrees to
file such registration statement within 60 days after receipt of such demand and
agrees to use its best efforts to procure the effectiveness of such registration
statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed pursuant
to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period set
forth in Section 2 hereof, a Shelf Registration Statement, which Shelf
Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects
with the requirements of the applicable form of registration
statement and include all financial statements required by the
SEC to be filed therewith.
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(ii) (A) Subject to Article III, Section (a)(ii)(B),
(I) prepare and file with the SEC such
amendments and post-effective amendments to each such
Registration Statement as may be necessary to keep
such Registration Statement effective for the
applicable period;
(II) cause each such Prospectus to be
supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule
424 or any similar rule that may be adopted under the
Securities Act;
(III) respond as promptly as practicable to
any comments received from the SEC with respect to
the Shelf Registration Statement, or any amendment,
post-effective amendment or supplement relating
thereto; and
(IV) comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by each Registration Statement
during the applicable period in accordance with the
intended method or methods of distribution by the
selling Holders thereof.
(B) (I) Each Holder shall promptly provide to the
Company such information as the Company reasonably
requests in order to identify such Holder and the
method of distribution in a post-effective amendment
to the Registration Statement or a supplement to the
Prospectus.
(II) Such Holder also shall notify the
Company in writing upon completion of any offer or
sale or at such time as such Holder no longer intends
to make offers or sales under the Registration
Statement.
(iii) Furnish to each Holder of Registrable Securities,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable
Securities; the Company consents to the use of the Prospectus,
including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary
Prospectus.
(iv) Use its reasonable efforts to register or qualify the
Registrable Securities by the time the applicable Registration
Statement is declared effective by the SEC under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
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Registrable Securities covered by a Registration Statement shall
reasonably request in writing, keep each such registration or
qualification effective during the period such Registration Statement
is required to be kept effective, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that
the Company shall not be required to
(A) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to
qualify but for this Article III, Section (a)(iv),
(B) subject itself to taxation in any such
jurisdiction, or
(C) submit to the general service of process in any
such jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and,
if requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become
effective and when any post-effective amendments and
supplements thereto become effective,
(B) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose,
(C) if the Company receives any notification with
respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and
(D) of the happening of any event during the period a
Registration Statement is effective which is of a type
specified in Article II, Section 2.1(iii) hereof or as a
result of which such Registration Statement or the related
Prospectus contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the
Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment.
(vii) Furnish to each Holder of Registrable Securities,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment
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thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested).
(viii) (A) Cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any Securities Act legend; and
(B) enable certificates for such Registrable
Securities to be issued for such numbers of shares of Common
Stock and registered in such names as the selling Holders may
reasonably request at least two business days prior to any
sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III,
Section (a)(ii)(B) hereof, upon the occurrence of any event
contemplated by Article III, Section (a)(v)(D) hereof, use its
reasonable efforts promptly to prepare and file a supplement or
prepare, file and obtain effectiveness of a post-effective amendment to
a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(x) Make available for inspection by representatives of the
Holders of the Registrable Securities and any counsel or accountant
retained by such Holders, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply
all information reasonably requested by any such representative,
counsel or accountant in connection with a Registration Statement;
provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies
such representatives, counsel or accountants in writing that such
records, documents or information are confidential shall not be
disclosed by such representatives, counsel or accountants unless
(A) the disclosure of such records, documents or
information is necessary to avoid or correct a material
misstatement or omission in a Registration Statement,
(B) the release of such records, documents or
information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, or
(C) such records, documents or information have been
generally made available to the public.
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(xi) Within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of
such document (not including any documents incorporated by reference
therein unless requested) to the Holders of Registrable Securities.
(xii) Use its reasonable efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar
securities issued by the Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities,
not later than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable Holders to consummate the disposition of such Registrable
Securities.
(b) The Company may require each Holder of Registrable Securities to
furnish to the Company in writing such information regarding the
proposed distribution by such Holder of such Registrable Securities as
the Company may from time to time reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations
with respect to the Registration Statement required to be filed
pursuant to Section 2 hereof and this Section 3, each Holder agrees
that
(i) it will not offer or sell its Registrable Securities under
the Registration Statement until it has received copies of the
supplemental or amended Prospectus contemplated by Article III, Section
(a)(ii) hereof and receives notice that any post-effective amendment
has become effective, and
(ii) upon receipt of any notice from the Company of the
happening of any event of the kind described in Article III, Section
(a)(v)(D) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such
Holder receives copies of the supplemented or amended Prospectus
contemplated by Article III, Section (a)(ix) hereof and receives notice
that any post-
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effective amendment has become effective, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
IV Indemnification; Contribution.
4.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder (within the meaning of Section 15 of the Securities
Act) as follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading or
(C) arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental
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agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of any such
amended or supplemental Prospectus by the Company, if such loss,
liability, claim, damage or expense would not have arisen had such
delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it
may have under the indemnity agreement provided in Section
4.1(a) or 4.1(b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the
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indemnified party results in the forfeiture by the
indemnifying party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than
the indemnification obligation provided under Section 4.1(a)
or 4.1(b) above.
(ii) If the indemnifying party so elects within a reasonable
time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved
by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however,
that, if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the
proviso to Section 4.1(c), such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's
defense, and counsel for the indemnified party or parties
shall be entitled to conduct the defense of such indemnified
party or parties, it being understood that both such counsel
will cooperate with each other to conduct the defense of such
action or proceeding as efficiently as possible.
(B) If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such
defense, after having received the notice referred to in
Section 4.1(c), the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified
party or parties as incurred.
(C) In such event, however, no indemnifying party
will be liable for any settlement effected without the written
consent of such indemnifying party, which consent may not be
unreasonably withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with
this Section 4(c), such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
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4.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 4 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one hand and the
selling Holders on the other (in such proportions that the
selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations.
(B) (I) The relative benefits to the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, the total proceeds
received by the indemnifying party and indemnified
parties in connection with the offering to which such
losses, claims, damages, liabilities or expenses
relate.
(II) The relative fault of the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether the action
in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact, has been made by,
or relates to information supplied by, such
indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section
4.4, no selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities of such selling Holder were
offered to the public exceeds the amount of any damages which
such selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
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(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any,
who controls a Holder within the meaning of Section 15 of the
Securities Act and directors and officers of a Holder shall have the
same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration
Statement and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act shall have the same rights
to contribution as the Company.
V Filing of Exchange Act Reports; Rule 144 Sales
5.1 The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act so as to
enable any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition by any
Holder of any Exchange Stock pursuant to Rule 144, the Company shall cooperate
with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Exchange
Stock.
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the outstanding
Registrable Securities; provided, however, that no amendment,
modification or supplement or waiver or consent to the departure with
respect to the provisions of Articles 2, 4 or 5 hereof shall be
effective as against any Holder unless consented to in writing by such
Holder.
(ii) Notice of any amendment, modification or supplement to
this Agreement adopted in accordance with this Section 6.1 shall be
provided by the Company to each Holder at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex,
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telecopier, or any courier guaranteeing overnight delivery, to the parties at
their respective addresses set forth opposite their signatures below or at such
other address as a party may indicate by written notice to the other party or
parties.
(ii) All such notices and communications shall be deemed to
have been duly given:
(A) at the time delivered by hand, if personally
delivered;
(B) three (3) business days after being deposited in
the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By:
----------------------------------------
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING
New York, New York 10036-4003 PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By:
----------------------------------------
Name:
Title:
HOLDERS:
[Address:]
---------------------------------------------
Signature
---------------------------------------------
Name (Please Print or Type)
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<PAGE> 62
ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public pursuant to a public offering (the "Offering").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Company's Registration Statement on Form S-11
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that without the prior written consent of Merrill Lynch, the undersigned
will not (and, except as may be disclosed in the Prospectus, will not announce
or disclose any intention to) directly or indirectly sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition at any time in
the future) of, any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, including any units of limited
partnership interest (the "OP Units") in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership") beneficially
owned by the undersigned as of the date of the closing of the Company's initial
public offering, for a period of twenty-four (24) months after the later of (i)
date of the final Prospectus relating to the
<PAGE> 63
offering of the Shares to the public by the Underwriters and (ii) the date the
Offering is consummated and closed. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and _____________________,
its Transfer Agent, are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
letter agreement.
Very truly yours,
[INVESTOR]
By:____________________________
Name:
Title:
-2-
<PAGE> 64
ATTACHMENT 3
(CONTINUED)
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Tower Realty Operating Partnership, L.P.
120 West 46th Street, 24th Floor
New York, New York 10036
Dear Sirs,
Reference is made to the Option Agreement, dated _________, 1997 (the
"Option Agreement"), by and between the undersigned and Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Option Agreement.
In consideration of the execution and exercise of the Option Agreement
by the Operating Partnership, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned hereby
irrevocably agrees that without the prior written consent of the Operating
Partnership, the undersigned will not directly or indirectly sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose (or enter into any transaction or device which
is designed to, or could be expected to, result in the disposition at any time
in the future) of any any units of limited partnership interest (the "OP Units")
in the Operating Partnership, or any securities convertible into or exercisable
or exchangeable for OP Units, beneficially owned by the undersigned as of the
date hereof, for a period of twenty-four (24) months after the date hereof.
Prior to the expiration of such period, the undersigned will not publicly
announce or disclose any intention to do anything after the expiration of such
period which the undersigned is prohibited, as provided in the preceding
sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Operating Partnership is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.46
- --------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
by and between
ROBERT ADAMS
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of July 31, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
RECITALS .......................................................................................................-1-
<S> <C>
1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP
UNITS..................................................................................................-2-
1.1 CONTRIBUTION TRANSACTION......................................................................-2-
1.2 ISSUANCE OF OP UNITS..........................................................................-3-
1.3 ADJUSTED CONSIDERATION........................................................................-3-
1.4 AUTHORIZATION.................................................................................-3-
1.5 CONTRIBUTION OF CERTAIN RIGHTS................................................................-3-
1.6 PRORATIONS....................................................................................-3-
1.7 TREATMENT AS CONTRIBUTION.....................................................................-4-
2. CLOSING................................................................................................-4-
2.1 CONDITIONS PRECEDENT..........................................................................-4-
2.2 TIME AND PLACE................................................................................-5-
2.3 CLOSING DELIVERIES............................................................................-6-
2.4 CLOSING COSTS.................................................................................-6-
3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES............................................................-7-
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP...................................................................................-7-
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR.................................................-7-
3.3 INDEMNIFICATION...............................................................................-7-
4. COVENANTS..............................................................................................-8-
4.1 COVENANTS OF CONTRIBUTOR......................................................................-8-
5. RELEASES AND WAIVERS...................................................................................-8-
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP......................................................-9-
5.2 GENERAL RELEASE OF CONTRIBUTOR................................................................-9-
5.3 INTENTIONALLY OMITTED.........................................................................-9-
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT..................................................-9-
6. POWER OF ATTORNEY......................................................................................-9-
6.1 GRANT OF POWER OF ATTORNEY....................................................................-9-
6.2 LIMITATION ON LIABILITY......................................................................-10-
7. MISCELLANEOUS.........................................................................................-11-
7.1 FURTHER ASSURANCES...........................................................................-11-
-i-
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
7.2 COUNTERPARTS.................................................................................-11-
7.3 GOVERNING LAW................................................................................-11-
7.4 NOTICES......................................................................................-11-
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT LIST
SECTION FIRST
EXHIBITS REFERENCED
----------
<S> <C>
A Constituent Interests of Contributor's Partnership Interest....................................Recital D
B Contribution and Assumption Agreement................................................................1.1
C Form of Quitclaim....................................................................................1.1
D Calculation of Number of OP Units....................................................................1.2
E Representations, Warranties and Indemnities of Contributor...........................................3.2
Attachment 1...................................................................Exchange Rights Agreement
Attachment 2...............................................................Registration Rights Agreement
Attachment 3..........................................................................Lock-Up Agreements
Attachment 4...............................................................List of Portfolio Agreements
-ii-
</TABLE>
<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"Contribution Agreement") is made and entered into as of July 31, 1997 by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), and Robert Adams, an individual (the
"Contributor").
RECITALS
A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office properties (the "Participating Properties") owned or managed
by Tower Equities & Realty Corp. or its affiliates through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively,
the "Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").
B. The Formation Transactions relate to the proposed initial public
offering (the "Public Offering") of the common stock, par value $.01 per share
(the "Common Stock") of Tower Realty Trust, Inc., a Maryland corporation (the
"Company"), which will operate as a self-administered and self-managed real
estate investment trust ("REIT") and will be the sole general partner of the
Operating Partnership.
C. The owners of the Property Interests and the partners and members of
the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "Cash Participants") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP Participants").
D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT A (the "Partnerships") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT A (the "Property" or the
"Properties"). As used herein, "Partnership Agreement" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.
E. The Contributor has previously contributed certain interests in the
Partnerships to the Operating Partnership in exchange for OP Units (as defined
below).
F. The Contributor desires to, and the Operating Partnership desires
the Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, as a
<PAGE> 5
partner (or member) of the Partnerships, including, without limitation, all of
its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in the Partnerships (such right, title and interest are hereinafter
collectively referred to as the "Partnership Interest"), in exchange for
partnership units in the Operating Partnership (the "OP Units"), on the terms
and subject to the conditions set forth herein.
G. The Operating Partnership desires to make, and the Contributor
desires to receive, a return of certain contributions previously made by the
Contributor to the Operating Partnership that relate to direct or indirect
interests in certain limited partnerships, limited liability companies and
certain other entities that do not relate to the Consolidation (the "Excluded
Interests").
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR
OP UNITS
1.1 CONTRIBUTION TRANSACTION
(a) At the Closing (as defined in ARTICLE 2.2 hereof) and
subject to the terms and conditions contained in this Contribution Agreement,
the Contributor shall transfer to the Operating Partnership, absolutely and
unconditionally, all of its Partnership Interest (as such term is defined in
Recital F herein) not previously contributed to the Operating Partnership. The
contribution of the Contributor's Partnership Interest shall be evidenced by a
"Contribution and Assumption Agreement" for each of the Partnerships in
substantially the form of EXHIBIT B attached hereto. Furthermore, the
Contributor shall execute and have duly acknowledged an individual quitclaim
deed for each property in the form of EXHIBIT C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the Agreement
of Limited Partnership of the Operating Partnership (the "OP Agreement") in
order to effect the transactions contemplated hereby.
(b) At the Closing, and subject to the terms and conditions
set forth in this Contribution Agreement, the Operating Partnership shall
transfer to the Contributor, absolutely and unconditionally, all of the Excluded
Interests (as such term is defined in Recital G herein) previously contributed
by the Contributor to the Operating Partnership.
-2-
<PAGE> 6
1.2 ISSUANCE OF OP UNITS
The Operating Partnership shall, in exchange for the
Partnership Interest and after taking into account the transfer of the Excluded
Interests to the Contributor, increase or decrease the number of OP Units issued
to the Contributor in accordance with EXHIBIT D hereto. The increase or decrease
of OP Units Issued to the Contributor shall be evidenced by either an amendment
(the "Amendment") to the OP Agreement or by certificates relating to such units
(the "Certificates") in either case, as shall be acceptable to the Contributor.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the OP
Agreement in order to effect the transactions contemplated hereby.
1.3 ADJUSTED CONSIDERATION
The Operating Partnership reserves the right not to acquire
any particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the number of OP Units to be received by the Contributor pursuant to this
Contribution Agreement may be reduced by an amount determined by Lawrence H.
Feldman, in his sole discretion, to reflect the reduction in total value of the
Partnership Interest ultimately contributed by the Contributor.
1.4 AUTHORIZATION
Contributor hereby authorizes Lawrence H. Feldman to make any
and all determinations to be made by him pursuant to ARTICLE 1.3 hereof, and any
and all such determinations shall be final and binding on all parties.
1.5 CONTRIBUTION OF CERTAIN RIGHTS
Effective upon the Closing, the Contributor hereby contributes
to the Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.
1.6 PRORATIONS
At the Closing, or as promptly as practicable following the
Closing, to the extent such matters are not the right or responsibility of all
tenants of a given Property, all revenue and all charges that are customarily
prorated in transactions of this nature, including accrued rent currently due
and payable, overpaid taxes or fees, real and personal property taxes, common
area maintenance charges and other similar periodic charges payable or
-3-
<PAGE> 7
receivable with respect to such Property shall be ratably prorated between the
partners of the Partnership which holds such Property prior to the Closing and
the Operating Partnership on and after the Closing, effective as of the Closing.
After providing for such prorations, (i) if any of the Partnerships has a
resultant cash surplus, the value of the Contributor's Partnership Interest
shall be increased in proportion to Contributor's ratable share of such cash
surplus and additional OP Units (based on the Mid-Point (as such term is defined
in Exhibit D attached hereto) of the proposed offering prices per share set
forth in the final preliminary prospectus relating to the offering of shares of
Common Stock ) shall be issued to the Contributor as a valuation adjustment to
the consideration to be received by the Contributor pursuant to this
Contribution Agreement, and (ii) if any of the Partnerships has a resultant cash
deficit, the value of the Contributor's Partnership Interest shall be reduced in
proportion to Contributor's ratable share of such cash deficit, and fewer OP
Units shall be issued to the Contributor as a valuation adjustment to the
consideration to be received by the Contributor pursuant to this Contribution
Agreement, unless such deficit is cured prior to the Closing.
1.7 TREATMENT AS CONTRIBUTION
The transfer, assignment and exchange of interests effectuated
with respect to the Operating Partnership, pursuant to this Contribution
Agreement, shall constitute a "Capital Contribution" pursuant to Article IV of
the OP Agreement and is intended to be governed by Section 721(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2. CLOSING
2.1 CONDITIONS PRECEDENT
The effectiveness of the Company's registration statement
filed with the Securities and Exchange Commission on Form S-11 (the
"Registration Statement") is a condition precedent to the obligations of all
parties to this Contribution Agreement to effect the transactions contemplated
by this Contribution Agreement on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and correct in all
material respects on the date such representations and warranties were made, and
shall be true and correct in all material respects on the Closing Date as if
made at and as of such date;
(b) Each of the obligations of the Contributor to be performed
by it shall have been duly performed by it on or before the Closing Date;
-4-
<PAGE> 8
(c) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents required to be
delivered pursuant to ARTICLE 2.3 hereof;
(d) The Contributor shall have obtained all necessary consents
or approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
or regulatory authority or instrumentality that prohibits the consummation of
the transactions contemplated hereby, and no litigation or governmental
proceeding seeking such an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof and
the Closing Date any material adverse change in any of the Partnerships'
businesses;
(h) All existing management agreements with respect to the
Properties shall have been contributed to the Operating Partnership prior to or
simultaneously with the Closing; and
(i) All management functions with respect to the Properties
presently conducted by Tower Equities & Realty Corp. and its affiliates shall be
assumed by the Operating Partnership or Tower Equities Management, Inc.
2.2 TIME AND PLACE
The date, time and place of the transactions contemplated
hereunder shall be the day the Operating Partnership receives the proceeds from
the Public Offering from the underwriter(s), at 10:00 a.m. in the office of
Battle Fowler LLP, 75 East 55th Street, New York, New York 10022 (the "Closing"
or "Closing Date"). The transfers described in ARTICLE 1.1 of this Contribution
Agreement, and all closing deliveries, and the consummation of the Public
Offering, shall be deemed concurrent for all purposes.
-5-
<PAGE> 9
2.3 CLOSING DELIVERIES
At the Closing, the parties shall make, execute, acknowledge
and deliver, or cause to be made, executed, acknowledged and delivered through
the Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other
items (collectively, the "Closing Documents") necessary to carry out the
intention of this Contribution Agreement, which Closing Documents and other
items shall include, without limitation, the following:
(i) A Contribution and Assumption Agreement for each
Partnership;
(ii) An individual quitclaim deed for each Property,
fully executed and duly acknowledged from each of the individual
constituent partners and/or members of the Contributor, as required by
the Operating Partnership;
(iii) The Amendment or the Certificates evidencing
the transfer of OP Units to the Contributor;
(iv) American Land Title Assurances ("ALTA") policies
of title insurance with appropriate endorsements and levels of
reinsurance for the Properties issued as of the Closing Date or
endorsements or other assurances that the existing policy or policies
of title insurance are sufficient for purposes of this Contribution
Agreement, which the Contributor shall cause the title company to issue
to the Operating Partnership in a form acceptable to the Operating
Partnership (the "Title Policies") including satisfaction by the
Contributor of any and all title company requirements applicable to it;
(v) The Partnerships' books and records and
securities or other evidences of ownership held by the Contributor; and
(vi) An affidavit from the Contributor stating, under
penalty of perjury, the Contributor's United States Taxpayer
Identification Number and that the Contributor is not a foreign person
pursuant to section 1445(b)(2) of the Code and a comparable affidavit
satisfying California and any other withholding requirements.
(vii) The Exchange Rights Agreement, the Registration
Rights Agreement and the Lock-Up Agreements substantially in the form
attached hereto as ATTACHMENTS 1, 2, and 3, respectively.
-6-
<PAGE> 10
2.4 CLOSING COSTS
The Operating Partnership shall pay any documentary transfer
taxes, escrow charges, title charges and recording taxes or fees incurred in
connection with the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP
The Operating Partnership hereby represents and warrants to
and covenants with the Contributor that:
(a) Organization; Authority. The Operating Partnership has
been duly formed and is validly existing with requisite power to enter this
Contribution Agreement and all agreements contemplated hereby. The persons and
entities executing this Contribution Agreement and all agreements contemplated
hereby on behalf of the Operating Partnership have the power and authority to
enter into this Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and performance
by the Operating Partnership of its obligations under this Contribution
Agreement and all agreements contemplated hereby will not contravene any
provision of applicable law, the OP Agreement, charter, declaration of trust or
other constituent document of the Operating Partnership, or any agreement or
other instrument binding upon the Operating Partnership or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over the
Operating Partnership, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Operating Partnership of its obligations under this
Contribution Agreement and all other agreements contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
The Contributor represents and warrants to and covenants with
the Operating Partnership as provided in EXHIBIT E attached hereto, and
acknowledges and agrees to be bound by the indemnification provisions contained
therein.
3.3 INDEMNIFICATION
The Operating Partnership shall indemnify and hold harmless
the Contributor (the "Indemnified Contributor Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable
-7-
<PAGE> 11
attorneys' fees, costs of investigation and remediation, costs of investigative
judicial or administrative proceedings or appeals therefrom and costs of
attachment or similar bonds (collectively, "Losses") asserted against, imposed
upon or incurred by the Indemnified Contributor Party in connection with: (i)
any breach of a representation or warranty of the Operating Partnership
contained in this Contribution Agreement; and (ii) all fees, costs and expenses
of the Operating Partnership in connection with the transactions contemplated by
this Contribution Agreement, including, without limitation, any and all costs
associated with the transfers contemplated herein.
ARTICLE 4. COVENANTS
4.1 Covenants of Contributor
(a) From the date hereof through the Closing, the Contributor
shall not:
(i) Sell or transfer all or any portion of the
Partnership Interest; or
(ii) Mortgage, pledge or encumber (or permit to
become encumbered) all or any portion of the Partnership Interest.
(b) From the date hereof through the Closing, the Contributor
shall permit each of the Partnerships to conduct its business in the ordinary
course, consistent with past practice, and shall not permit any of the
Partnerships to:
(i) Enter into any material transaction not in the
ordinary course of business;
(ii) Sell or transfer any assets of the Partnerships;
(iii) Mortgage, pledge or encumber (or permit to
become encumbered) any assets of the Partnerships, except (x) liens for
taxes not due, (y) purchase money security interests and (z) mechanics'
liens being disputed by any of the Partnerships in good faith and by
appropriate proceedings;
(iv) Amend, modify or terminate any material
agreements or other instruments to which any of the Partnerships is a
party; or
(v) Materially alter the manner of keeping the
Partnerships' books, accounts or records or the accounting practices
therein reflected.
(c) The Contributor shall use its good faith diligent efforts
to obtain any approvals, waivers or other consents of third parties required to
effect the transactions contemplated by this Contribution Agreement.
-8-
<PAGE> 12
ARTICLE 5. RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this ARTICLE 5
shall become effective only upon the Closing of the contribution and exchange of
the Partnership Interest pursuant to ARTICLES 1 and 2 hereof.
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP
As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the Operating
Partnership's affiliates, partners (including Lawrence H. Feldman), agents,
attorneys, successors and assigns of and from any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "Contributor Claims"), known or unknown,
suspected or unsuspected, arising out of or relating to any of the Partnership
Agreements, this Contribution Agreement or any other matter which exists at the
Closing, except for Contributor Claims arising from the breach of any
representation, warranty, covenant or obligation under this Contribution
Agreement.
5.2 GENERAL RELEASE OF CONTRIBUTOR
As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and Contributor's
agents, attorneys, successors and assigns of and from any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses and
costs of any nature whatsoever (collectively, "Operating Partnership Claims"),
known or unknown, suspected or unsuspected, arising out of or relating to any of
the Partnership Agreements, this Contribution Agreement or any other matter
which exists at the Closing, except for Operating Partnership Claims arising
from the breach of any representation, warranty, covenant or obligation under
this Contribution Agreement or any supplemental representations and warranties
agreement entered into as of the Closing Date by and among the Contributor,
certain other continuing investors in the Operating Partnership and the
Operating Partnership.
5.3 INTENTIONALLY OMITTED
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT
As of the Closing, the Contributor waives and relinquishes all
rights and benefits otherwise afforded to Contributor under the Partnership
Agreements including, without limitation, any right to consent to or approve of
the sale or contribution by the other partners (or members) of the Partnerships
of their partnership interests to the Company or the Operating Partnership.
-9-
<PAGE> 13
ARTICLE 6. POWER OF ATTORNEY
6.1 GRANT OF POWER OF ATTORNEY
Contributor does hereby irrevocably appoint the Operating
Partnership (or its designee) and each of them individually and any successor
thereof from time to time (such Operating Partnership or designee or any such
successor of any of them acting in his, her or its capacity as attorney-in-fact
pursuant hereto, the "Attorney-in-Fact") as the true and lawful attorney-in-fact
and agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including, without limitation, the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney-in-Fact a proxy (the
"Proxy") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.
Each of the Power of Attorney and Proxy and all authority
granted hereby shall be coupled with an interest and therefore shall be
irrevocable and shall not be terminated by any act of Contributor, by operation
of law or by the occurrence of any other event or events, and if any other such
act or events shall occur before the completion of the transactions contemplated
by this Contribution Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such other act
or events had not occurred and regardless of notice thereof. Contributor agrees
that, at the request of the Operating Partnership, it will promptly execute a
separate power of attorney and proxy on the same terms set forth in this ARTICLE
6, such execution to be witnessed and notarized. Contributor hereby authorizes
the reliance of third parties on each of the Power of Attorney and Proxy.
Contributor acknowledges that the Operating Partnership has,
and any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
-10-
<PAGE> 14
6.2 LIMITATION ON LIABILITY
It is understood that the Attorney-in-Fact assumes no
responsibility or liability to any person by virtue of the Power of Attorney or
Proxy granted by Contributor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
Formation Transactions or the Public Offering, or the acquisition of the
Partnership Interest by the Operating Partnership and shall not be liable for
any error or judgment or for any act done or omitted or for any mistake of fact
or law except for its own gross negligence or bad faith. Contributor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney or Proxy created by Contributor hereby, as well as the cost and expense
of investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is due to
the gross negligence or bad faith of the Attorney-in-Fact. Contributor agrees
that the Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to Contributor hereunder, release, amend or
modify any other power of attorney or proxy granted by any other person under
any related agreement.
ARTICLE 7. MISCELLANEOUS
7.1 FURTHER ASSURANCES.
The Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
7.2 COUNTERPARTS
This Contribution Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.3 GOVERNING LAW
This Contribution Agreement shall be governed by the internal
laws of the State of New York, without regard to the conflicts of laws
provisions thereof.
-11-
<PAGE> 15
7.4 NOTICES
Any notice to be given hereunder by any party to the other
shall be given in writing by personal delivery or by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed
communicated as of the date of personal delivery (including delivery by
overnight courier). Mailed notices shall be addressed as set forth below, but
any party may change the address set forth below by written notice to other
parties in accordance with this paragraph.
To the Contributor:
Robert Adams
c/o Adams Financial Services, Inc.
13 South Bayles Ave.
Port Washington, NY 11050
To the Operating Partnership:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, NY 10022
-12-
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this
Contribution Agreement as of the date first written above.
OPERATING PARTNERSHIP:
Tower Realty Operating Partnership, L.P.
By: Tower Realty Trust, Inc.
By: /s/Lawrence H. Feldman
----------------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board, Chief
Executive Officer and President
CONTRIBUTOR:
/s/ Robert Adams
---------------------------------------------
Robert Adams
<PAGE> 17
EXHIBIT A
CONSTITUENT INTERESTS OF
ROBERT ADAMS'S (THE "CONTRIBUTOR") PARTNERSHIP INTEREST
<TABLE>
<CAPTION>
PARTNERSHIPS IN WHICH CONTRIBUTOR PARTNERSHIPS IN WHICH CONTRIBUTOR
HOLDS OR HELD A DIRECT INTEREST* HOLDS OR HELD AN INDIRECT INTEREST PROPERTIES HELD BY THE PARTNERSHIPS
-------------------------------- ---------------------------------- -----------------------------------
<S> <C> <C>
FSA Associates, L.P. D/F Portfolio Associates Limited 286 Madison Ave.
Partnership
286 Madison, L.P.
D/F Portfolio Associates Limited 290 Madison Ave.
Partnership
D/F Portfolio Associates Limited 292 Madison Ave.
Partnership
292 Madison, L.P.
D/F Portfolio Associates Limited 5151 East Broadway
East Broadway 5151, L.P.
D/F Portfolio Associates Limited One Orlando Center
Magnolia Associates Limited
Partnership
</TABLE>
- -------------------------------
* Corporations owned by Robert Adams that hold interests in any of the
Properties shall contribute the partnership interests held by such
corporations to the Operating Partnership. Robert Adams contributed his
interest in FSA Associates to the Operating Partnership on March 31, 1997.
A-1
<PAGE> 18
EXHIBIT B
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby assigns,
transfers, contributes and conveys to Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), its entire legal
and beneficial right, title and interest in and to
______________________________, a __________________________ (the
"Partnership"), including, without limitation, all right, title and interest, if
any, of the undersigned in and to the assets of the Partnership and the right to
receive distributions of money, profits and other assets from the Partnership,
presently existing or hereafter at any time arising or accruing (such right,
title and interest are hereinafter collectively referred to as the "Partnership
Interest"), TO HAVE AND TO HOLD the same unto the Operating Partnership, its
successors and assigns, forever.
Upon the execution and delivery hereof, the Operating
Partnership assumes all obligations in respect of the Partnership Interest.
The Partnership owns certain real property as described in
Attachment 1 attached hereto.
Executed: ___________ ___, 1997
By: ______________________
Robert Adams
B-1
<PAGE> 19
EXHIBIT C
FORM OF QUITCLAIM
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ ..........................................
....................Computed on the consideration or value of
property conveyed; OR
....................Computed on the consideration or value
less liens or encumbrances remaining at
time of sale.
-----------------------------------------------------
Signature of Declarant of Agent determining
tax -- Firm name
- -------------------------------------------------------------------------------------------------------------------
QUITCLAIM DEED
</TABLE>
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to
Tower Realty Operating Partnership, L.P., a Delaware limited partnership
the real property in the City of ____________, County of _____________, State of
_____________, described as
Dated ___________________________________
___________________________________
___________________________________
C-1
<PAGE> 20
STATE OF NEW YORK )
)
COUNTY OF )
On __________________________________________________________________ before me,
_______________________________________________________________________________,
personally appeared ____________________________________________________________
_______________________________________________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature (This area for official notarial seal)
C-2
<PAGE> 21
EXHIBIT D
CALCULATION OF NUMBER OF OP UNITS
The number of OP Units to be issued to Contributor shall be
calculated as follows:
IAD 1
$1,030,000 + (AP x ( ---------- - TNSU ) - MCU) x -------
IADPS MP
Where:
AP = 1.0% (expressed as a decimal fraction).
IAD = Total estimated annual distributions to be made
by the Operating Partnership as set forth in the final preliminary
prospectus included in the Registration Statement on Form S-11 filed by
the Company with the Securities and Exchange Commission in connection
with the proposed public offering of shares of Common Stock (the
"Preliminary Prospectus").
IADPS = Estimated initial annual distribution per
share of Common Stock or OP Unit as set forth in the Preliminary
Prospectus.
TNSU = The total number of shares of Common Stock and
OP Units to be issued in the IPO to persons other than Lawrence H.
Feldman, Robert Cox, Joseph D. Kasman, Eric Reimer, Reuben Friedberg
and Robert Adams as set forth in the Preliminary Prospectus, other than
the number of OP Units to be issued to Robert Cox, Joseph D. Kasman,
Eric Reimer and Robert Adams in respect of the minimum contribution
consideration to be received by each of them in respect of their
individual Contribution Agreements.
MCU = The total number of OP Units to be issued to
Contributor directly or indirectly under the Omnibus Management Company Option
Agreement (assuming all shares of Common Stock and OP Units are issued at the
Mid-Point (as defined below)).
MP or "Mid-Point" = the median of the proposed per
share price range for the Common Stock as set forth in the Preliminary
Prospectus.
D-1
<PAGE> 22
EXHIBIT E
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
OF CONTRIBUTOR
ARTICLE 1. ADDITIONAL DEFINED TERMS
1.1 For purposes of this EXHIBIT E, the following terms have
the meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT E is attached:
ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively, "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.
CONTRIBUTION AGREEMENT: Means the Contribution Agreement to
which this EXHIBIT E is attached.
GOVERNMENTAL ENTITY: Means any government or agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
INDEMNIFYING PARTY: Means any party required to indemnify any
other party under ARTICLE 3.2 of this EXHIBIT E or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.
KNOWLEDGE: Means, with respect to any representation or
warranty so indicated, the actual knowledge, upon reasonable investigation and
inquiry in good faith, of the signatory to the Contribution Agreement.
LIENS: Means, with respect to any real and personal property,
all mortgages, pledges, liens, options, charges, security interests,
restrictions, prior assignments, encumbrances, covenants, encroachments,
assessments, rights of others, licenses, easements, liabilities or claims of any
kind or nature whatsoever, direct or indirect, including, without limitation,
interests in or claims to revenues generated by such property.
E-1
<PAGE> 23
PERMITTED LIENS: Means (a) Liens, or deposits made to secure
the release of such Liens, securing taxes, the payment of which is not
delinquent or the payment of which is actively being contested in good faith by
appropriate proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the
districts in which the Properties are located which are not violated by the
existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's
and mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not have a
material adverse effect upon, or materially interfere with the use of, the
Properties; and
(e) any exceptions contained in the Title Policies.
PERSON: Means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
PORTFOLIO AGREEMENTS: Means the agreements, including the
Contribution Agreement, listed on ATTACHMENT 1 hereto, which contemplate the
transfer of partnership and/or limited liability company membership interests in
certain of the Participating Partnerships and LLCs from any entity directly or
indirectly owned by Contributor to the Company and the Operating Partnership.
PROSPECTUS: Means the Company's Form S-11 Registration
Statement.
REIT STOCK: Shall have the meaning set forth in the OP
Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
The Contributor represents and warrants to the Operating
Partnership as set forth below in this ARTICLE 2. Notwithstanding any other
provision of the Contribution Agreement or this EXHIBIT E, the Contributor makes
representations, warranties and indemnities only with respect to: (i) the
Properties identified on EXHIBIT A to the Contribution Agreement (the "Property"
or the "Properties"), and (ii) the interests in the Partnerships to be
transferred by the Contributor.
E-2
<PAGE> 24
2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and (B)
has all requisite power and authority to own, lease or operate its property and
to carry on its business as presently conducted and, to the extent required
under applicable law, is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
2.2 DUE AUTHORIZATION. The execution, delivery and performance
of the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered by
or on behalf of the Contributor pursuant to this Contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.
2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is
the sole owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.
2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes
all of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of all
security interests, mortgages, pledges, liens, encumbrances, claims and equities
to the Operating Partnership.
E-3
<PAGE> 25
2.6 NO VIOLATION. None of the execution, delivery or
performance of the Contribution Agreement and the transactions contemplated
hereby does or will, with or without the giving of notice, lapse of time, or
both, (i) violate, conflict with, result in a breach of, or constitute a default
under or give to others any right of termination or cancellation of (A) the
organizational documents, including the charters and bylaws, if any, of the
Contributor, (B) any material agreement, document or instrument to which the
Contributor is a party or by which the Contributor or its Property is bound or
(C) any term or provision of any judgment, order, writ, injunction, or decree of
any governmental or regulatory authority binding on the Contributor or by which
the Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.
2.7 NON-FOREIGN STATUS. The Contributor is not a foreign
person, foreign corporation, foreign partnership, foreign trust or foreign
estate (as defined in the Code), and is, therefore, not subject to the
provisions of the Code relating to the withholding of sales proceeds to foreign
persons.
2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions. If Contributor fails to provide
such certificates or affidavits, the Operating Partnership may withhold a
portion of any payments otherwise to be made to the Contributor as required by
the Code or New York law.
2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her
or its understanding that the offering and sale of the OP Units to be acquired
pursuant to the Contribution Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Act"). In furtherance thereof, the
Contributor represents and warrants to the Company as follows:
2.9.1 INVESTMENT. The Contributor is acquiring the OP
Units solely for his, her or its own account for the purpose of investment and
not as a nominee or agent for any other person and not with a view to, or for
offer or sale in connection with, any distribution of any thereof. The
Contributor agrees and acknowledges that he, she or it will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (hereinafter, "Transfer") any of the OP Units unless (i) the Transfer
is pursuant to an effective registration statement under the Act and
qualification or other compliance under applicable blue sky or state securities
laws, or (ii) counsel for the Contributor (which counsel shall be reasonably
acceptable to the Operating Partnership) shall have furnished the Operating
Partnership with an opinion, reasonably satisfactory in form and substance to
the Operating Partnership to the effect that no such registration is required
because of the availability of an exemption from registration under the Act and
qualification or other compliance under applicable blue sky or state securities
laws.
E-4
<PAGE> 26
2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the Contributor
has previously invested in securities similar to the OP Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Contribution Agreement. The Contributor is able to bear
the economic risk of holding the OP Units for an indefinite period and is able
to afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.
2.9.3 HOLDING PERIOD. The Contributor acknowledges
that he, she or it has been advised that (i) the OP Units and the common stock
of the Company into which the OP Units may be exchanged in certain circumstances
(the "Common Stock") must be held indefinitely, and the Contributor must
continue to bear the economic risk of the investment in the OP Units (and any
Common Stock that might be exchanged therefor) unless they are subsequently
registered under the Act or an exemption from such registration is available,
(ii) a restrictive legend in the form hereafter set forth shall be placed on the
certificates representing the OP Units (and any Common Stock that might be
exchanged therefor), and (iii) a notation shall be made in the appropriate
records of the Operating Partnership (and the Company) indicating that the OP
Units (and any Common Stock that might be exchanged therefor) are subject to
restrictions on transfer.
2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is defined
in Rule 501(a) of Regulation D under the Act) and as such:
(i) is a director or executive officer of the
Company; or
(ii) has an individual net worth, or joint net
worth with his or her spouse, in excess of $1,000,000; or
(iii) had an individual annual adjusted gross
income in excess of $200,000 in each of the two most recent years and
reasonably expects to have annual adjusted gross income in excess of
$200,000 in the current year; or
E-5
<PAGE> 27
(iv) had a joint income with his spouse in
excess of $300,000 in each of the two most recent years and reasonably expects
to have an annual adjusted gross income, with his spouse, in excess of $300,000
in the current year.
If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).
2.9.5 LEGENDING. Each certificate representing the OP
Units (and any Common Stock that might be exchanged therefor) shall bear the
following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY
E-6
<PAGE> 28
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH
A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION.
2.10 LITIGATION. There are no Claims which could reasonably be
anticipated to result in damages in excess of $50,000 pending or, to Knowledge,
threatened that directly or indirectly affect the Contributor, the Partnerships,
the Properties or the Formation Transactions, nor has any such claim been
pending or, to Knowledge, threatened as of the Closing.
2.11 NO BROKERS. Neither the Contributor nor any of its
respective officers, directors or employees has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in the obligation of the Operating Partnership or any of its affiliates to pay
any finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.
2.12 SOLVENCY. The Contributor has been and will be solvent at
all times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.
E-7
<PAGE> 29
2.13 NO MISREPRESENTATIONS. No representation, warranty or
statement made, or information provided, by the Contributor in the Contribution
Agreement or in any other document or instrument furnished or to be furnished by
or on behalf of the Contributor pursuant hereto or as contemplated hereby (i)
contains or will contain any untrue statement of a material fact or (ii) omits
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. For purposes of the preceding sentence,
materiality shall be determined with reference to the total portfolio of real
properties and other interests to be transferred pursuant to the Operating
Partnership pursuant to the Formation Transactions.
ARTICLE 3. INDEMNIFICATION
3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
REMEDY FOR BREACH.
(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT E or in any Schedule or certificate delivered pursuant
hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the
Contribution Agreement or this EXHIBIT E, no party hereto shall be liable under
this EXHIBIT E or the Contribution Agreement for monetary damages (or otherwise)
for breach of any of its representations and warranties contained in this
EXHIBIT E or the Contribution Agreement, or in any Schedule, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this ARTICLE 3.
3.2 GENERAL INDEMNIFICATION
(a) The Contributor shall indemnify and hold harmless the
Operating Partnership, the Company, and their affiliates and each of their
respective directors, officers, employees, agents, representatives and
affiliates (each of which is an "Indemnified Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation, costs of investigative, judicial or administrative proceedings or
appeals therefrom, and costs of attachment or similar bonds (collectively,
"Losses"), asserted against, imposed upon or incurred by the Indemnified Party
in connection with or as a result of any breach of a representation or warranty
of the Contributor contained in the Contribution Agreement or in any Schedule,
certificate or affidavit delivered by the Contributor pursuant to the
Contribution Agreement.
E-8
<PAGE> 30
(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributor in
connection with the transactions contemplated by the Contribution
Agreement;
(ii) any liabilities or obligations incurred,
arising from or out of, in connection with or as a result of the
failure of the Contributor to obtain all consents required to
consummate the transactions contemplated by the Contribution Agreement;
or
(iii) any breach of any representation, warranty
or covenant set forth in the Contribution Agreement.
3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy
its obligations hereunder by the prompt delivery (paid promptly as and when
expenses are incurred) to an Indemnified Party of OP Units, subject to the
limits on ownership and transfer of REIT Stock set forth in the Company's
articles of incorporation. Any OP Units delivered to an Indemnified Party
hereunder shall be valued based upon the initial public offering price of the
Company's Common Stock.
3.4 NOTICE AND DEFENSE BY CLAIMS. As soon as reasonably
practicable after receipt by the Indemnified Party of notice of any liability or
claim incurred by or asserted against the Indemnified Party that is subject to
indemnification under this ARTICLE 3, the Indemnified Party shall give notice
thereof to the Contributor. The Indemnified Party may at its option demand
indemnity under this ARTICLE 3 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not frivolous
and that the Indemnified Party may be liable for, or otherwise incur, a Loss as
a result thereof and shall give notice of such determination to the Contributor.
The Indemnified Party shall permit the Contributor, at its option and expense,
to assume the defense of any such claim by counsel selected by the Contributor
and reasonably satisfactory to the Indemnified Party, and to settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that the Indemnified Party may at all
times participate in such defense at its expense; and PROVIDED FURTHER, HOWEVER,
that the Contributor shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party in its sole and absolute
discretion, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnified Party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall have
the right to
E-9
<PAGE> 31
undertake the defense, compromise or settlement of such liability or claim on
behalf of and for the account of the Contributor.
3.5 LIMITATIONS ON INDEMNIFICATION UNDER ARTICLE 3.
Notwithstanding anything contained herein to the contrary, the Contributor shall
not be liable or obligated to make payments under this ARTICLE 3 with respect to
any Property or Partnership Interest to the extent such payments in the
aggregate would exceed the value of the OP Units (based upon the initial public
offering price of the Common Stock) received by the Contributor at the Closing.
Notwithstanding anything contained herein to the contrary, the Indemnified
Parties shall look first to the Contributor's OP Units for indemnification under
this ARTICLE 3 and then to the Contributor's other assets.
3.6 LIMITATION PERIOD.
(a) Notwithstanding the foregoing, any claim for
indemnification under ARTICLE 3.2 hereof must be asserted in writing by the
Indemnified Party, stating the nature of the Losses and the basis for
indemnification therefor within one year after the Closing.
(b) If so asserted in writing prior to the applicable
expiration date, such claims for indemnification shall survive until resolved by
mutual agreement between the Contributor and the Indemnified Party or by
judicial determination. Any claim for indemnification not so asserted in writing
prior to the applicable expiration date shall not thereafter be asserted and
shall forever be waived.
3.7 RESERVATION OF CONTRIBUTOR RIGHTS. Notwithstanding
anything else in this Contribution Agreement to the contrary, the Contributor
reserves unto itself all rights and remedies (including rights to seek
contribution) against any third party indemnitors, prior property owners or
occupants, and contributors to any contamination, for which the Partnerships
have been indemnified by the Contributor hereunder. To the extent the
Contributor's rights against any such third party owners, occupants, indemnitors
or contributors may be materially prejudiced by actions or inactions by any
owner or occupant of the Properties after the Closing, the Contributor's
indemnity obligation shall be reduced in accordance with the effect of the
actions or inactions which so prejudiced the Contributor's rights.
E-10
<PAGE> 32
ATTACHMENT 1
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
__________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(i) The Company, together with certain other limited
partners, has formed the Operating Partnership
pursuant to the Agreement of Limited Partnership of
the Operating Partnership dated __________ __, 1997
(as such agreement may be amended or amended and
restated from time to time, the "PARTNERSHIP
AGREEMENT").
(ii) Pursuant to the Partnership Agreement, the Limited
Partners (as defined below) directly or indirectly
hold units of limited partnership interest ("OP
UNITS") in the Operating Partnership.
(iii) The Operating Partnership has agreed to provide the
Limited Partners with certain direct or indirect
rights to exchange their OP Units for cash or, at the
election of the Company, for shares of the Company's
common stock, par value $0.01 per share (the "REIT
STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
<PAGE> 33
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Stock in REIT
Stock or makes a distribution to all holders of its outstanding REIT Stock in
REIT Stock; (ii) subdivides its outstanding REIT Stock; or (iii) combines its
outstanding REIT Stock into a smaller number of shares of REIT Stock, the
Exchange Factor shall be adjusted by multiplying the Exchange Factor by a
fraction, the numerator of which shall be the number of shares of REIT Stock
issued and outstanding on the record date for such dividend, contribution,
subdivision or combination assuming for such purpose that such dividend,
distribution, subdivision or combination has occurred as of such time, and the
denominator of which shall be the actual number of shares of REIT Stock
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Exchange Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated
and/or the Operating Partnership
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
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<PAGE> 34
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to
the product of the number of OP Units offered for exchange by an Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company or the Operating Partnership issues to all holders
of REIT Stock rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase REIT Stock,
or any other securities or property (collectively, the "rights"), then the REIT
Stock Amount shall also include such rights that a holder of that number of
shares of REIT Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading
on the NYSE, any national securities exchange or Nasdaq, the last
reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
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<PAGE> 35
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"EXCHANGING PARTNER"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding
the provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging
Partner within five (5) Business Days after the receipt by the Company
of such Notice of Exchange,
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<PAGE> 36
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of
the Company,
(b) would otherwise jeopardize the REIT status of the Company,
or
(c) would cause the acquisition of the REIT Stock by the
Limited Partner to be "integrated" with any other distribution of REIT
Stock by the Company for purposes of complying with the registration
provisions of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article
2, any person to whom OP Units have been pledged, in compliance with the terms
of the Lock-up Agreement, may exercise its Exchange Right prior to the date that
is one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
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<PAGE> 37
(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of
the Exchange Right, the Company shall reserve for issuance such number of shares
of REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable
upon exchange of OP Units (or the cash equivalent amount thereof if the Cash
Amount is paid) shall be computed on the basis of the aggregate amount of OP
Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
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<PAGE> 38
(A) a copy of the prospectus contained in the
Registration Statement on Form S-11 filed by the Company in
connection with the IPO, any prospectus contained in any
Registration Statement subsequently filed by the Company, and
any supplement or amendment thereto (each, a "PROSPECTUS"),
and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by
the Company with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited investor"
as defined in Rule 501 of the regulations promulgated under
the Securities Act.
(B) If such Exchanging Partner has retained or
retains a person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
(b) (i) Such Exchanging Partner understands that an investment in the
Company involves substantial risks.
-7-
<PAGE> 39
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of such Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws, except as provided in the Registration Rights
Agreement entered into by the Company and the Exchanging
Partner (the "REGISTRATION RIGHTS AGREEMENT").
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<PAGE> 40
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
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<PAGE> 41
4.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with
the consent of the Company by a vote of the Limited Partners in the same manner
as the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein, provided, however, that the Company shall vote its
limited partnership interests in proportion to the votes of the other Limited
Partners.
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<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By: ___________________________________
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By: ______________________________
Name:
Title:
LIMITED PARTNERS:
___________________________
Signature
___________________________
Name (Please Print or Type)
-11-
<PAGE> 43
Exhibit A
Name and Address of Limited Partners
[To be attached]
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<PAGE> 44
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated: __________________________
______________________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
(Signature of Limited Partner)
_____________________________
(Street Address)
(City) (State) (Zip Code)
If REIT Stock is to be
issued, issue to:
Name:
Limited Partner's social security or
tax identification number:
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<PAGE> 45
BATTLE FOWLER LLP
DRAFT - 7/24/97
ATTACHMENT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, limited liability companies, corporations and
other entities which are Holders or in which the Holders own direct or indirect
interests (the "PROPERTY PARTNERSHIPS") pursuant to Option or Contribution
Agreements (the "OPTION AGREEMENTS") among the Operating Partnership and the
Grantors named therein, and in connection therewith the Holders will receive
units of limited partnership interest in the Operating Partnership (such units
of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
<PAGE> 46
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating
to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement
or
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<PAGE> 47
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
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"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not
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delay, suspend or withdraw a Registration Statement for such reason for
more than 60 days or more often than twice during any period of 12
consecutive months.
(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration Statement
covering the Registrable Securities held by more than one Holder.
2.2 Expenses.
(i) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if any,
sales commissions, the fees and disbursements of counsel representing
such Holder and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that does
not, within 10 days after receipt of a reasonable request by the Company for
information in connection with the Shelf Registration Statement, provide such
information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
2.4 Effect of Material Breach. In the event that the Company shall
breach any of its material obligations hereunder in any material respect, any
Holder of Registrable Securities may demand that the Company file a registration
statement covering such Holder's Registrable Securities. The Company agrees to
file such registration statement within 60 days after receipt of such demand and
agrees to use its best efforts to procure the effectiveness of such registration
statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed pursuant
to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period set
forth in Section 2 hereof, a Shelf Registration Statement, which Shelf
Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects
with the requirements of the applicable form of registration
statement and include all financial statements required by the
SEC to be filed therewith.
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(ii) (A) Subject to Article III, Section (a)(ii)(B),
(I) prepare and file with the SEC such
amendments and post-effective amendments to each such
Registration Statement as may be necessary to keep
such Registration Statement effective for the
applicable period;
(II) cause each such Prospectus to be
supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule
424 or any similar rule that may be adopted under the
Securities Act;
(III) respond as promptly as practicable to
any comments received from the SEC with respect to
the Shelf Registration Statement, or any amendment,
post-effective amendment or supplement relating
thereto; and
(IV) comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by each Registration Statement
during the applicable period in accordance with the
intended method or methods of distribution by the
selling Holders thereof.
(B) (I) Each Holder shall promptly provide to the
Company such information as the Company reasonably
requests in order to identify such Holder and the
method of distribution in a post-effective amendment
to the Registration Statement or a supplement to the
Prospectus.
(II) Such Holder also shall notify the
Company in writing upon completion of any offer or
sale or at such time as such Holder no longer intends
to make offers or sales under the Registration
Statement.
(iii) Furnish to each Holder of Registrable Securities,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable
Securities; the Company consents to the use of the Prospectus,
including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary
Prospectus.
(iv) Use its reasonable efforts to register or qualify the
Registrable Securities by the time the applicable Registration
Statement is declared effective by the SEC under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
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Registrable Securities covered by a Registration Statement shall
reasonably request in writing, keep each such registration or
qualification effective during the period such Registration Statement
is required to be kept effective, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that
the Company shall not be required to
(A) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to
qualify but for this Article III, Section (a)(iv),
(B) subject itself to taxation in any such
jurisdiction, or
(C) submit to the general service of process in any
such jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and,
if requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become
effective and when any post-effective amendments and
supplements thereto become effective,
(B) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose,
(C) if the Company receives any notification with
respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and
(D) of the happening of any event during the period a
Registration Statement is effective which is of a type
specified in Article II, Section 2.1(iii) hereof or as a
result of which such Registration Statement or the related
Prospectus contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the
Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment.
(vii) Furnish to each Holder of Registrable Securities,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment
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thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested).
(viii) (A) Cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any Securities Act legend; and
(B) enable certificates for such Registrable
Securities to be issued for such numbers of shares of Common
Stock and registered in such names as the selling Holders may
reasonably request at least two business days prior to any
sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III,
Section (a)(ii)(B) hereof, upon the occurrence of any event
contemplated by Article III, Section (a)(v)(D) hereof, use its
reasonable efforts promptly to prepare and file a supplement or
prepare, file and obtain effectiveness of a post-effective amendment to
a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(x) Make available for inspection by representatives of the
Holders of the Registrable Securities and any counsel or accountant
retained by such Holders, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply
all information reasonably requested by any such representative,
counsel or accountant in connection with a Registration Statement;
provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies
such representatives, counsel or accountants in writing that such
records, documents or information are confidential shall not be
disclosed by such representatives, counsel or accountants unless
(A) the disclosure of such records, documents or
information is necessary to avoid or correct a material
misstatement or omission in a Registration Statement,
(B) the release of such records, documents or
information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, or
(C) such records, documents or information have been
generally made available to the public.
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(xi) Within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of
such document (not including any documents incorporated by reference
therein unless requested) to the Holders of Registrable Securities.
(xii) Use its reasonable efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar
securities issued by the Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities,
not later than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable Holders to consummate the disposition of such Registrable
Securities.
(b) The Company may require each Holder of Registrable Securities to
furnish to the Company in writing such information regarding the
proposed distribution by such Holder of such Registrable Securities as
the Company may from time to time reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations
with respect to the Registration Statement required to be filed
pursuant to Section 2 hereof and this Section 3, each Holder agrees
that
(i) it will not offer or sell its Registrable Securities under
the Registration Statement until it has received copies of the
supplemental or amended Prospectus contemplated by Article III, Section
(a)(ii) hereof and receives notice that any post-effective amendment
has become effective, and
(ii) upon receipt of any notice from the Company of the
happening of any event of the kind described in Article III, Section
(a)(v)(D) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such
Holder receives copies of the supplemented or amended Prospectus
contemplated by Article III, Section (a)(ix) hereof and receives notice
that any post-
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effective amendment has become effective, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
IV Indemnification; Contribution.
7.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder (within the meaning of Section 15 of the Securities
Act) as follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading or
(C) arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental
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agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of any such
amended or supplemental Prospectus by the Company, if such loss,
liability, claim, damage or expense would not have arisen had such
delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it
may have under the indemnity agreement provided in Section
4.1(a) or 4.1(b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the
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indemnified party results in the forfeiture by the
indemnifying party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than
the indemnification obligation provided under Section 4.1(a)
or 4.1(b) above.
(ii) If the indemnifying party so elects within a reasonable
time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved
by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however,
that, if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the
proviso to Section 4.1(c), such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's
defense, and counsel for the indemnified party or parties
shall be entitled to conduct the defense of such indemnified
party or parties, it being understood that both such counsel
will cooperate with each other to conduct the defense of such
action or proceeding as efficiently as possible.
(B) If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such
defense, after having received the notice referred to in
Section 4.1(c), the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified
party or parties as incurred.
(C) In such event, however, no indemnifying party
will be liable for any settlement effected without the written
consent of such indemnifying party, which consent may not be
unreasonably withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with
this Section 4(c), such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
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4.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 4 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one hand and the
selling Holders on the other (in such proportions that the
selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations.
(B) (I) The relative benefits to the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, the total proceeds
received by the indemnifying party and indemnified
parties in connection with the offering to which such
losses, claims, damages, liabilities or expenses
relate.
(II) The relative fault of the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether the action
in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact, has been made by,
or relates to information supplied by, such
indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section
4.4, no selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities of such selling Holder were
offered to the public exceeds the amount of any damages which
such selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
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(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any,
who controls a Holder within the meaning of Section 15 of the
Securities Act and directors and officers of a Holder shall have the
same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration
Statement and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act shall have the same rights
to contribution as the Company.
V Filing of Exchange Act Reports; Rule 144 Sales
5.1 The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act so as to
enable any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition by any
Holder of any Exchange Stock pursuant to Rule 144, the Company shall cooperate
with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Exchange
Stock.
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the outstanding
Registrable Securities; provided, however, that no amendment,
modification or supplement or waiver or consent to the departure with
respect to the provisions of Articles 2, 4 or 5 hereof shall be
effective as against any Holder unless consented to in writing by such
Holder.
(ii) Notice of any amendment, modification or supplement to
this Agreement adopted in accordance with this Section 6.1 shall be
provided by the Company to each Holder at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex,
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telecopier, or any courier guaranteeing overnight delivery, to the parties at
their respective addresses set forth opposite their signatures below or at such
other address as a party may indicate by written notice to the other party or
parties.
(ii) All such notices and communications shall be deemed to
have been duly given:
(A) at the time delivered by hand, if personally
delivered;
(B) three (3) business days after being deposited in
the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By: ___________________________________
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING
New York, New York 10036-4003 PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc.,
its general partner
By: ___________________________________
Name:
Title:
HOLDERS:
[Address:] ________________________________________
Signature
________________________________________
Name (Please Print or Type)
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ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public pursuant to a public offering (the "Offering").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Company's Registration Statement on Form S-11
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that without the prior written consent of Merrill Lynch, the undersigned
will not (and, except as may be disclosed in the Prospectus, will not announce
or disclose any intention to) directly or indirectly sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition at any time in
the future) of, any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, including any units of limited
partnership interest (the "OP Units") in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership") beneficially
owned by the undersigned as of the date of the closing of the Company's initial
public offering, for a period of twenty-four (24) months after the later of (i)
date of the final Prospectus relating to the
<PAGE> 63
offering of the Shares to the public by the Underwriters and (ii) the date the
Offering is consummated and closed. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and
________________________, its Transfer Agent, are hereby authorized to decline
to make any transfer of securities if such transfer would constitute a violation
or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:____________________________
Name:
Title:
-2-
<PAGE> 64
ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Tower Realty Operating Partnership, L.P.
120 West 46th Street, 24th Floor
New York, New York 10036
Dear Sirs,
Reference is made to the Option Agreement, dated _________, 1997 (the
"Option Agreement"), by and between the undersigned and Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Option Agreement.
In consideration of the execution and exercise of the Option Agreement
by the Operating Partnership, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned hereby
irrevocably agrees that without the prior written consent of the Operating
Partnership, the undersigned will not directly or indirectly sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose (or enter into any transaction or device which
is designed to, or could be expected to, result in the disposition at any time
in the future) of any any units of limited partnership interest (the "OP Units")
in the Operating Partnership, or any securities convertible into or exercisable
or exchangeable for OP Units, beneficially owned by the undersigned as of the
date hereof, for a period of twenty-four (24) months after the date hereof.
Prior to the expiration of such period, the undersigned will not publicly
announce or disclose any intention to do anything after the expiration of such
period which the undersigned is prohibited, as provided in the preceding
sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Operating Partnership is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.47
------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
by and between
ERIC REIMER
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of July 31, 1997
------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS .....................................................................................-1-
1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP
UNITS................................................................................-2-
1.1 CONTRIBUTION TRANSACTION....................................................-2-
1.2 ISSUANCE OF OP UNITS........................................................-3-
1.3 ADJUSTED CONSIDERATION......................................................-3-
1.4 AUTHORIZATION...............................................................-3-
1.5 CONTRIBUTION OF CERTAIN RIGHTS..............................................-3-
1.6 PRORATIONS..................................................................-3-
1.7 TREATMENT AS CONTRIBUTION...................................................-4-
2. CLOSING..............................................................................-4-
2.1 CONDITIONS PRECEDENT........................................................-4-
2.2 TIME AND PLACE..............................................................-5-
2.3 CLOSING DELIVERIES..........................................................-6-
2.4 CLOSING COSTS...............................................................-6-
3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES..........................................-7-
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP.................................................................-7-
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR...............................-7-
3.3 INDEMNIFICATION.............................................................-7-
4. COVENANTS............................................................................-8-
4.1 COVENANTS OF CONTRIBUTOR....................................................-8-
5. RELEASES AND WAIVERS.................................................................-8-
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP....................................-9-
5.2 GENERAL RELEASE OF CONTRIBUTOR..............................................-9-
5.3 INTENTIONALLY OMITTED.......................................................-9-
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT................................-9-
6. POWER OF ATTORNEY....................................................................-9-
6.1 GRANT OF POWER OF ATTORNEY..................................................-9-
6.2 LIMITATION ON LIABILITY....................................................-10-
7. MISCELLANEOUS.......................................................................-11-
7.1 FURTHER ASSURANCES.........................................................-11-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.2 COUNTERPARTS...............................................................-11-
7.3 GOVERNING LAW..............................................................-11-
7.4 NOTICES....................................................................-11-
</TABLE>
EXHIBIT LIST
<TABLE>
<CAPTION>
SECTION FIRST
EXHIBITS REFERENCED
<S> <C>
A Constituent Interests of Contributor's Partnership Interest..................Recital D
B Contribution and Assumption Agreement..............................................1.1
C Form of Quitclaim..................................................................1.1
D Calculation of Number of OP Units..................................................1.2
E Representations, Warranties and Indemnities of Contributor.........................3.2
Attachment 1.................................................Exchange Rights Agreement
Attachment 2.............................................Registration Rights Agreement
Attachment 3........................................................Lock-Up Agreements
Attachment 4..............................................List of Portfolio Agreements
</TABLE>
-ii-
<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"Contribution Agreement") is made and entered into as of July 31, 1997 by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), and Eric Reimer, an individual (the
"Contributor").
RECITALS
A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office properties (the "Participating Properties") owned or managed
by Tower Equities & Realty Corp. or its affiliates through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively,
the "Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").
B. The Formation Transactions relate to the proposed initial public
offering (the "Public Offering") of the common stock, par value $.01 per share
(the "Common Stock") of Tower Realty Trust, Inc., a Maryland corporation (the
"Company"), which will operate as a self-administered and self-managed real
estate investment trust ("REIT") and will be the sole general partner of the
Operating Partnership.
C. The owners of the Property Interests and the partners and members of
the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "Cash Participants") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP Participants").
D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT A (the "Partnerships") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT A (the "Property" or the
"Properties"). As used herein, "Partnership Agreement" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.
E. The Contributor has previously contributed certain interests in the
Partnerships to the Operating Partnership in exchange for OP Units (as defined
below).
F. The Contributor desires to, and the Operating Partnership desires
the Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, as a
<PAGE> 5
partner (or member) of the Partnerships, including, without limitation, all of
its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in the Partnerships (such right, title and interest are hereinafter
collectively referred to as the "Partnership Interest"), in exchange for
partnership units in the Operating Partnership (the "OP Units"), on the terms
and subject to the conditions set forth herein.
G. The Operating Partnership desires to make, and the Contributor
desires to receive, a return of certain contributions previously made by the
Contributor to the Operating Partnership that relate to direct or indirect
interests in certain limited partnerships, limited liability companies and
certain other entities that do not relate to the Consolidation (the "Excluded
Interests").
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR
OP UNITS
1.1 CONTRIBUTION TRANSACTION
(a) At the Closing (as defined in ARTICLE 2.2 hereof) and
subject to the terms and conditions contained in this Contribution Agreement,
the Contributor shall transfer to the Operating Partnership, absolutely and
unconditionally, all of its Partnership Interest (as such term is defined in
Recital F herein) not previously contributed to the Operating Partnership. The
contribution of the Contributor's Partnership Interest shall be evidenced by a
"Contribution and Assumption Agreement" for each of the Partnerships in
substantially the form of EXHIBIT B attached hereto. Furthermore, the
Contributor shall execute and have duly acknowledged an individual quitclaim
deed for each property in the form of EXHIBIT C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the Agreement
of Limited Partnership of the Operating Partnership (the "OP Agreement") in
order to effect the transactions contemplated hereby.
(b) At the Closing, and subject to the terms and conditions
set forth in this Contribution Agreement, the Operating Partnership shall
transfer to the Contributor, absolutely and unconditionally, all of the Excluded
Interests (as such term is defined in Recital G herein) previously contributed
by the Contributor to the Operating Partnership.
-2-
<PAGE> 6
1.2 ISSUANCE OF OP UNITS
The Operating Partnership shall, in exchange for the
Partnership Interest and after taking into account the transfer of the Excluded
Interests to the Contributor, increase or decrease the number of OP Units issued
to the Contributor in accordance with EXHIBIT D hereto. The increase or decrease
of OP Units Issued to the Contributor shall be evidenced by either an amendment
(the "Amendment") to the OP Agreement or by certificates relating to such units
(the "Certificates") in either case, as shall be acceptable to the Contributor.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the OP
Agreement in order to effect the transactions contemplated hereby.
1.3 ADJUSTED CONSIDERATION
The Operating Partnership reserves the right not to acquire
any particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the number of OP Units to be received by the Contributor pursuant to this
Contribution Agreement may be reduced by an amount determined by Lawrence H.
Feldman, in his sole discretion, to reflect the reduction in total value of the
Partnership Interest ultimately contributed by the Contributor.
1.4 AUTHORIZATION
Contributor hereby authorizes Lawrence H. Feldman to make any
and all determinations to be made by him pursuant to ARTICLE 1.3 hereof, and any
and all such determinations shall be final and binding on all parties.
1.5 CONTRIBUTION OF CERTAIN RIGHTS
Effective upon the Closing, the Contributor hereby contributes
to the Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.
1.6 PRORATIONS
At the Closing, or as promptly as practicable following the
Closing, to the extent such matters are not the right or responsibility of all
tenants of a given Property, all revenue and all charges that are customarily
prorated in transactions of this nature, including accrued rent currently due
and payable, overpaid taxes or fees, real and personal property taxes, common
area maintenance charges and other similar periodic charges payable or
-3-
<PAGE> 7
receivable with respect to such Property shall be ratably prorated between the
partners of the Partnership which holds such Property prior to the Closing and
the Operating Partnership on and after the Closing, effective as of the Closing.
After providing for such prorations, (i) if any of the Partnerships has a
resultant cash surplus, the value of the Contributor's Partnership Interest
shall be increased in proportion to Contributor's ratable share of such cash
surplus and additional OP Units (based on the Mid-Point (as such term is defined
in Exhibit D attached hereto) of the proposed offering prices per share set
forth in the final preliminary prospectus relating to the offering of shares of
Common Stock ) shall be issued to the Contributor as a valuation adjustment to
the consideration to be received by the Contributor pursuant to this
Contribution Agreement, and (ii) if any of the Partnerships has a resultant cash
deficit, the value of the Contributor's Partnership Interest shall be reduced in
proportion to Contributor's ratable share of such cash deficit, and fewer OP
Units shall be issued to the Contributor as a valuation adjustment to the
consideration to be received by the Contributor pursuant to this Contribution
Agreement, unless such deficit is cured prior to the Closing.
1.7 TREATMENT AS CONTRIBUTION
The transfer, assignment and exchange of interests effectuated
with respect to the Operating Partnership, pursuant to this Contribution
Agreement, shall constitute a "Capital Contribution" pursuant to Article IV of
the OP Agreement and is intended to be governed by Section 721(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2. CLOSING
2.1 CONDITIONS PRECEDENT
The effectiveness of the Company's registration statement
filed with the Securities and Exchange Commission on Form S-11 (the
"Registration Statement") is a condition precedent to the obligations of all
parties to this Contribution Agreement to effect the transactions contemplated
by this Contribution Agreement on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and correct in all
material respects on the date such representations and warranties were made, and
shall be true and correct in all material respects on the Closing Date as if
made at and as of such date;
(b) Each of the obligations of the Contributor to be performed
by it shall have been duly performed by it on or before the Closing Date;
-4-
<PAGE> 8
(c) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents required to be
delivered pursuant to ARTICLE 2.3 hereof;
(d) The Contributor shall have obtained all necessary consents
or approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
or regulatory authority or instrumentality that prohibits the consummation of
the transactions contemplated hereby, and no litigation or governmental
proceeding seeking such an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof and
the Closing Date any material adverse change in any of the Partnerships'
businesses;
(h) All existing management agreements with respect to the
Properties shall have been contributed to the Operating Partnership prior to or
simultaneously with the Closing; and
(i) All management functions with respect to the Properties
presently conducted by Tower Equities & Realty Corp. and its affiliates shall be
assumed by the Operating Partnership or Tower Equities Management, Inc.
2.2 TIME AND PLACE
The date, time and place of the transactions contemplated
hereunder shall be the day the Operating Partnership receives the proceeds from
the Public Offering from the underwriter(s), at 10:00 a.m. in the office of
Battle Fowler LLP, 75 East 55th Street, New York, New York 10022 (the "Closing"
or "Closing Date"). The transfers described in ARTICLE 1.1 of this Contribution
Agreement, and all closing deliveries, and the consummation of the Public
Offering, shall be deemed concurrent for all purposes.
-5-
<PAGE> 9
2.3 CLOSING DELIVERIES
At the Closing, the parties shall make, execute, acknowledge
and deliver, or cause to be made, executed, acknowledged and delivered through
the Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other
items (collectively, the "Closing Documents") necessary to carry out the
intention of this Contribution Agreement, which Closing Documents and other
items shall include, without limitation, the following:
(i) A Contribution and Assumption Agreement for
each Partnership;
(ii) An individual quitclaim deed for each
Property, fully executed and duly acknowledged from each of the
individual constituent partners and/or members of the Contributor, as
required by the Operating Partnership;
(iii) The Amendment or the Certificates evidencing
the transfer of OP Units to the Contributor;
(iv) American Land Title Assurances ("ALTA")
policies of title insurance with appropriate endorsements and levels of
reinsurance for the Properties issued as of the Closing Date or
endorsements or other assurances that the existing policy or policies
of title insurance are sufficient for purposes of this Contribution
Agreement, which the Contributor shall cause the title company to issue
to the Operating Partnership in a form acceptable to the Operating
Partnership (the "Title Policies") including satisfaction by the
Contributor of any and all title company requirements applicable to it;
(v) The Partnerships' books and records and
securities or other evidences of ownership held by the Contributor; and
(vi) An affidavit from the Contributor stating,
under penalty of perjury, the Contributor's United States Taxpayer
Identification Number and that the Contributor is not a foreign person
pursuant to section 1445(b)(2) of the Code and a comparable affidavit
satisfying California and any other withholding requirements.
(vii) The Exchange Rights Agreement, the
Registration Rights Agreement and the Lock-Up Agreements substantially
in the form attached hereto as ATTACHMENTS 1, 2, and 3, respectively.
-6-
<PAGE> 10
2.4 CLOSING COSTS
The Operating Partnership shall pay any documentary transfer
taxes, escrow charges, title charges and recording taxes or fees incurred in
connection with the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP
The Operating Partnership hereby represents and warrants to
and covenants with the Contributor that:
(a) Organization; Authority. The Operating Partnership has
been duly formed and is validly existing with requisite power to enter this
Contribution Agreement and all agreements contemplated hereby. The persons and
entities executing this Contribution Agreement and all agreements contemplated
hereby on behalf of the Operating Partnership have the power and authority to
enter into this Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and performance
by the Operating Partnership of its obligations under this Contribution
Agreement and all agreements contemplated hereby will not contravene any
provision of applicable law, the OP Agreement, charter, declaration of trust or
other constituent document of the Operating Partnership, or any agreement or
other instrument binding upon the Operating Partnership or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over the
Operating Partnership, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Operating Partnership of its obligations under this
Contribution Agreement and all other agreements contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
The Contributor represents and warrants to and covenants with
the Operating Partnership as provided in EXHIBIT E attached hereto, and
acknowledges and agrees to be bound by the indemnification provisions contained
therein.
3.3 INDEMNIFICATION
The Operating Partnership shall indemnify and hold harmless
the Contributor (the "Indemnified Contributor Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable
-7-
<PAGE> 11
attorneys' fees, costs of investigation and remediation, costs of investigative
judicial or administrative proceedings or appeals therefrom and costs of
attachment or similar bonds (collectively, "Losses") asserted against, imposed
upon or incurred by the Indemnified Contributor Party in connection with: (i)
any breach of a representation or warranty of the Operating Partnership
contained in this Contribution Agreement; and (ii) all fees, costs and expenses
of the Operating Partnership in connection with the transactions contemplated by
this Contribution Agreement, including, without limitation, any and all costs
associated with the transfers contemplated herein.
ARTICLE 4. COVENANTS
4.1 Covenants of Contributor
(a) From the date hereof through the Closing, the
Contributor shall not:
(i) Sell or transfer all or any portion of the
Partnership Interest; or
(ii) Mortgage, pledge or encumber (or permit to
become encumbered) all or any portion of the Partnership Interest.
(b) From the date hereof through the Closing, the Contributor
shall permit each of the Partnerships to conduct its business in the ordinary
course, consistent with past practice, and shall not permit any of the
Partnerships to:
(i) Enter into any material transaction not in the
ordinary course of business;
(ii) Sell or transfer any assets of the
Partnerships;
(iii) Mortgage, pledge or encumber (or permit to
become encumbered) any assets of the Partnerships, except (x) liens for
taxes not due, (y) purchase money security interests and (z) mechanics'
liens being disputed by any of the Partnerships in good faith and by
appropriate proceedings;
(iv) Amend, modify or terminate any material
agreements or other instruments to which any of the Partnerships is a
party; or
(v) Materially alter the manner of keeping the
Partnerships' books, accounts or records or the accounting practices
therein reflected.
(c) The Contributor shall use its good faith diligent efforts
to obtain any approvals, waivers or other consents of third parties required to
effect the transactions contemplated by this Contribution Agreement.
-8-
<PAGE> 12
ARTICLE 5. RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this ARTICLE 5
shall become effective only upon the Closing of the contribution and exchange of
the Partnership Interest pursuant to ARTICLES 1 and 2 hereof.
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP
As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the Operating
Partnership's affiliates, partners (including Lawrence H. Feldman), agents,
attorneys, successors and assigns of and from any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "Contributor Claims"), known or unknown,
suspected or unsuspected, arising out of or relating to any of the Partnership
Agreements, this Contribution Agreement or any other matter which exists at the
Closing, except for Contributor Claims arising from the breach of any
representation, warranty, covenant or obligation under this Contribution
Agreement.
5.2 GENERAL RELEASE OF CONTRIBUTOR
As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and Contributor's
agents, attorneys, successors and assigns of and from any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses and
costs of any nature whatsoever (collectively, "Operating Partnership Claims"),
known or unknown, suspected or unsuspected, arising out of or relating to any of
the Partnership Agreements, this Contribution Agreement or any other matter
which exists at the Closing, except for Operating Partnership Claims arising
from the breach of any representation, warranty, covenant or obligation under
this Contribution Agreement or any supplemental representations and warranties
agreement entered into as of the Closing Date by and among the Contributor,
certain other continuing investors in the Operating Partnership and the
Operating Partnership.
5.3 INTENTIONALLY OMITTED
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT
As of the Closing, the Contributor waives and relinquishes all
rights and benefits otherwise afforded to Contributor under the Partnership
Agreements including, without limitation, any right to consent to or approve of
the sale or contribution by the other partners (or members) of the Partnerships
of their partnership interests to the Company or the Operating Partnership.
-9-
<PAGE> 13
ARTICLE 6. POWER OF ATTORNEY
6.1 GRANT OF POWER OF ATTORNEY
Contributor does hereby irrevocably appoint the Operating
Partnership (or its designee) and each of them individually and any successor
thereof from time to time (such Operating Partnership or designee or any such
successor of any of them acting in his, her or its capacity as attorney-in-fact
pursuant hereto, the "Attorney-in-Fact") as the true and lawful attorney-in-fact
and agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including, without limitation, the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney-in-Fact a proxy (the
"Proxy") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.
Each of the Power of Attorney and Proxy and all authority
granted hereby shall be coupled with an interest and therefore shall be
irrevocable and shall not be terminated by any act of Contributor, by operation
of law or by the occurrence of any other event or events, and if any other such
act or events shall occur before the completion of the transactions contemplated
by this Contribution Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such other act
or events had not occurred and regardless of notice thereof. Contributor agrees
that, at the request of the Operating Partnership, it will promptly execute a
separate power of attorney and proxy on the same terms set forth in this ARTICLE
6, such execution to be witnessed and notarized. Contributor hereby authorizes
the reliance of third parties on each of the Power of Attorney and Proxy.
Contributor acknowledges that the Operating Partnership has,
and any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
-10-
<PAGE> 14
6.2 LIMITATION ON LIABILITY
It is understood that the Attorney-in-Fact assumes no
responsibility or liability to any person by virtue of the Power of Attorney or
Proxy granted by Contributor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
Formation Transactions or the Public Offering, or the acquisition of the
Partnership Interest by the Operating Partnership and shall not be liable for
any error or judgment or for any act done or omitted or for any mistake of fact
or law except for its own gross negligence or bad faith. Contributor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney or Proxy created by Contributor hereby, as well as the cost and expense
of investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is due to
the gross negligence or bad faith of the Attorney-in-Fact. Contributor agrees
that the Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to Contributor hereunder, release, amend or
modify any other power of attorney or proxy granted by any other person under
any related agreement.
ARTICLE 7. MISCELLANEOUS
7.1 FURTHER ASSURANCES.
The Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
7.2 COUNTERPARTS
This Contribution Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.3 GOVERNING LAW
This Contribution Agreement shall be governed by the internal
laws of the State of New York, without regard to the conflicts of laws
provisions thereof.
-11-
<PAGE> 15
7.4 NOTICES
Any notice to be given hereunder by any party to the other
shall be given in writing by personal delivery or by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed
communicated as of the date of personal delivery (including delivery by
overnight courier). Mailed notices shall be addressed as set forth below, but
any party may change the address set forth below by written notice to other
parties in accordance with this paragraph.
To the Contributor:
Eric Reimer
c/o Feldman Equities
120 West 45th Street
New York, NY 10022
To the Operating Partnership:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, NY 10022
-12-
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this
Contribution Agreement as of the date first written above.
OPERATING PARTNERSHIP:
Tower Realty Operating Partnership, L.P.
By: Tower Realty Trust, Inc.
By: /s/ Lawrence H. Feldman
---------------------------
Name: Lawrence H. Feldman
Title: Chariman of the Board, Chief
Executive Officer and President
CONTRIBUTOR:
/s/ Eric Reimer
----------------------------
Eric Reimer
<PAGE> 17
EXHIBIT A
CONSTITUENT INTERESTS OF
ERIC REIMER'S (THE "CONTRIBUTOR") PARTNERSHIP INTEREST
<TABLE>
<CAPTION>
PARTNERSHIPS IN WHICH CONTRIBUTOR PARTNERSHIPS IN WHICH CONTRIBUTOR PROPERTIES HELD BY THE PARTNERSHIPS
HOLDS A DIRECT INTEREST* HOLDS AN INDIRECT INTEREST
- --------------------------------- --------------------------------- -----------------------------------
<S> <C> <C>
2800 Associates, L.P. 2800 North Central
5750 Feldman, Ltd. 5750 Feldstein, Ltd. 5750 Major Blvd.
5750 Associates Limited Partnership
Terco Partners I, L.L.C. Maitland West Associates Limited Maitland West
Terco Partners II, L.L.C. Partnership
</TABLE>
- -------------------------------
* Corporations owned by Eric Reimer that hold interests in any of the
Properties shall contribute the partnership interests held by such
corporations to the Operating Partnership.
A-1
<PAGE> 18
EXHIBIT B
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby assigns,
transfers, contributes and conveys to Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), its entire legal
and beneficial right, title and interest in and to _________________________, a
__________________________ (the "Partnership"), including, without limitation,
all right, title and interest, if any, of the undersigned in and to the assets
of the Partnership and the right to receive distributions of money, profits and
other assets from the Partnership, presently existing or hereafter at any time
arising or accruing (such right, title and interest are hereinafter collectively
referred to as the "Partnership Interest"), TO HAVE AND TO HOLD the same unto
the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating
Partnership assumes all obligations in respect of the Partnership Interest.
The Partnership owns certain real property as described in
Attachment 1 attached hereto.
Executed: , 1997
----------- ---
By:
----------------------------
Eric Reimer
B-1
<PAGE> 19
EXHIBIT C
FORM OF QUITCLAIM
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ ..........................
.......... Computed on the consideration or value of
property conveyed; OR
.......... Computed on the consideration or value
less liens or encumbrances remaining at
time of sale.
-------------------------------------------------------
Signature of Declarant of Agent
determining tax -- Firm name
- --------------------------------------------------------------------------------
QUITCLAIM DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to
Tower Realty Operating Partnership, L.P., a Delaware limited partnership
the real property in the City of ____________, County of _____________, State of
_____________, described as
Dated __________
____________________
____________________
____________________
C-1
<PAGE> 20
STATE OF NEW YORK )
)
COUNTY OF )
On _______________________________________________________________ before me,
___________________________________________________________________________ ,
personally appeared ________________________________________________________
___________________________________________________________________________ ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature (This area for official notarial seal)
--------------------
C-2
<PAGE> 21
EXHIBIT D
CALCULATION OF NUMBER OF OP UNITS
The number of OP Units to be issued to Contributor shall be
calculated as follows:
1
$266,000 + (SRSE - MCU) x ----
MP
SRSE = Share of REIT Sponsor Equity as set forth below:
7.50% of the first $10.0 million of REIT Sponsor Equity;
7.25% of the next $1.0 million of REIT Sponsor Equity;
7.0% of the next $1.0 million of REIT Sponsor Equity;
6.75% of the next $1.0 million of REIT Sponsor Equity;
6.50% of the next $1.0 million of REIT Sponsor Equity;
6.25% of the next $1.0 million of REIT Sponsor Equity;
6.0% of the next $1.0 million of REIT Sponsor Equity;
5.75% of the next $1.0 million of REIT Sponsor Equity;
5.50% of the next $1.0 million of REIT Sponsor Equity;
5.25% of the next $1.0 million of REIT Sponsor Equity and
5.0% of REIT Sponsor Equity above $19.0 million.
For the purpose of calculating REIT Sponsor Equity it is
assumed all shares of Common Stock and OP Units are issued at the Mid-Point (as
defined below).
IAD
REIT Sponsor Equity = (---------- - TNSU)
IADPS
Where:
IAD = Total estimated annual distributions to be made
by the Operating Partnership as set forth in the final preliminary
prospectus included in the Registration Statement on Form S-11 filed by
the Company with the Securities and Exchange Commission in connection
with the proposed public offering of shares of Common Stock (the
"Preliminary Prospectus").
IADPS = Estimated initial annual distribution per
share of Common Stock or OP Unit as set forth in the Preliminary
Prospectus.
TNSU = The total number of shares of Common Stock
and OP Units to be issued in the IPO to persons other than Lawrence H.
Feldman, Robert Cox, Joseph D. Kasman, Eric Reimer, Reuben Friedberg
and Robert Adams as set forth in
D-1
<PAGE> 22
the Preliminary Prospectus, other than the number of OP Units to be
issued to Robert Cox, Joseph D. Kasman, Eric Reimer and Robert Adams in
respect of the minimum contribution consideration to be received by
each of them in respect of their individual Contribution Agreements.
MCU = The total number of OP Units to be issued to
Contributor directly or indirectly under the Omnibus Management Company Option
Agreement (assuming all shares of Common Stock and OP Units are issued at the
Mid-Point (as defined below)).
MP or "Mid-Point" = the median of the proposed per
share price range for the Common Stock as set forth in the Preliminary
Prospectus.
D-2
<PAGE> 23
EXHIBIT E
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
OF CONTRIBUTOR
ARTICLE 1. ADDITIONAL DEFINED TERMS
1.1 For purposes of this EXHIBIT E, the following terms have
the meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT E is attached:
ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively, "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.
CONTRIBUTION AGREEMENT: Means the Contribution Agreement to
which this EXHIBIT E is attached.
GOVERNMENTAL ENTITY: Means any government or agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
INDEMNIFYING PARTY: Means any party required to indemnify any
other party under ARTICLE 3.2 of this EXHIBIT E or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.
KNOWLEDGE: Means, with respect to any representation or
warranty so indicated, the actual knowledge, upon reasonable investigation and
inquiry in good faith, of the signatory to the Contribution Agreement.
LIENS: Means, with respect to any real and personal property,
all mortgages, pledges, liens, options, charges, security interests,
restrictions, prior assignments, encumbrances, covenants, encroachments,
assessments, rights of others, licenses, easements, liabilities or claims of any
kind or nature whatsoever, direct or indirect, including, without limitation,
interests in or claims to revenues generated by such property.
E-1
<PAGE> 24
PERMITTED LIENS: Means (a) Liens, or deposits made to secure
the release of such Liens, securing taxes, the payment of which is not
delinquent or the payment of which is actively being contested in good faith by
appropriate proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the
districts in which the Properties are located which are not violated by the
existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's
and mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not have a
material adverse effect upon, or materially interfere with the use of, the
Properties; and
(e) any exceptions contained in the Title Policies.
PERSON: Means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
PORTFOLIO AGREEMENTS: Means the agreements, including the
Contribution Agreement, listed on ATTACHMENT 1 hereto, which contemplate the
transfer of partnership and/or limited liability company membership interests in
certain of the Participating Partnerships and LLCs from any entity directly or
indirectly owned by Contributor to the Company and the Operating Partnership.
PROSPECTUS: Means the Company's Form S-11 Registration
Statement.
REIT STOCK: Shall have the meaning set forth in the OP
Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
The Contributor represents and warrants to the Operating
Partnership as set forth below in this ARTICLE 2. Notwithstanding any other
provision of the Contribution Agreement or this EXHIBIT E, the Contributor makes
representations, warranties and indemnities only with respect to: (i) the
Properties identified on EXHIBIT A to the Contribution Agreement (the "Property"
or the "Properties"), and (ii) the interests in the Partnerships to be
transferred by the Contributor.
E-2
<PAGE> 25
2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and (B)
has all requisite power and authority to own, lease or operate its property and
to carry on its business as presently conducted and, to the extent required
under applicable law, is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
2.2 DUE AUTHORIZATION. The execution, delivery and performance
of the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered by
or on behalf of the Contributor pursuant to this Contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.
2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is
the sole owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.
2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes
all of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of all
security interests, mortgages, pledges, liens, encumbrances, claims and equities
to the Operating Partnership.
E-3
<PAGE> 26
2.6 NO VIOLATION. None of the execution, delivery or
performance of the Contribution Agreement and the transactions contemplated
hereby does or will, with or without the giving of notice, lapse of time, or
both, (i) violate, conflict with, result in a breach of, or constitute a default
under or give to others any right of termination or cancellation of (A) the
organizational documents, including the charters and bylaws, if any, of the
Contributor, (B) any material agreement, document or instrument to which the
Contributor is a party or by which the Contributor or its Property is bound or
(C) any term or provision of any judgment, order, writ, injunction, or decree of
any governmental or regulatory authority binding on the Contributor or by which
the Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.
2.7 NON-FOREIGN STATUS. The Contributor is not a foreign
person, foreign corporation, foreign partnership, foreign trust or foreign
estate (as defined in the Code), and is, therefore, not subject to the
provisions of the Code relating to the withholding of sales proceeds to foreign
persons.
2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions. If Contributor fails to provide
such certificates or affidavits, the Operating Partnership may withhold a
portion of any payments otherwise to be made to the Contributor as required by
the Code or New York law.
2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her
or its understanding that the offering and sale of the OP Units to be acquired
pursuant to the Contribution Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Act"). In furtherance thereof, the
Contributor represents and warrants to the Company as follows:
2.9.1 INVESTMENT. The Contributor is acquiring the OP
Units solely for his, her or its own account for the purpose of investment and
not as a nominee or agent for any other person and not with a view to, or for
offer or sale in connection with, any distribution of any thereof. The
Contributor agrees and acknowledges that he, she or it will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (hereinafter, "Transfer") any of the OP Units unless (i) the Transfer
is pursuant to an effective registration statement under the Act and
qualification or other compliance under applicable blue sky or state securities
laws, or (ii) counsel for the Contributor (which counsel shall be reasonably
acceptable to the Operating Partnership) shall have furnished the Operating
Partnership with an opinion, reasonably satisfactory in form and substance to
the Operating Partnership to the effect that no such registration is required
because of the availability of an exemption from registration under the Act and
qualification or other compliance under applicable blue sky or state securities
laws.
E-4
<PAGE> 27
2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the Contributor
has previously invested in securities similar to the OP Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Contribution Agreement. The Contributor is able to bear
the economic risk of holding the OP Units for an indefinite period and is able
to afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.
2.9.3 HOLDING PERIOD. The Contributor acknowledges
that he, she or it has been advised that (i) the OP Units and the common stock
of the Company into which the OP Units may be exchanged in certain circumstances
(the "Common Stock") must be held indefinitely, and the Contributor must
continue to bear the economic risk of the investment in the OP Units (and any
Common Stock that might be exchanged therefor) unless they are subsequently
registered under the Act or an exemption from such registration is available,
(ii) a restrictive legend in the form hereafter set forth shall be placed on the
certificates representing the OP Units (and any Common Stock that might be
exchanged therefor), and (iii) a notation shall be made in the appropriate
records of the Operating Partnership (and the Company) indicating that the OP
Units (and any Common Stock that might be exchanged therefor) are subject to
restrictions on transfer.
2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is defined
in Rule 501(a) of Regulation D under the Act) and as such:
(i) is a director or executive officer of
the Company; or
(ii) has an individual net worth, or joint
net worth with his or her spouse, in excess of $1,000,000; or
(iii) had an individual annual adjusted
gross income in excess of $200,000 in each of the two most recent years and
reasonably expects to have annual adjusted gross income in excess of $200,000 in
the current year; or
E-5
<PAGE> 28
(iv) had a joint income with his spouse in
excess of $300,000 in each of the two most recent years and reasonably expects
to have an annual adjusted gross income, with his spouse, in excess of $300,000
in the current year.
If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).
2.9.5 LEGENDING. Each certificate representing the OP
Units (and any Common Stock that might be exchanged therefor) shall bear the
following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY
E-6
<PAGE> 29
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH
A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION.
2.10 LITIGATION. There are no Claims which could reasonably be
anticipated to result in damages in excess of $50,000 pending or, to Knowledge,
threatened that directly or indirectly affect the Contributor, the Partnerships,
the Properties or the Formation Transactions, nor has any such claim been
pending or, to Knowledge, threatened as of the Closing.
2.11 NO BROKERS. Neither the Contributor nor any of its
respective officers, directors or employees has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in the obligation of the Operating Partnership or any of its affiliates to pay
any finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.
2.12 SOLVENCY. The Contributor has been and will be solvent at
all times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.
E-7
<PAGE> 30
2.13 NO MISREPRESENTATIONS. No representation, warranty or
statement made, or information provided, by the Contributor in the Contribution
Agreement or in any other document or instrument furnished or to be furnished by
or on behalf of the Contributor pursuant hereto or as contemplated hereby (i)
contains or will contain any untrue statement of a material fact or (ii) omits
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. For purposes of the preceding sentence,
materiality shall be determined with reference to the total portfolio of real
properties and other interests to be transferred pursuant to the Operating
Partnership pursuant to the Formation Transactions.
ARTICLE 3. INDEMNIFICATION
3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
REMEDY FOR BREACH.
(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT E or in any Schedule or certificate delivered pursuant
hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the
Contribution Agreement or this EXHIBIT E, no party hereto shall be liable under
this EXHIBIT E or the Contribution Agreement for monetary damages (or otherwise)
for breach of any of its representations and warranties contained in this
EXHIBIT E or the Contribution Agreement, or in any Schedule, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this ARTICLE 3.
3.2 GENERAL INDEMNIFICATION
(a) The Contributor shall indemnify and hold harmless the
Operating Partnership, the Company, and their affiliates and each of their
respective directors, officers, employees, agents, representatives and
affiliates (each of which is an "Indemnified Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation, costs of investigative, judicial or administrative proceedings or
appeals therefrom, and costs of attachment or similar bonds (collectively,
"Losses"), asserted against, imposed upon or incurred by the Indemnified Party
in connection with or as a result of any breach of a representation or warranty
of the Contributor contained in the Contribution Agreement or in any Schedule,
certificate or affidavit delivered by the Contributor pursuant to the
Contribution Agreement.
E-8
<PAGE> 31
(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributor in
connection with the transactions contemplated by the Contribution
Agreement;
(ii) any liabilities or obligations incurred,
arising from or out of, in connection with or as a result of the
failure of the Contributor to obtain all consents required to
consummate the transactions contemplated by the Contribution Agreement;
or
(iii) any breach of any representation, warranty or
covenant set forth in the Contribution Agreement.
3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy
its obligations hereunder by the prompt delivery (paid promptly as and when
expenses are incurred) to an Indemnified Party of OP Units, subject to the
limits on ownership and transfer of REIT Stock set forth in the Company's
articles of incorporation. Any OP Units delivered to an Indemnified Party
hereunder shall be valued based upon the initial public offering price of the
Company's Common Stock.
3.4 NOTICE AND DEFENSE BY CLAIMS. As soon as reasonably
practicable after receipt by the Indemnified Party of notice of any liability or
claim incurred by or asserted against the Indemnified Party that is subject to
indemnification under this ARTICLE 3, the Indemnified Party shall give notice
thereof to the Contributor. The Indemnified Party may at its option demand
indemnity under this ARTICLE 3 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not frivolous
and that the Indemnified Party may be liable for, or otherwise incur, a Loss as
a result thereof and shall give notice of such determination to the Contributor.
The Indemnified Party shall permit the Contributor, at its option and expense,
to assume the defense of any such claim by counsel selected by the Contributor
and reasonably satisfactory to the Indemnified Party, and to settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that the Indemnified Party may at all
times participate in such defense at its expense; and PROVIDED FURTHER, HOWEVER,
that the Contributor shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party in its sole and absolute
discretion, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnified Party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall have
the right to undertake the
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defense, compromise or settlement of such liability or claim on behalf of and
for the account of the Contributor.
3.5 LIMITATIONS ON INDEMNIFICATION UNDER ARTICLE 3.
Notwithstanding anything contained herein to the contrary, the Contributor shall
not be liable or obligated to make payments under this ARTICLE 3 with respect to
any Property or Partnership Interest to the extent such payments in the
aggregate would exceed the value of the OP Units (based upon the initial public
offering price of the Common Stock) received by the Contributor at the Closing.
Notwithstanding anything contained herein to the contrary, the Indemnified
Parties shall look first to the Contributor's OP Units for indemnification under
this ARTICLE 3 and then to the Contributor's other assets.
3.6 LIMITATION PERIOD.
(a) Notwithstanding the foregoing, any claim for
indemnification under ARTICLE 3.2 hereof must be asserted in writing by the
Indemnified Party, stating the nature of the Losses and the basis for
indemnification therefor within one year after the Closing.
(b) If so asserted in writing prior to the applicable
expiration date, such claims for indemnification shall survive until resolved by
mutual agreement between the Contributor and the Indemnified Party or by
judicial determination. Any claim for indemnification not so asserted in writing
prior to the applicable expiration date shall not thereafter be asserted and
shall forever be waived.
3.7 RESERVATION OF CONTRIBUTOR RIGHTS. Notwithstanding
anything else in this Contribution Agreement to the contrary, the Contributor
reserves unto itself all rights and remedies (including rights to seek
contribution) against any third party indemnitors, prior property owners or
occupants, and contributors to any contamination, for which the Partnerships
have been indemnified by the Contributor hereunder. To the extent the
Contributor's rights against any such third party owners, occupants, indemnitors
or contributors may be materially prejudiced by actions or inactions by any
owner or occupant of the Properties after the Closing, the Contributor's
indemnity obligation shall be reduced in accordance with the effect of the
actions or inactions which so prejudiced the Contributor's rights.
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ATTACHMENT 1
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
__________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, together with certain other limited
partners, has formed the Operating Partnership
pursuant to the Agreement of Limited Partnership of
the Operating Partnership dated __________ __, 1997
(as such agreement may be amended or amended and
restated from time to time, the "PARTNERSHIP
AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited
Partners (as defined below) directly or indirectly
hold units of limited partnership interest ("OP
UNITS") in the Operating Partnership.
(c) The Operating Partnership has agreed to provide the
Limited Partners with certain direct or indirect
rights to exchange their OP Units for cash or, at the
election of the Company, for shares of the Company's
common stock, par value $0.01 per share (the "REIT
STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
<PAGE> 34
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Stock in REIT
Stock or makes a distribution to all holders of its outstanding REIT Stock in
REIT Stock; (ii) subdivides its outstanding REIT Stock; or (iii) combines its
outstanding REIT Stock into a smaller number of shares of REIT Stock, the
Exchange Factor shall be adjusted by multiplying the Exchange Factor by a
fraction, the numerator of which shall be the number of shares of REIT Stock
issued and outstanding on the record date for such dividend, contribution,
subdivision or combination assuming for such purpose that such dividend,
distribution, subdivision or combination has occurred as of such time, and the
denominator of which shall be the actual number of shares of REIT Stock
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Exchange Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated
and/or the Operating Partnership
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
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<PAGE> 35
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to
the product of the number of OP Units offered for exchange by an Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company or the Operating Partnership issues to all holders
of REIT Stock rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase REIT Stock,
or any other securities or property (collectively, the "rights"), then the REIT
Stock Amount shall also include such rights that a holder of that number of
shares of REIT Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading
on the NYSE, any national securities exchange or Nasdaq, the last
reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
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<PAGE> 36
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"EXCHANGING PARTNER"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding
the provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging
Partner within five (5) Business Days after the receipt by the Company
of such Notice of Exchange,
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<PAGE> 37
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of
the Company,
(b) would otherwise jeopardize the REIT status of the Company,
or
(c) would cause the acquisition of the REIT Stock by the
Limited Partner to be "integrated" with any other distribution of REIT
Stock by the Company for purposes of complying with the registration
provisions of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article
2, any person to whom OP Units have been pledged, in compliance with the terms
of the Lock-up Agreement, may exercise its Exchange Right prior to the date that
is one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
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<PAGE> 38
(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of
the Exchange Right, the Company shall reserve for issuance such number of shares
of REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable
upon exchange of OP Units (or the cash equivalent amount thereof if the Cash
Amount is paid) shall be computed on the basis of the aggregate amount of OP
Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
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<PAGE> 39
(A) a copy of the prospectus contained in the
Registration Statement on Form S-11 filed by the Company in
connection with the IPO, any prospectus contained in any
Registration Statement subsequently filed by the Company, and
any supplement or amendment thereto (each, a "PROSPECTUS"),
and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by
the Company with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited
investor" as defined in Rule 501 of the regulations
promulgated under the Securities Act.
(B) If such Exchanging Partner has retained or
retains a person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
(b) (i) Such Exchanging Partner understands that an investment in the
Company involves substantial risks.
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<PAGE> 40
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of such Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws, except as provided in the Registration Rights
Agreement entered into by the Company and the Exchanging
Partner (the "REGISTRATION RIGHTS AGREEMENT").
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<PAGE> 41
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
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<PAGE> 42
4.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with
the consent of the Company by a vote of the Limited Partners in the same manner
as the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein, provided, however, that the Company shall vote its
limited partnership interests in proportion to the votes of the other Limited
Partners.
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By:
------------------------------------
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By:
---------------------------
Name:
Title:
LIMITED PARTNERS:
------------------------------------
Signature
------------------------------------
Name (Please Print or Type)
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<PAGE> 44
Exhibit A
Name and Address of Limited Partners
[To be attached]
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<PAGE> 45
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated:
-------------------------
-------------------------------
Name of Limited Partner (Please Print)
Signature guaranteed by:
(Signature of Limited Partner)
- -----------------------------
(Street Address)
(City) (State) (Zip Code)
If REIT Stock is to be
Name:
Limited Partner's social
security or tax
identification number:
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<PAGE> 46
BATTLE FOWLER LLP
DRAFT - 7/24/97
ATTACHMENT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, limited liability companies, corporations and
other entities which are Holders or in which the Holders own direct or indirect
interests (the "PROPERTY PARTNERSHIPS") pursuant to Option or Contribution
Agreements (the "OPTION AGREEMENTS") among the Operating Partnership and the
Grantors named therein, and in connection therewith the Holders will receive
units of limited partnership interest in the Operating Partnership (such units
of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
<PAGE> 47
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating
to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement
or
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<PAGE> 48
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
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"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not
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delay, suspend or withdraw a Registration Statement for such reason for
more than 60 days or more often than twice during any period of 12
consecutive months.
(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration Statement
covering the Registrable Securities held by more than one Holder.
2.2 Expenses.
(i) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if any,
sales commissions, the fees and disbursements of counsel representing
such Holder and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that does
not, within 10 days after receipt of a reasonable request by the Company for
information in connection with the Shelf Registration Statement, provide such
information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
2.4 Effect of Material Breach. In the event that the Company shall
breach any of its material obligations hereunder in any material respect, any
Holder of Registrable Securities may demand that the Company file a registration
statement covering such Holder's Registrable Securities. The Company agrees to
file such registration statement within 60 days after receipt of such demand and
agrees to use its best efforts to procure the effectiveness of such registration
statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed pursuant
to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period set
forth in Section 2 hereof, a Shelf Registration Statement, which Shelf
Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects
with the requirements of the applicable form of registration
statement and include all financial statements required by the
SEC to be filed therewith.
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(ii) (A) Subject to Article III, Section (a)(ii)(B),
(I) prepare and file with the SEC such
amendments and post-effective amendments to each such
Registration Statement as may be necessary to keep
such Registration Statement effective for the
applicable period;
(II) cause each such Prospectus to be
supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule
424 or any similar rule that may be adopted under the
Securities Act;
(III) respond as promptly as practicable to
any comments received from the SEC with respect to
the Shelf Registration Statement, or any amendment,
post-effective amendment or supplement relating
thereto; and
(IV) comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by each Registration Statement
during the applicable period in accordance with the
intended method or methods of distribution by the
selling Holders thereof.
(B) (I) Each Holder shall promptly provide to the
Company such information as the Company reasonably
requests in order to identify such Holder and the
method of distribution in a post-effective amendment
to the Registration Statement or a supplement to the
Prospectus.
(II) Such Holder also shall notify the
Company in writing upon completion of any offer or
sale or at such time as such Holder no longer intends
to make offers or sales under the Registration
Statement.
(iii) Furnish to each Holder of Registrable Securities,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable
Securities; the Company consents to the use of the Prospectus,
including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary
Prospectus.
(iv) Use its reasonable efforts to register or qualify the
Registrable Securities by the time the applicable Registration
Statement is declared effective by the SEC under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
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Registrable Securities covered by a Registration Statement shall
reasonably request in writing, keep each such registration or
qualification effective during the period such Registration Statement
is required to be kept effective, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that
the Company shall not be required to
(A) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to
qualify but for this Article III, Section (a)(iv),
(B) subject itself to taxation in any such
jurisdiction, or
(C) submit to the general service of process in any
such jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and,
if requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become
effective and when any post-effective amendments and
supplements thereto become effective,
(B) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose,
(C) if the Company receives any notification with
respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and
(D) of the happening of any event during the period a
Registration Statement is effective which is of a type
specified in Article II, Section 2.1(iii) hereof or as a
result of which such Registration Statement or the related
Prospectus contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the
Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment.
(vii) Furnish to each Holder of Registrable Securities,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment
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thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested).
(viii) (A) Cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any Securities Act legend; and
(B) enable certificates for such Registrable
Securities to be issued for such numbers of shares of Common
Stock and registered in such names as the selling Holders may
reasonably request at least two business days prior to any
sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III,
Section (a)(ii)(B) hereof, upon the occurrence of any event
contemplated by Article III, Section (a)(v)(D) hereof, use its
reasonable efforts promptly to prepare and file a supplement or
prepare, file and obtain effectiveness of a post-effective amendment to
a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(x) Make available for inspection by representatives of the
Holders of the Registrable Securities and any counsel or accountant
retained by such Holders, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply
all information reasonably requested by any such representative,
counsel or accountant in connection with a Registration Statement;
provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies
such representatives, counsel or accountants in writing that such
records, documents or information are confidential shall not be
disclosed by such representatives, counsel or accountants unless
(A) the disclosure of such records, documents or
information is necessary to avoid or correct a material
misstatement or omission in a Registration Statement,
(B) the release of such records, documents or
information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, or
(C) such records, documents or information have been
generally made available to the public.
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(xi) Within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of
such document (not including any documents incorporated by reference
therein unless requested) to the Holders of Registrable Securities.
(xii) Use its reasonable efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar
securities issued by the Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities,
not later than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable Holders to consummate the disposition of such Registrable
Securities.
(b) The Company may require each Holder of Registrable Securities to
furnish to the Company in writing such information regarding the
proposed distribution by such Holder of such Registrable Securities as
the Company may from time to time reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations
with respect to the Registration Statement required to be filed
pursuant to Section 2 hereof and this Section 3, each Holder agrees
that
(i) it will not offer or sell its Registrable Securities under
the Registration Statement until it has received copies of the
supplemental or amended Prospectus contemplated by Article III, Section
(a)(ii) hereof and receives notice that any post-effective amendment
has become effective, and
(ii) upon receipt of any notice from the Company of the
happening of any event of the kind described in Article III, Section
(a)(v)(D) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such
Holder receives copies of the supplemented or amended Prospectus
contemplated by Article III, Section (a)(ix) hereof and receives notice
that any post-
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effective amendment has become effective, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
IV Indemnification; Contribution.
4.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder (within the meaning of Section 15 of the Securities
Act) as follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading or
(C) arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental
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agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of any such
amended or supplemental Prospectus by the Company, if such loss,
liability, claim, damage or expense would not have arisen had such
delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it
may have under the indemnity agreement provided in Section
4.1(a) or 4.1(b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the
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indemnified party results in the forfeiture by the
indemnifying party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than
the indemnification obligation provided under Section 4.1(a)
or 4.1(b) above.
(ii) If the indemnifying party so elects within a reasonable
time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved
by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however,
that, if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the
proviso to Section 4.1(c), such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's
defense, and counsel for the indemnified party or parties
shall be entitled to conduct the defense of such indemnified
party or parties, it being understood that both such counsel
will cooperate with each other to conduct the defense of such
action or proceeding as efficiently as possible.
(B) If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such
defense, after having received the notice referred to in
Section 4.1(c), the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified
party or parties as incurred.
(C) In such event, however, no indemnifying party
will be liable for any settlement effected without the written
consent of such indemnifying party, which consent may not be
unreasonably withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with
this Section 4(c), such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
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4.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 4 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one hand and the
selling Holders on the other (in such proportions that the
selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations.
(B) (I) The relative benefits to the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, the total proceeds
received by the indemnifying party and indemnified
parties in connection with the offering to which such
losses, claims, damages, liabilities or expenses
relate.
(II) The relative fault of the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether the action
in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact, has been made by,
or relates to information supplied by, such
indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section
4.4, no selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities of such selling Holder were
offered to the public exceeds the amount of any damages which
such selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
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(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any,
who controls a Holder within the meaning of Section 15 of the
Securities Act and directors and officers of a Holder shall have the
same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration
Statement and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act shall have the same rights
to contribution as the Company.
V Filing of Exchange Act Reports; Rule 144 Sales
5.1 The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act so as to
enable any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition by any
Holder of any Exchange Stock pursuant to Rule 144, the Company shall cooperate
with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Exchange
Stock.
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the outstanding
Registrable Securities; provided, however, that no amendment,
modification or supplement or waiver or consent to the departure with
respect to the provisions of Articles 2, 4 or 5 hereof shall be
effective as against any Holder unless consented to in writing by such
Holder.
(ii) Notice of any amendment, modification or supplement to
this Agreement adopted in accordance with this Section 6.1 shall be
provided by the Company to each Holder at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex,
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telecopier, or any courier guaranteeing overnight
delivery, to the parties at their respective addresses set forth opposite their
signatures below or at such other address as a party may indicate by written
notice to the other party or parties.
(ii) All such notices and communications shall be deemed to
have been duly given:
(A) at the time delivered by hand, if personally
delivered;
(B) three (3) business days after being deposited in
the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By:
----------------------------------
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING
New York, New York 10036-4003
PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By:
----------------------------------
Name:
Title:
HOLDERS:
[Address:]
----------------------------------
Signature
----------------------------------
Name (Please Print or Type)
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ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public pursuant to a public offering (the "Offering").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Company's Registration Statement on Form S-11
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that without the prior written consent of Merrill Lynch, the undersigned
will not (and, except as may be disclosed in the Prospectus, will not announce
or disclose any intention to) directly or indirectly sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition at any time in
the future) of, any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, including any units of limited
partnership interest (the "OP Units") in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership") beneficially
owned by the undersigned as of the date of the closing of the Company's initial
public offering, for a period of twenty-four (24) months after the later of (i)
date of the final Prospectus relating to the
<PAGE> 64
offering of the Shares to the public by the Underwriters and (ii) the date the
Offering is consummated and closed. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and __________________,
its Transfer Agent, are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
letter agreement.
Very truly yours,
[INVESTOR]
By:____________________________
Name:
Title:
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<PAGE> 65
ATTACHMENT 3
(CONTINUED)
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Tower Realty Operating Partnership, L.P.
120 West 46th Street, 24th Floor
New York, New York 10036
Dear Sirs,
Reference is made to the Option Agreement, dated _________, 1997 (the
"Option Agreement"), by and between the undersigned and Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Option Agreement.
In consideration of the execution and exercise of the Option Agreement
by the Operating Partnership, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned hereby
irrevocably agrees that without the prior written consent of the Operating
Partnership, the undersigned will not directly or indirectly sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose (or enter into any transaction or device which
is designed to, or could be expected to, result in the disposition at any time
in the future) of any any units of limited partnership interest (the "OP Units")
in the Operating Partnership, or any securities convertible into or exercisable
or exchangeable for OP Units, beneficially owned by the undersigned as of the
date hereof, for a period of twenty-four (24) months after the date hereof.
Prior to the expiration of such period, the undersigned will not publicly
announce or disclose any intention to do anything after the expiration of such
period which the undersigned is prohibited, as provided in the preceding
sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Operating Partnership is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.48
- --------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
by and between
REUBEN FRIEDBERG
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of July 31, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS ...................................................................... -1-
1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP
UNITS................................................................. -2-
1.1 CONTRIBUTION TRANSACTION..................................... -2-
1.2 ISSUANCE OF OP UNITS......................................... -3-
1.3 ADJUSTED CONSIDERATION....................................... -3-
1.4 AUTHORIZATION................................................ -3-
1.5 CONTRIBUTION OF CERTAIN RIGHTS............................... -3-
1.6 PRORATIONS................................................... -3-
1.7 TREATMENT AS CONTRIBUTION.................................... -4-
2. CLOSING............................................................... -4-
2.1 CONDITIONS PRECEDENT......................................... -4-
2.2 TIME AND PLACE............................................... -5-
2.3 CLOSING DELIVERIES........................................... -6-
2.4 CLOSING COSTS................................................ -6-
3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES........................... -7-
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP.................................................. -7-
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR................ -7-
3.3 INDEMNIFICATION.............................................. -7-
4. COVENANTS............................................................. -8-
4.1 COVENANTS OF CONTRIBUTOR..................................... -8-
5. RELEASES AND WAIVERS.................................................. -8-
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP..................... -9-
5.2 GENERAL RELEASE OF CONTRIBUTOR............................... -9-
5.3 INTENTIONALLY OMITTED........................................ -9-
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT................. -9-
6. POWER OF ATTORNEY..................................................... -9-
6.1 GRANT OF POWER OF ATTORNEY................................... -9-
6.2 LIMITATION ON LIABILITY...................................... -10-
7. MISCELLANEOUS......................................................... -11-
7.1 FURTHER ASSURANCES........................................... -11-
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
7.2 COUNTERPARTS................................................. -11-
7.3 GOVERNING LAW................................................ -11-
7.4 NOTICES...................................................... -11-
</TABLE>
EXHIBIT LIST
<TABLE>
<CAPTION>
SECTION FIRST
EXHIBITS REFERENCED
<S> <C>
A Constituent Interests of Contributor's Partnership Interest.......... Recital D
B Contribution and Assumption Agreement................................ 1.1
C Form of Quitclaim.................................................... 1.1
D Calculation of Number of OP Units.................................... 1.2
E Representations, Warranties and Indemnities of Contributor........... 3.2
Attachment 1......................................................... Exchange Rights Agreement
Attachment 2......................................................... Registration Rights Agreement
Attachment 3......................................................... Lock-Up Agreements
Attachment 4......................................................... List of Portfolio Agreements
</TABLE>
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<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"Contribution Agreement") is made and entered into as of July 31, 1997 by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), and Reuben Friedberg, an individual (the
"Contributor").
RECITALS
A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office properties (the "Participating Properties") owned or managed
by Tower Equities & Realty Corp. or its affiliates through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively,
the "Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").
B. The Formation Transactions relate to the proposed initial public
offering (the "Public Offering") of the common stock, par value $.01 per share
(the "Common Stock") of Tower Realty Trust, Inc., a Maryland corporation (the
"Company"), which will operate as a self-administered and self-managed real
estate investment trust ("REIT") and will be the sole general partner of the
Operating Partnership.
C. The owners of the Property Interests and the partners and members of
the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "Cash Participants") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP Participants").
D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT A (the "Partnerships") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT A (the "Property" or the
"Properties"). As used herein, "Partnership Agreement" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.
E. The Contributor has previously contributed certain interests in the
Partnerships to the Operating Partnership in exchange for OP Units (as defined
below).
F. The Contributor desires to, and the Operating Partnership desires
the Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, as a
<PAGE> 5
partner (or member) of the Partnerships, including, without limitation, all of
its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in the Partnerships (such right, title and interest are hereinafter
collectively referred to as the "Partnership Interest"), in exchange for
partnership units in the Operating Partnership (the "OP Units"), on the terms
and subject to the conditions set forth herein.
G. The Operating Partnership desires to make, and the Contributor
desires to receive, a return of certain contributions previously made by the
Contributor to the Operating Partnership that relate to direct or indirect
interests in certain limited partnerships, limited liability companies and
certain other entities that do not relate to the Consolidation (the "Excluded
Interests").
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR
OP UNITS
1.1 CONTRIBUTION TRANSACTION
(a) At the Closing (as defined in ARTICLE 2.2 hereof) and
subject to the terms and conditions contained in this Contribution Agreement,
the Contributor shall transfer to the Operating Partnership, absolutely and
unconditionally, all of its Partnership Interest (as such term is defined in
Recital F herein) not previously contributed to the Operating Partnership. The
contribution of the Contributor's Partnership Interest shall be evidenced by a
"Contribution and Assumption Agreement" for each of the Partnerships in
substantially the form of EXHIBIT B attached hereto. Furthermore, the
Contributor shall execute and have duly acknowledged an individual quitclaim
deed for each property in the form of EXHIBIT C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the Agreement
of Limited Partnership of the Operating Partnership (the "OP Agreement") in
order to effect the transactions contemplated hereby.
(b) At the Closing, and subject to the terms and conditions
set forth in this Contribution Agreement, the Operating Partnership shall
transfer to the Contributor, absolutely and unconditionally, all of the Excluded
Interests (as such term is defined in Recital G herein) previously contributed
by the Contributor to the Operating Partnership.
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<PAGE> 6
1.2 ISSUANCE OF OP UNITS
The Operating Partnership shall, in exchange for the
Partnership Interest and after taking into account the transfer of the Excluded
Interests to the Contributor, increase or decrease the number of OP Units issued
to the Contributor in accordance with EXHIBIT D hereto. The increase or decrease
of OP Units Issued to the Contributor shall be evidenced by either an amendment
(the "Amendment") to the OP Agreement or by certificates relating to such units
(the "Certificates") in either case, as shall be acceptable to the Contributor.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the OP
Agreement in order to effect the transactions contemplated hereby.
1.3 ADJUSTED CONSIDERATION
The Operating Partnership reserves the right not to acquire
any particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the number of OP Units to be received by the Contributor pursuant to this
Contribution Agreement may be reduced by an amount determined by Lawrence H.
Feldman, in his sole discretion, to reflect the reduction in total value of the
Partnership Interest ultimately contributed by the Contributor.
1.4 AUTHORIZATION
Contributor hereby authorizes Lawrence H. Feldman to make any
and all determinations to be made by him pursuant to ARTICLE 1.3 hereof, and any
and all such determinations shall be final and binding on all parties.
1.5 CONTRIBUTION OF CERTAIN RIGHTS
Effective upon the Closing, the Contributor hereby contributes
to the Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.
1.6 PRORATIONS
At the Closing, or as promptly as practicable following the
Closing, to the extent such matters are not the right or responsibility of all
tenants of a given Property, all revenue and all charges that are customarily
prorated in transactions of this nature, including accrued rent currently due
and payable, overpaid taxes or fees, real and personal property taxes, common
area maintenance charges and other similar periodic charges payable or
-3-
<PAGE> 7
receivable with respect to such Property shall be ratably prorated between the
partners of the Partnership which holds such Property prior to the Closing and
the Operating Partnership on and after the Closing, effective as of the Closing.
After providing for such prorations, (i) if any of the Partnerships has a
resultant cash surplus, the value of the Contributor's Partnership Interest
shall be increased in proportion to Contributor's ratable share of such cash
surplus and additional OP Units (based on the Mid-Point (as such term is defined
in Exhibit D attached hereto) of the proposed offering prices per share set
forth in the final preliminary prospectus relating to the offering of shares of
Common Stock ) shall be issued to the Contributor as a valuation adjustment to
the consideration to be received by the Contributor pursuant to this
Contribution Agreement, and (ii) if any of the Partnerships has a resultant cash
deficit, the value of the Contributor's Partnership Interest shall be reduced in
proportion to Contributor's ratable share of such cash deficit, and fewer OP
Units shall be issued to the Contributor as a valuation adjustment to the
consideration to be received by the Contributor pursuant to this Contribution
Agreement, unless such deficit is cured prior to the Closing.
1.7 TREATMENT AS CONTRIBUTION
The transfer, assignment and exchange of interests effectuated
with respect to the Operating Partnership, pursuant to this Contribution
Agreement, shall constitute a "Capital Contribution" pursuant to Article IV of
the OP Agreement and is intended to be governed by Section 721(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2. CLOSING
2.1 CONDITIONS PRECEDENT
The effectiveness of the Company's registration statement
filed with the Securities and Exchange Commission on Form S-11 (the
"Registration Statement") is a condition precedent to the obligations of all
parties to this Contribution Agreement to effect the transactions contemplated
by this Contribution Agreement on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and correct in all
material respects on the date such representations and warranties were made, and
shall be true and correct in all material respects on the Closing Date as if
made at and as of such date;
(b) Each of the obligations of the Contributor to be performed
by it shall have been duly performed by it on or before the Closing Date;
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<PAGE> 8
(c) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents required to be
delivered pursuant to ARTICLE 2.3 hereof;
(d) The Contributor shall have obtained all necessary consents
or approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
or regulatory authority or instrumentality that prohibits the consummation of
the transactions contemplated hereby, and no litigation or governmental
proceeding seeking such an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof and
the Closing Date any material adverse change in any of the Partnerships'
businesses;
(h) All existing management agreements with respect to the
Properties shall have been contributed to the Operating Partnership prior to or
simultaneously with the Closing; and
(i) All management functions with respect to the Properties
presently conducted by Tower Equities & Realty Corp. and its affiliates shall be
assumed by the Operating Partnership or Tower Equities Management, Inc.
2.2 TIME AND PLACE
The date, time and place of the transactions contemplated
hereunder shall be the day the Operating Partnership receives the proceeds from
the Public Offering from the underwriter(s), at 10:00 a.m. in the office of
Battle Fowler LLP, 75 East 55th Street, New York, New York 10022 (the "Closing"
or "Closing Date"). The transfers described in ARTICLE 1.1 of this Contribution
Agreement, and all closing deliveries, and the consummation of the Public
Offering, shall be deemed concurrent for all purposes.
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<PAGE> 9
2.3 CLOSING DELIVERIES
At the Closing, the parties shall make, execute, acknowledge
and deliver, or cause to be made, executed, acknowledged and delivered through
the Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other
items (collectively, the "Closing Documents") necessary to carry out the
intention of this Contribution Agreement, which Closing Documents and other
items shall include, without limitation, the following:
(i) A Contribution and Assumption Agreement for
each Partnership;
(ii) An individual quitclaim deed for each Property,
fully executed and duly acknowledged from each of the individual
constituent partners and/or members of the Contributor, as required by
the Operating Partnership;
(iii) The Amendment or the Certificates evidencing
the transfer of OP Units to the Contributor;
(iv) American Land Title Assurances ("ALTA")
policies of title insurance with appropriate endorsements and levels of
reinsurance for the Properties issued as of the Closing Date or
endorsements or other assurances that the existing policy or policies
of title insurance are sufficient for purposes of this Contribution
Agreement, which the Contributor shall cause the title company to issue
to the Operating Partnership in a form acceptable to the Operating
Partnership (the "Title Policies") including satisfaction by the
Contributor of any and all title company requirements applicable to it;
(v) The Partnerships' books and records and
securities or other evidences of ownership held by the Contributor; and
(vi) An affidavit from the Contributor stating,
under penalty of perjury, the Contributor's United States Taxpayer
Identification Number and that the Contributor is not a foreign person
pursuant to section 1445(b)(2) of the Code and a comparable affidavit
satisfying California and any other withholding requirements.
(vii) The Exchange Rights Agreement, the
Registration Rights Agreement and the Lock-Up Agreements substantially
in the form attached hereto as ATTACHMENTS 1, 2, and 3, respectively.
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<PAGE> 10
2.4 CLOSING COSTS
The Operating Partnership shall pay any documentary transfer
taxes, escrow charges, title charges and recording taxes or fees incurred in
connection with the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP
The Operating Partnership hereby represents and warrants to
and covenants with the Contributor that:
(a) Organization; Authority. The Operating Partnership has
been duly formed and is validly existing with requisite power to enter this
Contribution Agreement and all agreements contemplated hereby. The persons and
entities executing this Contribution Agreement and all agreements contemplated
hereby on behalf of the Operating Partnership have the power and authority to
enter into this Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and performance
by the Operating Partnership of its obligations under this Contribution
Agreement and all agreements contemplated hereby will not contravene any
provision of applicable law, the OP Agreement, charter, declaration of trust or
other constituent document of the Operating Partnership, or any agreement or
other instrument binding upon the Operating Partnership or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over the
Operating Partnership, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Operating Partnership of its obligations under this
Contribution Agreement and all other agreements contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
The Contributor represents and warrants to and covenants with
the Operating Partnership as provided in EXHIBIT E attached hereto, and
acknowledges and agrees to be bound by the indemnification provisions contained
therein.
3.3 INDEMNIFICATION
The Operating Partnership shall indemnify and hold harmless
the Contributor (the "Indemnified Contributor Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable
-7-
<PAGE> 11
attorneys' fees, costs of investigation and remediation, costs of investigative
judicial or administrative proceedings or appeals therefrom and costs of
attachment or similar bonds (collectively, "Losses") asserted against, imposed
upon or incurred by the Indemnified Contributor Party in connection with: (i)
any breach of a representation or warranty of the Operating Partnership
contained in this Contribution Agreement; and (ii) all fees, costs and expenses
of the Operating Partnership in connection with the transactions contemplated by
this Contribution Agreement, including, without limitation, any and all costs
associated with the transfers contemplated herein.
ARTICLE 4. COVENANTS
4.1 Covenants of Contributor
(a) From the date hereof through the Closing, the Contributor
shall not:
(i) Sell or transfer all or any portion of the
Partnership Interest; or
(ii) Mortgage, pledge or encumber (or permit to
become encumbered) all or any portion of the Partnership Interest.
(b) From the date hereof through the Closing, the Contributor
shall permit each of the Partnerships to conduct its business in the ordinary
course, consistent with past practice, and shall not permit any of the
Partnerships to:
(i) Enter into any material transaction not in the
ordinary course of business;
(ii) Sell or transfer any assets of the
Partnerships;
(iii) Mortgage, pledge or encumber (or permit to
become encumbered) any assets of the Partnerships, except (x) liens for
taxes not due, (y) purchase money security interests and (z) mechanics'
liens being disputed by any of the Partnerships in good faith and by
appropriate proceedings;
(iv) Amend, modify or terminate any material
agreements or other instruments to which any of the Partnerships is a
party; or
(v) Materially alter the manner of keeping the
Partnerships' books, accounts or records or the accounting practices
therein reflected.
(c) The Contributor shall use its good faith diligent efforts
to obtain any approvals, waivers or other consents of third parties required to
effect the transactions contemplated by this Contribution Agreement.
-8-
<PAGE> 12
ARTICLE 5. RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this ARTICLE 5
shall become effective only upon the Closing of the contribution and exchange of
the Partnership Interest pursuant to ARTICLES 1 and 2 hereof.
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP
As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the Operating
Partnership's affiliates, partners (including Lawrence H. Feldman), agents,
attorneys, successors and assigns of and from any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "Contributor Claims"), known or unknown,
suspected or unsuspected, arising out of or relating to any of the Partnership
Agreements, this Contribution Agreement or any other matter which exists at the
Closing, except for Contributor Claims arising from the breach of any
representation, warranty, covenant or obligation under this Contribution
Agreement.
5.2 GENERAL RELEASE OF CONTRIBUTOR
As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and Contributor's
agents, attorneys, successors and assigns of and from any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses and
costs of any nature whatsoever (collectively, "Operating Partnership Claims"),
known or unknown, suspected or unsuspected, arising out of or relating to any of
the Partnership Agreements, this Contribution Agreement or any other matter
which exists at the Closing, except for Operating Partnership Claims arising
from the breach of any representation, warranty, covenant or obligation under
this Contribution Agreement or any supplemental representations and warranties
agreement entered into as of the Closing Date by and among the Contributor,
certain other continuing investors in the Operating Partnership and the
Operating Partnership.
5.3 INTENTIONALLY OMITTED
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT
As of the Closing, the Contributor waives and relinquishes all
rights and benefits otherwise afforded to Contributor under the Partnership
Agreements including, without limitation, any right to consent to or approve of
the sale or contribution by the other partners (or members) of the Partnerships
of their partnership interests to the Company or the Operating Partnership.
-9-
<PAGE> 13
ARTICLE 6. POWER OF ATTORNEY
6.1 GRANT OF POWER OF ATTORNEY
Contributor does hereby irrevocably appoint the Operating
Partnership (or its designee) and each of them individually and any successor
thereof from time to time (such Operating Partnership or designee or any such
successor of any of them acting in his, her or its capacity as attorney-in-fact
pursuant hereto, the "Attorney-in-Fact") as the true and lawful attorney-in-fact
and agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including, without limitation, the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney-in-Fact a proxy (the
"Proxy") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.
Each of the Power of Attorney and Proxy and all authority
granted hereby shall be coupled with an interest and therefore shall be
irrevocable and shall not be terminated by any act of Contributor, by operation
of law or by the occurrence of any other event or events, and if any other such
act or events shall occur before the completion of the transactions contemplated
by this Contribution Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such other act
or events had not occurred and regardless of notice thereof. Contributor agrees
that, at the request of the Operating Partnership, it will promptly execute a
separate power of attorney and proxy on the same terms set forth in this ARTICLE
6, such execution to be witnessed and notarized. Contributor hereby authorizes
the reliance of third parties on each of the Power of Attorney and Proxy.
Contributor acknowledges that the Operating Partnership has,
and any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
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<PAGE> 14
6.2 LIMITATION ON LIABILITY
It is understood that the Attorney-in-Fact assumes no
responsibility or liability to any person by virtue of the Power of Attorney or
Proxy granted by Contributor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
Formation Transactions or the Public Offering, or the acquisition of the
Partnership Interest by the Operating Partnership and shall not be liable for
any error or judgment or for any act done or omitted or for any mistake of fact
or law except for its own gross negligence or bad faith. Contributor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney or Proxy created by Contributor hereby, as well as the cost and expense
of investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is due to
the gross negligence or bad faith of the Attorney-in-Fact. Contributor agrees
that the Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to Contributor hereunder, release, amend or
modify any other power of attorney or proxy granted by any other person under
any related agreement.
ARTICLE 7. MISCELLANEOUS
7.1 FURTHER ASSURANCES.
The Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
7.2 COUNTERPARTS
This Contribution Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.3 GOVERNING LAW
This Contribution Agreement shall be governed by the internal
laws of the State of New York, without regard to the conflicts of laws
provisions thereof.
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<PAGE> 15
7.4 NOTICES
Any notice to be given hereunder by any party to the other
shall be given in writing by personal delivery or by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed
communicated as of the date of personal delivery (including delivery by
overnight courier). Mailed notices shall be addressed as set forth below, but
any party may change the address set forth below by written notice to other
parties in accordance with this paragraph.
To the Contributor:
Reuben Friedberg
c/o Feldman Equities
120 West 45th Street
New York, NY 10022
To the Operating Partnership:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, NY 10022
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<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this
Contribution Agreement as of the date first written above.
OPERATING PARTNERSHIP:
Tower Realty Operating Partnership, L.P.
By: Tower Realty Trust, Inc.
By: /s/Lawrence H. Feldman
--------------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board, Chief
Executive Officer and President
CONTRIBUTOR:
/s/ Reuben Friedberg
--------------------------------------------------
Reuben Friedberg
<PAGE> 17
EXHIBIT A
CONSTITUENT INTERESTS OF
REUBEN FRIEDBERG'S (THE "CONTRIBUTOR") PARTNERSHIP INTEREST
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
PARTNERSHIPS IN WHICH CONTRIBUTOR PARTNERSHIPS IN WHICH CONTRIBUTOR PROPERTIES HELD BY THE PARTNERSHIPS
HOLDS A DIRECT INTEREST* HOLDS AN INDIRECT INTEREST
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Terco Partners I, L.L.C. Maitland West Associates Limited Maitland West
Terco Partners II, L.L.C. Partnership
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------
* Corporations owned by Reuben Friedberg that hold interests in any of the
Properties shall contribute the partnership interests held by such
corporations to the Operating Partnership.
A-1
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EXHIBIT B
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby assigns,
transfers, contributes and conveys to Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), its entire legal
and beneficial right, title and interest in and to ______________________, a
__________________________ (the "Partnership"), including, without limitation,
all right, title and interest, if any, of the undersigned in and to the assets
of the Partnership and the right to receive distributions of money, profits and
other assets from the Partnership, presently existing or hereafter at any time
arising or accruing (such right, title and interest are hereinafter collectively
referred to as the "Partnership Interest"), TO HAVE AND TO HOLD the same unto
the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating
Partnership assumes all obligations in respect of the Partnership Interest.
The Partnership owns certain real property as described in
Attachment 1 attached hereto.
Executed: ___________ ___, 1997
By: _________________________________
Reuben Friedberg
B-1
<PAGE> 19
EXHIBIT C
FORM OF QUITCLAIM
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ ....................
...... Computed on the consideration or value of
property conveyed; OR
...... Computed on the consideration or value
less liens or encumbrances remaining at
time of sale.
_________________________________________________
Signature of Declarant of Agent determining
tax -- Firm name
- --------------------------------------------------------------------------------
QUITCLAIM DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to
Tower Realty Operating Partnership, L.P., a Delaware limited partnership
the real property in the City of ____________, County of _____________, State of
_____________, described as
Dated _________________ ___________________________________
___________________________________
___________________________________
C-1
<PAGE> 20
STATE OF NEW YORK )
)
COUNTY OF )
On __________________________________________________________________ before me,
_______________________________________________________________________________,
personally appeared_____________________________________________________________
_______________________________________________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature ________________________ (This area for official notarial seal)
C-2
<PAGE> 21
EXHIBIT D
CALCULATION OF NUMBER OF OP UNITS
The number of OP Units to be issued to Contributor shall be
calculated as follows:
IAD 1
AP x ( ---------- - TNSU - MCU ) x ------
IADPS MP
Where:
AP = 2.35% (expressed as a decimal fraction).
IAD = Total estimated annual distributions to be made by the
Operating Partnership as set forth in the final preliminary prospectus
included in the Registration Statement on Form S-11 filed by the
Company with the Securities and Exchange Commission in connection with
the proposed public offering of shares of Common Stock (the
"Preliminary Prospectus").
IADPS = Estimated initial annual distribution per share of
Common Stock or OP Unit as set forth in the Preliminary Prospectus.
TNSU = The total number of shares of Common Stock and OP Units
to be issued in the IPO to persons other than Lawrence H. Feldman,
Robert Cox, Joseph D. Kasman, Eric Reimer, Reuben Friedberg and Robert
Adams as set forth in the Preliminary Prospectus, other than the number
of OP Units to be issued to Robert Cox, Joseph D. Kasman, Eric Reimer
and Robert Adams in respect of the minimum contribution consideration
to be received by each of them in respect of their individual
Contribution Agreements.
MCU = The total number of OP Units to be issued to Contributor
directly or indirectly under the Omnibus Management Company Option
Agreement (assuming all shares of Common Stock and OP Units are issued
at the Mid-Point (as defined below)).
MP or "Mid-Point" = the median of the proposed per share price
range for the Common Stock as set forth in the Preliminary Prospectus
(assuming all shares of Common Stock are issued at the Mid-Point (as
defined below)).
D-1
<PAGE> 22
EXHIBIT E
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
OF CONTRIBUTOR
ARTICLE 1. ADDITIONAL DEFINED TERMS
1.1 For purposes of this EXHIBIT E, the following terms have
the meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT E is attached:
ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively, "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.
CONTRIBUTION AGREEMENT: Means the Contribution Agreement to
which this EXHIBIT E is attached.
GOVERNMENTAL ENTITY: Means any government or agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
INDEMNIFYING PARTY: Means any party required to indemnify any
other party under ARTICLE 3.2 of this EXHIBIT E or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.
KNOWLEDGE: Means, with respect to any representation or
warranty so indicated, the actual knowledge, upon reasonable investigation and
inquiry in good faith, of the signatory to the Contribution Agreement.
LIENS: Means, with respect to any real and personal property,
all mortgages, pledges, liens, options, charges, security interests,
restrictions, prior assignments, encumbrances, covenants, encroachments,
assessments, rights of others, licenses, easements, liabilities or claims of any
kind or nature whatsoever, direct or indirect, including, without limitation,
interests in or claims to revenues generated by such property.
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<PAGE> 23
PERMITTED LIENS: Means (a) Liens, or deposits made to secure
the release of such Liens, securing taxes, the payment of which is not
delinquent or the payment of which is actively being contested in good faith by
appropriate proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the
districts in which the Properties are located which are not violated by the
existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's
and mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not have a
material adverse effect upon, or materially interfere with the use of, the
Properties; and
(e) any exceptions contained in the Title Policies.
PERSON: Means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
PORTFOLIO AGREEMENTS: Means the agreements, including the
Contribution Agreement, listed on ATTACHMENT 1 hereto, which contemplate the
transfer of partnership and/or limited liability company membership interests in
certain of the Participating Partnerships and LLCs from any entity directly or
indirectly owned by Contributor to the Company and the Operating Partnership.
PROSPECTUS: Means the Company's Form S-11 Registration
Statement.
REIT STOCK: Shall have the meaning set forth in the OP
Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
The Contributor represents and warrants to the Operating
Partnership as set forth below in this ARTICLE 2. Notwithstanding any other
provision of the Contribution Agreement or this EXHIBIT E, the Contributor makes
representations, warranties and indemnities only with respect to: (i) the
Properties identified on EXHIBIT A to the Contribution Agreement (the "Property"
or the "Properties"), and (ii) the interests in the Partnerships to be
transferred by the Contributor.
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<PAGE> 24
2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and (B)
has all requisite power and authority to own, lease or operate its property and
to carry on its business as presently conducted and, to the extent required
under applicable law, is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
2.2 DUE AUTHORIZATION. The execution, delivery and performance
of the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered by
or on behalf of the Contributor pursuant to this Contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.
2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is
the sole owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.
2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes
all of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of all
security interests, mortgages, pledges, liens, encumbrances, claims and equities
to the Operating Partnership.
E-3
<PAGE> 25
2.6 NO VIOLATION. None of the execution, delivery or
performance of the Contribution Agreement and the transactions contemplated
hereby does or will, with or without the giving of notice, lapse of time, or
both, (i) violate, conflict with, result in a breach of, or constitute a default
under or give to others any right of termination or cancellation of (A) the
organizational documents, including the charters and bylaws, if any, of the
Contributor, (B) any material agreement, document or instrument to which the
Contributor is a party or by which the Contributor or its Property is bound or
(C) any term or provision of any judgment, order, writ, injunction, or decree of
any governmental or regulatory authority binding on the Contributor or by which
the Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.
2.7 NON-FOREIGN STATUS. The Contributor is not a foreign
person, foreign corporation, foreign partnership, foreign trust or foreign
estate (as defined in the Code), and is, therefore, not subject to the
provisions of the Code relating to the withholding of sales proceeds to foreign
persons.
2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions. If Contributor fails to provide
such certificates or affidavits, the Operating Partnership may withhold a
portion of any payments otherwise to be made to the Contributor as required by
the Code or New York law.
2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her
or its understanding that the offering and sale of the OP Units to be acquired
pursuant to the Contribution Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Act"). In furtherance thereof, the
Contributor represents and warrants to the Company as follows:
2.9.1 INVESTMENT. The Contributor is acquiring the OP
Units solely for his, her or its own account for the purpose of investment and
not as a nominee or agent for any other person and not with a view to, or for
offer or sale in connection with, any distribution of any thereof. The
Contributor agrees and acknowledges that he, she or it will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (hereinafter, "Transfer") any of the OP Units unless (i) the Transfer
is pursuant to an effective registration statement under the Act and
qualification or other compliance under applicable blue sky or state securities
laws, or (ii) counsel for the Contributor (which counsel shall be reasonably
acceptable to the Operating Partnership) shall have furnished the Operating
Partnership with an opinion, reasonably satisfactory in form and substance to
the Operating Partnership to the effect that no such registration is required
because of the availability of an exemption from registration under the Act and
qualification or other compliance under applicable blue sky or state securities
laws.
E-4
<PAGE> 26
2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the Contributor
has previously invested in securities similar to the OP Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Contribution Agreement. The Contributor is able to bear
the economic risk of holding the OP Units for an indefinite period and is able
to afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.
2.9.3 HOLDING PERIOD. The Contributor acknowledges
that he, she or it has been advised that (i) the OP Units and the common stock
of the Company into which the OP Units may be exchanged in certain circumstances
(the "Common Stock") must be held indefinitely, and the Contributor must
continue to bear the economic risk of the investment in the OP Units (and any
Common Stock that might be exchanged therefor) unless they are subsequently
registered under the Act or an exemption from such registration is available,
(ii) a restrictive legend in the form hereafter set forth shall be placed on the
certificates representing the OP Units (and any Common Stock that might be
exchanged therefor), and (iii) a notation shall be made in the appropriate
records of the Operating Partnership (and the Company) indicating that the OP
Units (and any Common Stock that might be exchanged therefor) are subject to
restrictions on transfer.
2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is defined
in Rule 501(a) of Regulation D under the Act) and as such:
(i) is a director or executive officer of the
Company; or
(ii) has an individual net worth, or joint net
worth with his or her spouse, in excess of $1,000,000; or
(iii) had an individual annual adjusted gross
income in excess of $200,000 in each of the two most recent years and reasonably
expects to have annual adjusted gross income in excess of $200,000 in the
current year; or
E-5
<PAGE> 27
(iv) had a joint income with his spouse in excess
of $300,000 in each of the two most recent years and reasonably expects to have
an annual adjusted gross income, with his spouse, in excess of $300,000 in the
current year.
If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).
2.9.5 LEGENDING. Each certificate representing the OP
Units (and any Common Stock that might be exchanged therefor) shall bear the
following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY
E-6
<PAGE> 28
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH
A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION.
2.10 LITIGATION. There are no Claims which could reasonably be
anticipated to result in damages in excess of $50,000 pending or, to Knowledge,
threatened that directly or indirectly affect the Contributor, the Partnerships,
the Properties or the Formation Transactions, nor has any such claim been
pending or, to Knowledge, threatened as of the Closing.
2.11 NO BROKERS. Neither the Contributor nor any of its
respective officers, directors or employees has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in the obligation of the Operating Partnership or any of its affiliates to pay
any finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.
2.12 SOLVENCY. The Contributor has been and will be solvent at
all times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.
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<PAGE> 29
2.13 NO MISREPRESENTATIONS. No representation, warranty or
statement made, or information provided, by the Contributor in the Contribution
Agreement or in any other document or instrument furnished or to be furnished by
or on behalf of the Contributor pursuant hereto or as contemplated hereby (i)
contains or will contain any untrue statement of a material fact or (ii) omits
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. For purposes of the preceding sentence,
materiality shall be determined with reference to the total portfolio of real
properties and other interests to be transferred pursuant to the Operating
Partnership pursuant to the Formation Transactions.
ARTICLE 3. INDEMNIFICATION
3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR
BREACH.
(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT E or in any Schedule or certificate delivered pursuant
hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the
Contribution Agreement or this EXHIBIT E, no party hereto shall be liable under
this EXHIBIT E or the Contribution Agreement for monetary damages (or otherwise)
for breach of any of its representations and warranties contained in this
EXHIBIT E or the Contribution Agreement, or in any Schedule, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this ARTICLE 3.
3.2 GENERAL INDEMNIFICATION
(a) The Contributor shall indemnify and hold harmless the
Operating Partnership, the Company, and their affiliates and each of their
respective directors, officers, employees, agents, representatives and
affiliates (each of which is an "Indemnified Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation, costs of investigative, judicial or administrative proceedings or
appeals therefrom, and costs of attachment or similar bonds (collectively,
"Losses"), asserted against, imposed upon or incurred by the Indemnified Party
in connection with or as a result of any breach of a representation or warranty
of the Contributor contained in the Contribution Agreement or in any Schedule,
certificate or affidavit delivered by the Contributor pursuant to the
Contribution Agreement.
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<PAGE> 30
(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributor in
connection with the transactions contemplated by the Contribution
Agreement;
(ii) any liabilities or obligations incurred,
arising from or out of, in connection with or as a result of the
failure of the Contributor to obtain all consents required to
consummate the transactions contemplated by the Contribution Agreement;
or
(iii) any breach of any representation, warranty
or covenant set forth in the Contribution Agreement.
3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy
its obligations hereunder by the prompt delivery (paid promptly as and when
expenses are incurred) to an Indemnified Party of OP Units, subject to the
limits on ownership and transfer of REIT Stock set forth in the Company's
articles of incorporation. Any OP Units delivered to an Indemnified Party
hereunder shall be valued based upon the initial public offering price of the
Company's Common Stock.
3.4 NOTICE AND DEFENSE BY CLAIMS. As soon as reasonably
practicable after receipt by the Indemnified Party of notice of any liability or
claim incurred by or asserted against the Indemnified Party that is subject to
indemnification under this ARTICLE 3, the Indemnified Party shall give notice
thereof to the Contributor. The Indemnified Party may at its option demand
indemnity under this ARTICLE 3 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not frivolous
and that the Indemnified Party may be liable for, or otherwise incur, a Loss as
a result thereof and shall give notice of such determination to the Contributor.
The Indemnified Party shall permit the Contributor, at its option and expense,
to assume the defense of any such claim by counsel selected by the Contributor
and reasonably satisfactory to the Indemnified Party, and to settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that the Indemnified Party may at all
times participate in such defense at its expense; and PROVIDED FURTHER, HOWEVER,
that the Contributor shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party in its sole and absolute
discretion, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnified Party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall have
the right to undertake the
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<PAGE> 31
defense, compromise or settlement of such liability or claim on behalf of and
for the account of the Contributor.
3.5 LIMITATIONS ON INDEMNIFICATION UNDER ARTICLE 3.
Notwithstanding anything contained herein to the contrary, the Contributor shall
not be liable or obligated to make payments under this ARTICLE 3 with respect to
any Property or Partnership Interest to the extent such payments in the
aggregate would exceed the value of the OP Units (based upon the initial public
offering price of the Common Stock) received by the Contributor at the Closing.
Notwithstanding anything contained herein to the contrary, the Indemnified
Parties shall look first to the Contributor's OP Units for indemnification under
this ARTICLE 3 and then to the Contributor's other assets.
3.6 LIMITATION PERIOD.
(a) Notwithstanding the foregoing, any claim for
indemnification under ARTICLE 3.2 hereof must be asserted in writing by the
Indemnified Party, stating the nature of the Losses and the basis for
indemnification therefor within one year after the Closing.
(b) If so asserted in writing prior to the applicable
expiration date, such claims for indemnification shall survive until resolved by
mutual agreement between the Contributor and the Indemnified Party or by
judicial determination. Any claim for indemnification not so asserted in writing
prior to the applicable expiration date shall not thereafter be asserted and
shall forever be waived.
3.7 RESERVATION OF CONTRIBUTOR RIGHTS. Notwithstanding
anything else in this Contribution Agreement to the contrary, the Contributor
reserves unto itself all rights and remedies (including rights to seek
contribution) against any third party indemnitors, prior property owners or
occupants, and contributors to any contamination, for which the Partnerships
have been indemnified by the Contributor hereunder. To the extent the
Contributor's rights against any such third party owners, occupants, indemnitors
or contributors may be materially prejudiced by actions or inactions by any
owner or occupant of the Properties after the Closing, the Contributor's
indemnity obligation shall be reduced in accordance with the effect of the
actions or inactions which so prejudiced the Contributor's rights.
E-10
<PAGE> 32
ATTACHMENT 1
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
__________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, together with certain other limited
partners, has formed the Operating Partnership
pursuant to the Agreement of Limited Partnership of
the Operating Partnership dated __________ __, 1997
(as such agreement may be amended or amended and
restated from time to time, the "PARTNERSHIP
AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited
Partners (as defined below) directly or indirectly
hold units of limited partnership interest ("OP
UNITS") in the Operating Partnership.
(c) The Operating Partnership has agreed to provide the
Limited Partners with certain direct or indirect
rights to exchange their OP Units for cash or, at the
election of the Company, for shares of the Company's
common stock, par value $0.01 per share (the "REIT
STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
<PAGE> 33
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Stock in REIT
Stock or makes a distribution to all holders of its outstanding REIT Stock in
REIT Stock; (ii) subdivides its outstanding REIT Stock; or (iii) combines its
outstanding REIT Stock into a smaller number of shares of REIT Stock, the
Exchange Factor shall be adjusted by multiplying the Exchange Factor by a
fraction, the numerator of which shall be the number of shares of REIT Stock
issued and outstanding on the record date for such dividend, contribution,
subdivision or combination assuming for such purpose that such dividend,
distribution, subdivision or combination has occurred as of such time, and the
denominator of which shall be the actual number of shares of REIT Stock
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Exchange Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated
and/or the Operating Partnership
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
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<PAGE> 34
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to
the product of the number of OP Units offered for exchange by an Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company or the Operating Partnership issues to all holders
of REIT Stock rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase REIT Stock,
or any other securities or property (collectively, the "rights"), then the REIT
Stock Amount shall also include such rights that a holder of that number of
shares of REIT Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading
on the NYSE, any national securities exchange or Nasdaq, the last
reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
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<PAGE> 35
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"EXCHANGING PARTNER"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding
the provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging
Partner within five (5) Business Days after the receipt by the Company
of such Notice of Exchange,
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<PAGE> 36
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of
the Company,
(b) would otherwise jeopardize the REIT status of the Company,
or
(c) would cause the acquisition of the REIT Stock by the
Limited Partner to be "integrated" with any other distribution of REIT
Stock by the Company for purposes of complying with the registration
provisions of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article
2, any person to whom OP Units have been pledged, in compliance with the terms
of the Lock-up Agreement, may exercise its Exchange Right prior to the date that
is one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
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<PAGE> 37
(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of
the Exchange Right, the Company shall reserve for issuance such number of shares
of REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable
upon exchange of OP Units (or the cash equivalent amount thereof if the Cash
Amount is paid) shall be computed on the basis of the aggregate amount of OP
Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
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<PAGE> 38
(A) a copy of the prospectus contained in the
Registration Statement on Form S-11 filed by the Company in
connection with the IPO, any prospectus contained in any
Registration Statement subsequently filed by the Company, and
any supplement or amendment thereto (each, a "PROSPECTUS"),
and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by
the Company with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited investor"
as defined in Rule 501 of the regulations promulgated under
the Securities Act.
(B) If such Exchanging Partner has retained or
retains a person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
(b) (i) Such Exchanging Partner understands that an investment in the
Company involves substantial risks.
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<PAGE> 39
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of such Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws, except as provided in the Registration Rights
Agreement entered into by the Company and the Exchanging
Partner (the "REGISTRATION RIGHTS AGREEMENT").
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<PAGE> 40
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
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<PAGE> 41
4.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with
the consent of the Company by a vote of the Limited Partners in the same manner
as the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein, provided, however, that the Company shall vote its
limited partnership interests in proportion to the votes of the other Limited
Partners.
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<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By: _______________________________________
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By: ______________________________
Name:
Title:
LIMITED PARTNERS:
___________________________
Signature
___________________________
Name (Please Print or Type)
-11-
<PAGE> 43
Exhibit A
Name and Address of Limited Partners
[To be attached]
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<PAGE> 44
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated: __________________________
________________________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
(Signature of Limited Partner)
__________________________________
(Street Address)
(City) (State) (Zip Code)
If REIT Stock is to be issued, issue to:
Name:
Limited Partner's social security or tax
identification number:
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<PAGE> 45
BATTLE FOWLER LLP
DRAFT - 7/24/97
ATTACHMENT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, limited liability companies, corporations and
other entities which are Holders or in which the Holders own direct or indirect
interests (the "PROPERTY PARTNERSHIPS") pursuant to Option or Contribution
Agreements (the "OPTION AGREEMENTS") among the Operating Partnership and the
Grantors named therein, and in connection therewith the Holders will receive
units of limited partnership interest in the Operating Partnership (such units
of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
<PAGE> 46
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating
to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement
or
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<PAGE> 47
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
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"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not
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delay, suspend or withdraw a Registration Statement for such reason for
more than 60 days or more often than twice during any period of 12
consecutive months.
(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration Statement
covering the Registrable Securities held by more than one Holder.
2.2 Expenses.
(i) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if any,
sales commissions, the fees and disbursements of counsel representing
such Holder and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that does
not, within 10 days after receipt of a reasonable request by the Company for
information in connection with the Shelf Registration Statement, provide such
information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
2.4 Effect of Material Breach. In the event that the Company shall
breach any of its material obligations hereunder in any material respect, any
Holder of Registrable Securities may demand that the Company file a registration
statement covering such Holder's Registrable Securities. The Company agrees to
file such registration statement within 60 days after receipt of such demand and
agrees to use its best efforts to procure the effectiveness of such registration
statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed pursuant
to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period set
forth in Section 2 hereof, a Shelf Registration Statement, which Shelf
Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects
with the requirements of the applicable form of registration
statement and include all financial statements required by the
SEC to be filed therewith.
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(ii) (A) Subject to Article III, Section (a)(ii)(B),
(I) prepare and file with the SEC such
amendments and post-effective amendments to each such
Registration Statement as may be necessary to keep
such Registration Statement effective for the
applicable period;
(II) cause each such Prospectus to be
supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule
424 or any similar rule that may be adopted under the
Securities Act;
(III) respond as promptly as practicable to
any comments received from the SEC with respect to
the Shelf Registration Statement, or any amendment,
post-effective amendment or supplement relating
thereto; and
(IV) comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by each Registration Statement
during the applicable period in accordance with the
intended method or methods of distribution by the
selling Holders thereof.
(B) (I) Each Holder shall promptly provide to the
Company such information as the Company reasonably
requests in order to identify such Holder and the
method of distribution in a post-effective amendment
to the Registration Statement or a supplement to the
Prospectus.
(II) Such Holder also shall notify the
Company in writing upon completion of any offer or
sale or at such time as such Holder no longer intends
to make offers or sales under the Registration
Statement.
(iii) Furnish to each Holder of Registrable Securities,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable
Securities; the Company consents to the use of the Prospectus,
including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary
Prospectus.
(iv) Use its reasonable efforts to register or qualify the
Registrable Securities by the time the applicable Registration
Statement is declared effective by the SEC under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
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Registrable Securities covered by a Registration Statement shall
reasonably request in writing, keep each such registration or
qualification effective during the period such Registration Statement
is required to be kept effective, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that
the Company shall not be required to
(A) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to
qualify but for this Article III, Section (a)(iv),
(B) subject itself to taxation in any such
jurisdiction, or
(C) submit to the general service of process in any
such jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and,
if requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become
effective and when any post-effective amendments and
supplements thereto become effective,
(B) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose,
(C) if the Company receives any notification with
respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and
(D) of the happening of any event during the period a
Registration Statement is effective which is of a type
specified in Article II, Section 2.1(iii) hereof or as a
result of which such Registration Statement or the related
Prospectus contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the
Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment.
(vii) Furnish to each Holder of Registrable Securities,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment
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thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested).
(viii) (A) Cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any Securities Act legend; and
(B) enable certificates for such Registrable
Securities to be issued for such numbers of shares of Common
Stock and registered in such names as the selling Holders may
reasonably request at least two business days prior to any
sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III,
Section (a)(ii)(B) hereof, upon the occurrence of any event
contemplated by Article III, Section (a)(v)(D) hereof, use its
reasonable efforts promptly to prepare and file a supplement or
prepare, file and obtain effectiveness of a post-effective amendment to
a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(x) Make available for inspection by representatives of the
Holders of the Registrable Securities and any counsel or accountant
retained by such Holders, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply
all information reasonably requested by any such representative,
counsel or accountant in connection with a Registration Statement;
provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies
such representatives, counsel or accountants in writing that such
records, documents or information are confidential shall not be
disclosed by such representatives, counsel or accountants unless
(A) the disclosure of such records, documents or
information is necessary to avoid or correct a material
misstatement or omission in a Registration Statement,
(B) the release of such records, documents or
information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, or
(C) such records, documents or information have been
generally made available to the public.
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(xi) Within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of
such document (not including any documents incorporated by reference
therein unless requested) to the Holders of Registrable Securities.
(xii) Use its reasonable efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar
securities issued by the Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities,
not later than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable Holders to consummate the disposition of such Registrable
Securities.
(b) The Company may require each Holder of Registrable Securities to
furnish to the Company in writing such information regarding the
proposed distribution by such Holder of such Registrable Securities as
the Company may from time to time reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations
with respect to the Registration Statement required to be filed
pursuant to Section 2 hereof and this Section 3, each Holder agrees
that
(i) it will not offer or sell its Registrable Securities under
the Registration Statement until it has received copies of the
supplemental or amended Prospectus contemplated by Article III, Section
(a)(ii) hereof and receives notice that any post-effective amendment
has become effective, and
(ii) upon receipt of any notice from the Company of the
happening of any event of the kind described in Article III, Section
(a)(v)(D) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such
Holder receives copies of the supplemented or amended Prospectus
contemplated by Article III, Section (a)(ix) hereof and receives notice
that any post-
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effective amendment has become effective, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
IV Indemnification; Contribution.
4.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder (within the meaning of Section 15 of the Securities
Act) as follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading or
(C) arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental
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agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of any such
amended or supplemental Prospectus by the Company, if such loss,
liability, claim, damage or expense would not have arisen had such
delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it
may have under the indemnity agreement provided in Section
4.1(a) or 4.1(b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the
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indemnified party results in the forfeiture by the
indemnifying party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than
the indemnification obligation provided under Section 4.1(a)
or 4.1(b) above.
(ii) If the indemnifying party so elects within a reasonable
time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved
by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however,
that, if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the
proviso to Section 4.1(c), such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's
defense, and counsel for the indemnified party or parties
shall be entitled to conduct the defense of such indemnified
party or parties, it being understood that both such counsel
will cooperate with each other to conduct the defense of such
action or proceeding as efficiently as possible.
(B) If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such
defense, after having received the notice referred to in
Section 4.1(c), the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified
party or parties as incurred.
(C) In such event, however, no indemnifying party
will be liable for any settlement effected without the written
consent of such indemnifying party, which consent may not be
unreasonably withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with
this Section 4(c), such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
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4.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 4 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one hand and the
selling Holders on the other (in such proportions that the
selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations.
(B) (I) The relative benefits to the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, the total proceeds
received by the indemnifying party and indemnified
parties in connection with the offering to which such
losses, claims, damages, liabilities or expenses
relate.
(II) The relative fault of the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether the action
in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact, has been made by,
or relates to information supplied by, such
indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section
4.4, no selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities of such selling Holder were
offered to the public exceeds the amount of any damages which
such selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
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(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any,
who controls a Holder within the meaning of Section 15 of the
Securities Act and directors and officers of a Holder shall have the
same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration
Statement and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act shall have the same rights
to contribution as the Company.
V Filing of Exchange Act Reports; Rule 144 Sales
5.1 The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act so as to
enable any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition by any
Holder of any Exchange Stock pursuant to Rule 144, the Company shall cooperate
with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Exchange
Stock.
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the outstanding
Registrable Securities; provided, however, that no amendment,
modification or supplement or waiver or consent to the departure with
respect to the provisions of Articles 2, 4 or 5 hereof shall be
effective as against any Holder unless consented to in writing by such
Holder.
(ii) Notice of any amendment, modification or supplement to
this Agreement adopted in accordance with this Section 6.1 shall be
provided by the Company to each Holder at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex,
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telecopier, or any courier guaranteeing overnight delivery, to the parties at
their respective addresses set forth opposite their signatures below or at such
other address as a party may indicate by written notice to the other party or
parties.
(ii) All such notices and communications shall be deemed to
have been duly given:
(A) at the time delivered by hand, if personally
delivered;
(B) three (3) business days after being deposited in
the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By: _______________________________
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING
New York, New York 10036-4003 PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc.,
its general partner
By: _______________________________
Name:
Title:
HOLDERS:
[Address:] ___________________________________
Signature
___________________________________
Name (Please Print or Type)
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ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public pursuant to a public offering (the "Offering").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Company's Registration Statement on Form S-11
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that without the prior written consent of Merrill Lynch, the undersigned
will not (and, except as may be disclosed in the Prospectus, will not announce
or disclose any intention to) directly or indirectly sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition at any time in
the future) of, any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, including any units of limited
partnership interest (the "OP Units") in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership") beneficially
owned by the undersigned as of the date of the closing of the Company's initial
public offering, for a period of twenty-four (24) months after the later of (i)
date of the final Prospectus relating to the
<PAGE> 63
offering of the Shares to the public by the Underwriters and (ii) the date the
Offering is consummated and closed. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and __________________,
its Transfer Agent, are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
letter agreement.
Very truly yours,
[INVESTOR]
By:____________________________
Name:
Title:
-2-
<PAGE> 64
ATTACHMENT 3
(CONTINUED)
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Tower Realty Operating Partnership, L.P.
120 West 46th Street, 24th Floor
New York, New York 10036
Dear Sirs,
Reference is made to the Option Agreement, dated _________, 1997 (the
"Option Agreement"), by and between the undersigned and Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Option Agreement.
In consideration of the execution and exercise of the Option Agreement
by the Operating Partnership, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned hereby
irrevocably agrees that without the prior written consent of the Operating
Partnership, the undersigned will not directly or indirectly sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose (or enter into any transaction or device which
is designed to, or could be expected to, result in the disposition at any time
in the future) of any any units of limited partnership interest (the "OP Units")
in the Operating Partnership, or any securities convertible into or exercisable
or exchangeable for OP Units, beneficially owned by the undersigned as of the
date hereof, for a period of twenty-four (24) months after the date hereof.
Prior to the expiration of such period, the undersigned will not publicly
announce or disclose any intention to do anything after the expiration of such
period which the undersigned is prohibited, as provided in the preceding
sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Operating Partnership is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.49
CONTRIBUTION AGREEMENT
by and between
JOSEPH KASMAN
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of July 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS .................................................................. -1-
1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP
UNITS................................................................ -2-
1.1 CONTRIBUTION TRANSACTION.................................... -2-
1.2 ISSUANCE OF OP UNITS........................................ -3-
1.3 ADJUSTED CONSIDERATION...................................... -3-
1.4 AUTHORIZATION............................................... -3-
1.5 CONTRIBUTION OF CERTAIN RIGHTS.............................. -3-
1.6 PRORATIONS.................................................. -3-
1.7 TREATMENT AS CONTRIBUTION................................... -4-
2. CLOSING.............................................................. -4-
2.1 CONDITIONS PRECEDENT........................................ -4-
2.2 TIME AND PLACE.............................................. -5-
2.3 CLOSING DELIVERIES.......................................... -6-
2.4 CLOSING COSTS............................................... -6-
3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES.......................... -7-
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP................................................. -7-
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR............... -7-
3.3 INDEMNIFICATION............................................. -7-
4. COVENANTS............................................................ -8-
4.1 COVENANTS OF CONTRIBUTOR.................................... -8-
5. RELEASES AND WAIVERS................................................. -8-
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP.................... -9-
5.2 GENERAL RELEASE OF CONTRIBUTOR.............................. -9-
5.3 INTENTIONALLY OMITTED....................................... -9-
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT................ -9-
6. POWER OF ATTORNEY.................................................... -9-
6.1 GRANT OF POWER OF ATTORNEY.................................. -9-
6.2 LIMITATION ON LIABILITY..................................... -10-
7. MISCELLANEOUS........................................................ -11-
7.1 FURTHER ASSURANCES.......................................... -11-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
7.2 COUNTERPARTS................................................ -11-
7.3 GOVERNING LAW............................................... -11-
7.4 NOTICES..................................................... -11-
</TABLE>
EXHIBIT LIST
<TABLE>
<CAPTION>
SECTION FIRST
EXHIBITS REFERENCED
----------
<S> <C>
A Constituent Interests of Contributor's Partnership Interest.......... Recital D
B Contribution and Assumption Agreement................................ 1.1
C Form of Quitclaim.................................................... 1.1
D Calculation of Number of OP Units.................................... 1.2
E Representations, Warranties and Indemnities of Contributor........... 3.2
Attachment 1......................................................... Exchange Rights Agreement
Attachment 2......................................................... Registration Rights Agreement
Attachment 3......................................................... Lock-Up Agreements
Attachment 4......................................................... List of Portfolio Agreements
</TABLE>
-ii-
<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"Contribution Agreement") is made and entered into as of July 31, 1997 by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), and Joseph Kasman, an individual (the
"Contributor").
RECITALS
A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office properties (the "Participating Properties") owned or managed
by Tower Equities & Realty Corp. or its affiliates through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively,
the "Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").
B. The Formation Transactions relate to the proposed initial public
offering (the "Public Offering") of the common stock, par value $.01 per share
(the "Common Stock") of Tower Realty Trust, Inc., a Maryland corporation (the
"Company"), which will operate as a self-administered and self-managed real
estate investment trust ("REIT") and will be the sole general partner of the
Operating Partnership.
C. The owners of the Property Interests and the partners and members of
the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "Cash Participants") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP Participants").
D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT A (the "Partnerships") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT A (the "Property" or the
"Properties"). As used herein, "Partnership Agreement" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.
E. The Contributor has previously contributed certain interests in the
Partnerships to the Operating Partnership in exchange for OP Units (as defined
below).
F. The Contributor desires to, and the Operating Partnership desires
the Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, as a
<PAGE> 5
partner (or member) of the Partnerships, including, without limitation, all of
its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in the Partnerships (such right, title and interest are hereinafter
collectively referred to as the "Partnership Interest"), in exchange for
partnership units in the Operating Partnership (the "OP Units"), on the terms
and subject to the conditions set forth herein.
G. The Operating Partnership desires to make, and the Contributor
desires to receive, a return of certain contributions previously made by the
Contributor to the Operating Partnership that relate to direct or indirect
interests in certain limited partnerships, limited liability companies and
certain other entities that do not relate to the Consolidation (the "Excluded
Interests").
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR
OP UNITS
1.1 CONTRIBUTION TRANSACTION
(a) At the Closing (as defined in ARTICLE 2.2 hereof) and
subject to the terms and conditions contained in this Contribution Agreement,
the Contributor shall transfer to the Operating Partnership, absolutely and
unconditionally, all of its Partnership Interest (as such term is defined in
Recital F herein) not previously contributed to the Operating Partnership. The
contribution of the Contributor's Partnership Interest shall be evidenced by a
"Contribution and Assumption Agreement" for each of the Partnerships in
substantially the form of EXHIBIT B attached hereto. Furthermore, the
Contributor shall execute and have duly acknowledged an individual quitclaim
deed for each property in the form of EXHIBIT C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the Agreement
of Limited Partnership of the Operating Partnership (the "OP Agreement") in
order to effect the transactions contemplated hereby.
(b) At the Closing, and subject to the terms and conditions
set forth in this Contribution Agreement, the Operating Partnership shall
transfer to the Contributor, absolutely and unconditionally, all of the Excluded
Interests (as such term is defined in Recital G herein) previously contributed
by the Contributor to the Operating Partnership.
-2-
<PAGE> 6
1.2 ISSUANCE OF OP UNITS
The Operating Partnership shall, in exchange for the
Partnership Interest and after taking into account the transfer of the Excluded
Interests to the Contributor, increase or decrease the number of OP Units issued
to the Contributor in accordance with EXHIBIT D hereto. The increase or decrease
of OP Units Issued to the Contributor shall be evidenced by either an amendment
(the "Amendment") to the OP Agreement or by certificates relating to such units
(the "Certificates") in either case, as shall be acceptable to the Contributor.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the OP
Agreement in order to effect the transactions contemplated hereby.
1.3 ADJUSTED CONSIDERATION
The Operating Partnership reserves the right not to acquire
any particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the number of OP Units to be received by the Contributor pursuant to this
Contribution Agreement may be reduced by an amount determined by Lawrence H.
Feldman, in his sole discretion, to reflect the reduction in total value of the
Partnership Interest ultimately contributed by the Contributor.
1.4 AUTHORIZATION
Contributor hereby authorizes Lawrence H. Feldman to make any
and all determinations to be made by him pursuant to ARTICLE 1.3 hereof, and any
and all such determinations shall be final and binding on all parties.
1.5 CONTRIBUTION OF CERTAIN RIGHTS
Effective upon the Closing, the Contributor hereby contributes
to the Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.
1.6 PRORATIONS
At the Closing, or as promptly as practicable following the
Closing, to the extent such matters are not the right or responsibility of all
tenants of a given Property, all revenue and all charges that are customarily
prorated in transactions of this nature, including accrued rent currently due
and payable, overpaid taxes or fees, real and personal property taxes, common
area maintenance charges and other similar periodic charges payable or
-3-
<PAGE> 7
receivable with respect to such Property shall be ratably prorated between the
partners of the Partnership which holds such Property prior to the Closing and
the Operating Partnership on and after the Closing, effective as of the Closing.
After providing for such prorations, (i) if any of the Partnerships has a
resultant cash surplus, the value of the Contributor's Partnership Interest
shall be increased in proportion to Contributor's ratable share of such cash
surplus and additional OP Units (based on the Mid-Point (as such term is defined
in Exhibit D attached hereto) of the proposed offering prices per share set
forth in the final preliminary prospectus relating to the offering of shares of
Common Stock ) shall be issued to the Contributor as a valuation adjustment to
the consideration to be received by the Contributor pursuant to this
Contribution Agreement, and (ii) if any of the Partnerships has a resultant cash
deficit, the value of the Contributor's Partnership Interest shall be reduced in
proportion to Contributor's ratable share of such cash deficit, and fewer OP
Units shall be issued to the Contributor as a valuation adjustment to the
consideration to be received by the Contributor pursuant to this Contribution
Agreement, unless such deficit is cured prior to the Closing.
1.7 TREATMENT AS CONTRIBUTION
The transfer, assignment and exchange of interests effectuated
with respect to the Operating Partnership, pursuant to this Contribution
Agreement, shall constitute a "Capital Contribution" pursuant to Article IV of
the OP Agreement and is intended to be governed by ARTICLE 721(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2. CLOSING
2.1 CONDITIONS PRECEDENT
The effectiveness of the Company's registration statement
filed with the Securities and Exchange Commission on Form S-11 (the
"Registration Statement") is a condition precedent to the obligations of all
parties to this Contribution Agreement to effect the transactions contemplated
by this Contribution Agreement on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and correct in all
material respects on the date such representations and warranties were made, and
shall be true and correct in all material respects on the Closing Date as if
made at and as of such date;
(b) Each of the obligations of the Contributor to be performed
by it shall have been duly performed by it on or before the Closing Date;
-4-
<PAGE> 8
(c) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents required to be
delivered pursuant to ARTICLE 2.3 hereof;
(d) The Contributor shall have obtained all necessary consents
or approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
or regulatory authority or instrumentality that prohibits the consummation of
the transactions contemplated hereby, and no litigation or governmental
proceeding seeking such an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof and
the Closing Date any material adverse change in any of the Partnerships'
businesses;
(h) All existing management agreements with respect to the
Properties shall have been contributed to the Operating Partnership prior to or
simultaneously with the Closing; and
(i) All management functions with respect to the Properties
presently conducted by Tower Equities & Realty Corp. and its affiliates shall be
assumed by the Operating Partnership or Tower Equities Management, Inc.
2.2 TIME AND PLACE
The date, time and place of the transactions contemplated
hereunder shall be the day the Operating Partnership receives the proceeds from
the Public Offering from the underwriter(s), at 10:00 a.m. in the office of
Battle Fowler LLP, 75 East 55th Street, New York, New York 10022 (the "Closing"
or "Closing Date"). The transfers described in ARTICLE 1.1 of this Contribution
Agreement, and all closing deliveries, and the consummation of the Public
Offering, shall be deemed concurrent for all purposes.
-5-
<PAGE> 9
2.3 CLOSING DELIVERIES
At the Closing, the parties shall make, execute, acknowledge
and deliver, or cause to be made, executed, acknowledged and delivered through
the Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other
items (collectively, the "Closing Documents") necessary to carry out the
intention of this Contribution Agreement, which Closing Documents and other
items shall include, without limitation, the following:
(i) A Contribution and Assumption Agreement for each
Partnership;
(ii) An individual quitclaim deed for each Property,
fully executed and duly acknowledged from each of the individual
constituent partners and/or members of the Contributor, as required by
the Operating Partnership;
(iii) The Amendment or the Certificates evidencing
the transfer of OP Units to the Contributor;
(iv) American Land Title Assurances ("ALTA") policies
of title insurance with appropriate endorsements and levels of
reinsurance for the Properties issued as of the Closing Date or
endorsements or other assurances that the existing policy or policies
of title insurance are sufficient for purposes of this Contribution
Agreement, which the Contributor shall cause the title company to issue
to the Operating Partnership in a form acceptable to the Operating
Partnership (the "Title Policies") including satisfaction by the
Contributor of any and all title company requirements applicable to it;
(v) The Partnerships' books and records and
securities or other evidences of ownership held by the Contributor; and
(vi) An affidavit from the Contributor stating, under
penalty of perjury, the Contributor's United States Taxpayer
Identification Number and that the Contributor is not a foreign person
pursuant to section 1445(b)(2) of the Code and a comparable affidavit
satisfying California and any other withholding requirements.
(vii) The Exchange Rights Agreement, the Registration
Rights Agreement and the Lock-Up Agreements substantially in the form
attached hereto as ATTACHMENTS 1, 2, and 3, respectively.
-6-
<PAGE> 10
2.4 CLOSING COSTS
The Operating Partnership shall pay any documentary transfer
taxes, escrow charges, title charges and recording taxes or fees incurred in
connection with the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP
The Operating Partnership hereby represents and warrants to
and covenants with the Contributor that:
(a) Organization; Authority. The Operating Partnership has
been duly formed and is validly existing with requisite power to enter this
Contribution Agreement and all agreements contemplated hereby. The persons and
entities executing this Contribution Agreement and all agreements contemplated
hereby on behalf of the Operating Partnership have the power and authority to
enter into this Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and performance
by the Operating Partnership of its obligations under this Contribution
Agreement and all agreements contemplated hereby will not contravene any
provision of applicable law, the OP Agreement, charter, declaration of trust or
other constituent document of the Operating Partnership, or any agreement or
other instrument binding upon the Operating Partnership or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over the
Operating Partnership, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Operating Partnership of its obligations under this
Contribution Agreement and all other agreements contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
The Contributor represents and warrants to and covenants with
the Operating Partnership as provided in EXHIBIT E attached hereto, and
acknowledges and agrees to be bound by the indemnification provisions contained
therein.
3.3 INDEMNIFICATION
The Operating Partnership shall indemnify and hold harmless
the Contributor (the "Indemnified Contributor Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable
-7-
<PAGE> 11
attorneys' fees, costs of investigation and remediation, costs of investigative
judicial or administrative proceedings or appeals therefrom and costs of
attachment or similar bonds (collectively, "Losses") asserted against, imposed
upon or incurred by the Indemnified Contributor Party in connection with: (i)
any breach of a representation or warranty of the Operating Partnership
contained in this Contribution Agreement; and (ii) all fees, costs and expenses
of the Operating Partnership in connection with the transactions contemplated by
this Contribution Agreement, including, without limitation, any and all costs
associated with the transfers contemplated herein.
ARTICLE 4. COVENANTS
4.1 Covenants of Contributor
(a) From the date hereof through the Closing, the Contributor
shall not:
(i) Sell or transfer all or any portion of the
Partnership Interest; or
(ii) Mortgage, pledge or encumber (or permit to
become encumbered) all or any portion of the Partnership Interest.
(b) From the date hereof through the Closing, the Contributor
shall permit each of the Partnerships to conduct its business in the ordinary
course, consistent with past practice, and shall not permit any of the
Partnerships to:
(i) Enter into any material transaction not in the
ordinary course of business;
(ii) Sell or transfer any assets of the Partnerships;
(iii) Mortgage, pledge or encumber (or permit to
become encumbered) any assets of the Partnerships, except (x) liens for
taxes not due, (y) purchase money security interests and (z) mechanics'
liens being disputed by any of the Partnerships in good faith and by
appropriate proceedings;
(iv) Amend, modify or terminate any material
agreements or other instruments to which any of the Partnerships is a
party; or
(v) Materially alter the manner of keeping the
Partnerships' books, accounts or records or the accounting practices
therein reflected.
(c) The Contributor shall use its good faith diligent efforts
to obtain any approvals, waivers or other consents of third parties required to
effect the transactions contemplated by this Contribution Agreement.
-8-
<PAGE> 12
ARTICLE 5. RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this ARTICLE 5
shall become effective only upon the Closing of the contribution and exchange of
the Partnership Interest pursuant to ARTICLES 1 and 2 hereof.
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP
As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the Operating
Partnership's affiliates, partners (including Lawrence H. Feldman), agents,
attorneys, successors and assigns of and from any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "Contributor Claims"), known or unknown,
suspected or unsuspected, arising out of or relating to any of the Partnership
Agreements, this Contribution Agreement or any other matter which exists at the
Closing, except for Contributor Claims arising from the breach of any
representation, warranty, covenant or obligation under this Contribution
Agreement.
5.2 GENERAL RELEASE OF CONTRIBUTOR
As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and Contributor's
agents, attorneys, successors and assigns of and from any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses and
costs of any nature whatsoever (collectively, "Operating Partnership Claims"),
known or unknown, suspected or unsuspected, arising out of or relating to any of
the Partnership Agreements, this Contribution Agreement or any other matter
which exists at the Closing, except for Operating Partnership Claims arising
from the breach of any representation, warranty, covenant or obligation under
this Contribution Agreement or any supplemental representations and warranties
agreement entered into as of the Closing Date by and among the Contributor,
certain other continuing investors in the Operating Partnership and the
Operating Partnership.
5.3 INTENTIONALLY OMITTED
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT
As of the Closing, the Contributor waives and relinquishes all
rights and benefits otherwise afforded to Contributor under the Partnership
Agreements including, without limitation, any right to consent to or approve of
the sale or contribution by the other partners (or members) of the Partnerships
of their partnership interests to the Company or the Operating Partnership.
-9-
<PAGE> 13
ARTICLE 6. POWER OF ATTORNEY
6.1 GRANT OF POWER OF ATTORNEY
Contributor does hereby irrevocably appoint the Operating
Partnership (or its designee) and each of them individually and any successor
thereof from time to time (such Operating Partnership or designee or any such
successor of any of them acting in his, her or its capacity as attorney-in-fact
pursuant hereto, the "Attorney-in-Fact") as the true and lawful attorney-in-fact
and agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including, without limitation, the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney-in-Fact a proxy (the
"Proxy") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.
Each of the Power of Attorney and Proxy and all authority
granted hereby shall be coupled with an interest and therefore shall be
irrevocable and shall not be terminated by any act of Contributor, by operation
of law or by the occurrence of any other event or events, and if any other such
act or events shall occur before the completion of the transactions contemplated
by this Contribution Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such other act
or events had not occurred and regardless of notice thereof. Contributor agrees
that, at the request of the Operating Partnership, it will promptly execute a
separate power of attorney and proxy on the same terms set forth in this ARTICLE
6, such execution to be witnessed and notarized. Contributor hereby authorizes
the reliance of third parties on each of the Power of Attorney and Proxy.
Contributor acknowledges that the Operating Partnership has,
and any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
-10-
<PAGE> 14
6.2 LIMITATION ON LIABILITY
It is understood that the Attorney-in-Fact assumes no
responsibility or liability to any person by virtue of the Power of Attorney or
Proxy granted by Contributor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
Formation Transactions or the Public Offering, or the acquisition of the
Partnership Interest by the Operating Partnership and shall not be liable for
any error or judgment or for any act done or omitted or for any mistake of fact
or law except for its own gross negligence or bad faith. Contributor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney or Proxy created by Contributor hereby, as well as the cost and expense
of investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is due to
the gross negligence or bad faith of the Attorney-in-Fact. Contributor agrees
that the Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to Contributor hereunder, release, amend or
modify any other power of attorney or proxy granted by any other person under
any related agreement.
ARTICLE 7. MISCELLANEOUS
7.1 FURTHER ASSURANCES.
The Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
7.2 COUNTERPARTS
This Contribution Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.3 GOVERNING LAW
This Contribution Agreement shall be governed by the internal
laws of the State of New York, without regard to the conflicts of laws
provisions thereof.
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<PAGE> 15
7.4 NOTICES
Any notice to be given hereunder by any party to the other
shall be given in writing by personal delivery or by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed
communicated as of the date of personal delivery (including delivery by
overnight courier). Mailed notices shall be addressed as set forth below, but
any party may change the address set forth below by written notice to other
parties in accordance with this paragraph.
To the Contributor:
Joseph Kasman
c/o Feldman Equities
120 West 45th Street
New York, NY 10022
To the Operating Partnership:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, NY 10022
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<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this
Contribution Agreement as of the date first written above.
OPERATING PARTNERSHIP:
Tower Realty Operating Partnership, L.P.
By: Tower Realty Trust, Inc.
By: /s/ Lawrence H. Feldman
--------------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board, Chief
Executive Officer and President
CONTRIBUTOR:
/s/ Joseph Kasman
---------------------------------------------
Joseph Kasman
<PAGE> 17
EXHIBIT A
CONSTITUENT INTERESTS OF
JOSEPH KASMAN'S (THE "CONTRIBUTOR") PARTNERSHIP INTEREST
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PARTNERSHIPS IN WHICH CONTRIBUTOR PARTNERSHIPS IN WHICH CONTRIBUTOR PROPERTIES HELD BY THE PARTNERSHIPS
HOLDS A DIRECT INTEREST* HOLDS AN INDIRECT INTEREST
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2800 Company, L.L.C. 2800 Associates, L.P. 2800 North Central
- -----------------------------------------------------------------------------------------------------------------
5750 Feldman, Ltd. 5750 Feldstein, Ltd. 5750 Major Blvd.
5750 Associates Limited Partnership
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------
* Corporations owned by Joseph Kasman that hold interests in any of the
Properties shall contribute the partnership interests held by such
corporations to the Operating Partnership.
A-1
<PAGE> 18
EXHIBIT B
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby assigns,
transfers, contributes and conveys to Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), its entire legal
and beneficial right, title and interest in and to ____________________________,
a __________________________ (the "Partnership"), including, without limitation,
all right, title and interest, if any, of the undersigned in and to the assets
of the Partnership and the right to receive distributions of money, profits and
other assets from the Partnership, presently existing or hereafter at any time
arising or accruing (such right, title and interest are hereinafter collectively
referred to as the "Partnership Interest"), TO HAVE AND TO HOLD the same unto
the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating
Partnership assumes all obligations in respect of the Partnership Interest.
The Partnership owns certain real property as described in
Attachment 1 attached hereto.
Executed: ___________ ___, 1997
By:_____________________________________
Joseph Kasman
B-1
<PAGE> 19
EXHIBIT C
FORM OF QUITCLAIM
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ ...............
............ Computed on the consideration
or value of property conveyed;
OR
............ Computed on the consideration
or value less liens or
encumbrances remaining at time
of sale.
---------------------------------------------
Signature of Declarant of Agent determining
tax -- Firm name
- --------------------------------------------------------------------------------
QUITCLAIM DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to
Tower Realty Operating Partnership, L.P., a Delaware limited partnership
the real property in the City of ____________, County of _____________, State of
_____________, described as
Dated _____________ ___________________________________
___________________________________
___________________________________
C-1
<PAGE> 20
STATE OF NEW YORK )
)
COUNTY OF )
On __________________________________________________________________ before me,
_______________________________________________________________________________,
personally appeared ____________________________________________________________
_______________________________________________________________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature _________________________ (This area for official notarial seal)
C-2
<PAGE> 21
EXHIBIT D
CALCULATION OF NUMBER OF OP UNITS
The number of OP Units to be issued to Contributor shall be
calculated as follows:
IAD 1
$172,250 + (AP x ( ------- - TNSU ) - MCU) x ----
IADPS MP
Where:
AP = 8.0% (expressed as a decimal fraction).
IAD = Total estimated annual distributions to be made
by the Operating Partnership as set forth in the final preliminary
prospectus included in the Registration Statement on Form S-11 filed by
the Company with the Securities and Exchange Commission in connection
with the proposed public offering of shares of Common Stock (the
"Preliminary Prospectus").
IADPS = Estimated initial annual distribution per
share of Common Stock or OP Unit as set forth in the Preliminary
Prospectus.
TNSU = The total number of shares of Common Stock and
OP Units to be issued in the IPO to persons other than Lawrence H.
Feldman, Robert Cox, Joseph D. Kasman, Eric Reimer, Reuben Friedberg
and Robert Adams as set forth in the Preliminary Prospectus, other than
the number of OP Units to be issued to Robert Cox, Joseph D. Kasman,
Eric Reimer and Robert Adams in respect of the minimum contribution
consideration to be received by each of them in respect of their
individual Contribution Agreements.
MCU = The total number of OP Units to be issued to
Contributor directly or indirectly under the Omnibus Management Company Option
Agreement (assuming all shares of Common Stock and OP Units are issued at the
Mid-Point (as defined below)).
MP or "Mid-Point" = the median of the proposed per
share price range for the Common Stock as set forth in the Preliminary
Prospectus.
D-1
<PAGE> 22
EXHIBIT E
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
OF CONTRIBUTOR
ARTICLE 1. ADDITIONAL DEFINED TERMS
1.1 For purposes of this EXHIBIT E, the following terms have
the meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT E is attached:
ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively, "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.
CONTRIBUTION AGREEMENT: Means the Contribution Agreement to
which this EXHIBIT E is attached.
GOVERNMENTAL ENTITY: Means any government or agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
INDEMNIFYING PARTY: Means any party required to indemnify any
other party under ARTICLE 3.2 of this EXHIBIT E or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.
KNOWLEDGE: Means, with respect to any representation or
warranty so indicated, the actual knowledge, upon reasonable investigation and
inquiry in good faith, of the signatory to the Contribution Agreement.
LIENS: Means, with respect to any real and personal property,
all mortgages, pledges, liens, options, charges, security interests,
restrictions, prior assignments, encumbrances, covenants, encroachments,
assessments, rights of others, licenses, easements, liabilities or claims of any
kind or nature whatsoever, direct or indirect, including, without limitation,
interests in or claims to revenues generated by such property.
E-1
<PAGE> 23
PERMITTED LIENS: Means (a) Liens, or deposits made to secure
the release of such Liens, securing taxes, the payment of which is not
delinquent or the payment of which is actively being contested in good faith by
appropriate proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the
districts in which the Properties are located which are not violated by the
existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's
and mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not have a
material adverse effect upon, or materially interfere with the use of, the
Properties; and
(e) any exceptions contained in the Title Policies.
PERSON: Means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
PORTFOLIO AGREEMENTS: Means the agreements, including the
Contribution Agreement, listed on ATTACHMENT 1 hereto, which contemplate the
transfer of partnership and/or limited liability company membership interests in
certain of the Participating Partnerships and LLCs from any entity directly or
indirectly owned by Contributor to the Company and the Operating Partnership.
PROSPECTUS: Means the Company's Form S-11 Registration
Statement.
REIT STOCK: Shall have the meaning set forth in the OP
Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
The Contributor represents and warrants to the Operating
Partnership as set forth below in this ARTICLE 2. Notwithstanding any other
provision of the Contribution Agreement or this EXHIBIT E, the Contributor makes
representations, warranties and indemnities only with respect to: (i) the
Properties identified on EXHIBIT A to the Contribution Agreement (the "Property"
or the "Properties"), and (ii) the interests in the Partnerships to be
transferred by the Contributor.
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<PAGE> 24
2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and (B)
has all requisite power and authority to own, lease or operate its property and
to carry on its business as presently conducted and, to the extent required
under applicable law, is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
2.2 DUE AUTHORIZATION. The execution, delivery and performance
of the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered by
or on behalf of the Contributor pursuant to this Contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.
2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is
the sole owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.
2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes
all of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of all
security interests, mortgages, pledges, liens, encumbrances, claims and equities
to the Operating Partnership.
E-3
<PAGE> 25
2.6 NO VIOLATION. None of the execution, delivery or
performance of the Contribution Agreement and the transactions contemplated
hereby does or will, with or without the giving of notice, lapse of time, or
both, (i) violate, conflict with, result in a breach of, or constitute a default
under or give to others any right of termination or cancellation of (A) the
organizational documents, including the charters and bylaws, if any, of the
Contributor, (B) any material agreement, document or instrument to which the
Contributor is a party or by which the Contributor or its Property is bound or
(C) any term or provision of any judgment, order, writ, injunction, or decree of
any governmental or regulatory authority binding on the Contributor or by which
the Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.
2.7 NON-FOREIGN STATUS. The Contributor is not a foreign
person, foreign corporation, foreign partnership, foreign trust or foreign
estate (as defined in the Code), and is, therefore, not subject to the
provisions of the Code relating to the withholding of sales proceeds to foreign
persons.
2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions. If Contributor fails to provide
such certificates or affidavits, the Operating Partnership may withhold a
portion of any payments otherwise to be made to the Contributor as required by
the Code or New York law.
2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her
or its understanding that the offering and sale of the OP Units to be acquired
pursuant to the Contribution Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Act"). In furtherance thereof, the
Contributor represents and warrants to the Company as follows:
2.9.1 INVESTMENT. The Contributor is acquiring the OP
Units solely for his, her or its own account for the purpose of investment and
not as a nominee or agent for any other person and not with a view to, or for
offer or sale in connection with, any distribution of any thereof. The
Contributor agrees and acknowledges that he, she or it will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (hereinafter, "Transfer") any of the OP Units unless (i) the Transfer
is pursuant to an effective registration statement under the Act and
qualification or other compliance under applicable blue sky or state securities
laws, or (ii) counsel for the Contributor (which counsel shall be reasonably
acceptable to the Operating Partnership) shall have furnished the Operating
Partnership with an opinion, reasonably satisfactory in form and substance to
the Operating Partnership to the effect that no such registration is required
because of the availability of an exemption from registration under the Act and
qualification or other compliance under applicable blue sky or state securities
laws.
E-4
<PAGE> 26
2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the Contributor
has previously invested in securities similar to the OP Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Contribution Agreement. The Contributor is able to bear
the economic risk of holding the OP Units for an indefinite period and is able
to afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.
2.9.3 HOLDING PERIOD. The Contributor acknowledges
that he, she or it has been advised that (i) the OP Units and the common stock
of the Company into which the OP Units may be exchanged in certain circumstances
(the "Common Stock") must be held indefinitely, and the Contributor must
continue to bear the economic risk of the investment in the OP Units (and any
Common Stock that might be exchanged therefor) unless they are subsequently
registered under the Act or an exemption from such registration is available,
(ii) a restrictive legend in the form hereafter set forth shall be placed on the
certificates representing the OP Units (and any Common Stock that might be
exchanged therefor), and (iii) a notation shall be made in the appropriate
records of the Operating Partnership (and the Company) indicating that the OP
Units (and any Common Stock that might be exchanged therefor) are subject to
restrictions on transfer.
2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is defined
in Rule 501(a) of Regulation D under the Act) and as such:
(i) is a director or executive officer of
the Company; or
(ii) has an individual net worth, or joint
net worth with his or her spouse, in excess of $1,000,000; or
(iii) had an individual annual adjusted
gross income in excess of $200,000 in each of the two most recent years
and reasonably expects to have annual adjusted gross income in excess
of $200,000 in the current year; or
E-5
<PAGE> 27
(iv) had a joint income with his spouse in
excess of $300,000 in each of the two most recent years and reasonably
expects to have an annual adjusted gross income, with his spouse, in
excess of $300,000 in the current year.
If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).
2.9.5 LEGENDING. Each certificate representing the OP
Units (and any Common Stock that might be exchanged therefor) shall bear the
following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY
E-6
<PAGE> 28
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH
A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION.
2.10 LITIGATION. There are no Claims which could reasonably be
anticipated to result in damages in excess of $50,000 pending or, to Knowledge,
threatened that directly or indirectly affect the Contributor, the Partnerships,
the Properties or the Formation Transactions, nor has any such claim been
pending or, to Knowledge, threatened as of the Closing.
2.11 NO BROKERS. Neither the Contributor nor any of its
respective officers, directors or employees has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in the obligation of the Operating Partnership or any of its affiliates to pay
any finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.
2.12 SOLVENCY. The Contributor has been and will be solvent at
all times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.
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<PAGE> 29
2.13 NO MISREPRESENTATIONS. No representation, warranty or
statement made, or information provided, by the Contributor in the Contribution
Agreement or in any other document or instrument furnished or to be furnished by
or on behalf of the Contributor pursuant hereto or as contemplated hereby (i)
contains or will contain any untrue statement of a material fact or (ii) omits
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. For purposes of the preceding sentence,
materiality shall be determined with reference to the total portfolio of real
properties and other interests to be transferred pursuant to the Operating
Partnership pursuant to the Formation Transactions.
ARTICLE 3. INDEMNIFICATION
3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR
BREACH.
(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT E or in any Schedule or certificate delivered pursuant
hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the
Contribution Agreement or this EXHIBIT E, no party hereto shall be liable under
this EXHIBIT E or the Contribution Agreement for monetary damages (or otherwise)
for breach of any of its representations and warranties contained in this
EXHIBIT E or the Contribution Agreement, or in any Schedule, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this ARTICLE 3.
3.2 GENERAL INDEMNIFICATION
(a) The Contributor shall indemnify and hold harmless the
Operating Partnership, the Company, and their affiliates and each of their
respective directors, officers, employees, agents, representatives and
affiliates (each of which is an "Indemnified Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation, costs of investigative, judicial or administrative proceedings or
appeals therefrom, and costs of attachment or similar bonds (collectively,
"Losses"), asserted against, imposed upon or incurred by the Indemnified Party
in connection with or as a result of any breach of a representation or warranty
of the Contributor contained in the Contribution Agreement or in any Schedule,
certificate or affidavit delivered by the Contributor pursuant to the
Contribution Agreement.
E-8
<PAGE> 30
(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributor in
connection with the transactions contemplated by the Contribution
Agreement;
(ii) any liabilities or obligations incurred, arising
from or out of, in connection with or as a result of the failure of the
Contributor to obtain all consents required to consummate the
transactions contemplated by the Contribution Agreement; or
(iii) any breach of any representation, warranty or
covenant set forth in the Contribution Agreement.
3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy
its obligations hereunder by the prompt delivery (paid promptly as and when
expenses are incurred) to an Indemnified Party of OP Units, subject to the
limits on ownership and transfer of REIT Stock set forth in the Company's
articles of incorporation. Any OP Units delivered to an Indemnified Party
hereunder shall be valued based upon the initial public offering price of the
Company's Common Stock.
3.4 NOTICE AND DEFENSE BY CLAIMS. As soon as reasonably
practicable after receipt by the Indemnified Party of notice of any liability or
claim incurred by or asserted against the Indemnified Party that is subject to
indemnification under this ARTICLE 3, the Indemnified Party shall give notice
thereof to the Contributor. The Indemnified Party may at its option demand
indemnity under this ARTICLE 3 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not frivolous
and that the Indemnified Party may be liable for, or otherwise incur, a Loss as
a result thereof and shall give notice of such determination to the Contributor.
The Indemnified Party shall permit the Contributor, at its option and expense,
to assume the defense of any such claim by counsel selected by the Contributor
and reasonably satisfactory to the Indemnified Party, and to settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that the Indemnified Party may at all
times participate in such defense at its expense; and PROVIDED FURTHER, HOWEVER,
that the Contributor shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party in its sole and absolute
discretion, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnified Party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall have
the right to undertake the
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<PAGE> 31
defense, compromise or settlement of such liability or claim on behalf of and
for the account of the Contributor.
3.5 LIMITATIONS ON INDEMNIFICATION UNDER ARTICLE 3.
Notwithstanding anything contained herein to the contrary, the Contributor shall
not be liable or obligated to make payments under this ARTICLE 3 with respect to
any Property or Partnership Interest to the extent such payments in the
aggregate would exceed the value of the OP Units (based upon the initial public
offering price of the Common Stock) received by the Contributor at the Closing.
Notwithstanding anything contained herein to the contrary, the Indemnified
Parties shall look first to the Contributor's OP Units for indemnification under
this ARTICLE 3 and then to the Contributor's other assets.
3.6 LIMITATION PERIOD.
(a) Notwithstanding the foregoing, any claim for
indemnification under ARTICLE 3.2 hereof must be asserted in writing by the
Indemnified Party, stating the nature of the Losses and the basis for
indemnification therefor within one year after the Closing.
(b) If so asserted in writing prior to the applicable
expiration date, such claims for indemnification shall survive until resolved by
mutual agreement between the Contributor and the Indemnified Party or by
judicial determination. Any claim for indemnification not so asserted in writing
prior to the applicable expiration date shall not thereafter be asserted and
shall forever be waived.
3.7 RESERVATION OF CONTRIBUTOR RIGHTS. Notwithstanding
anything else in this Contribution Agreement to the contrary, the Contributor
reserves unto itself all rights and remedies (including rights to seek
contribution) against any third party indemnitors, prior property owners or
occupants, and contributors to any contamination, for which the Partnerships
have been indemnified by the Contributor hereunder. To the extent the
Contributor's rights against any such third party owners, occupants, indemnitors
or contributors may be materially prejudiced by actions or inactions by any
owner or occupant of the Properties after the Closing, the Contributor's
indemnity obligation shall be reduced in accordance with the effect of the
actions or inactions which so prejudiced the Contributor's rights.
E-10
<PAGE> 32
ATTACHMENT 1
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
__________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, together with certain other limited
partners, has formed the Operating Partnership
pursuant to the Agreement of Limited Partnership of
the Operating Partnership dated __________ __, 1997
(as such agreement may be amended or amended and
restated from time to time, the "PARTNERSHIP
AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited
Partners (as defined below) directly or indirectly
hold units of limited partnership interest ("OP
UNITS") in the Operating Partnership.
(c) The Operating Partnership has agreed to provide the
Limited Partners with certain direct or indirect
rights to exchange their OP Units for cash or, at the
election of the Company, for shares of the Company's
common stock, par value $0.01 per share (the "REIT
STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
<PAGE> 33
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Stock in REIT
Stock or makes a distribution to all holders of its outstanding REIT Stock in
REIT Stock; (ii) subdivides its outstanding REIT Stock; or (iii) combines its
outstanding REIT Stock into a smaller number of shares of REIT Stock, the
Exchange Factor shall be adjusted by multiplying the Exchange Factor by a
fraction, the numerator of which shall be the number of shares of REIT Stock
issued and outstanding on the record date for such dividend, contribution,
subdivision or combination assuming for such purpose that such dividend,
distribution, subdivision or combination has occurred as of such time, and the
denominator of which shall be the actual number of shares of REIT Stock
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Exchange Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated
and/or the Operating Partnership
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
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<PAGE> 34
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to
the product of the number of OP Units offered for exchange by an Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company or the Operating Partnership issues to all holders
of REIT Stock rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase REIT Stock,
or any other securities or property (collectively, the "rights"), then the REIT
Stock Amount shall also include such rights that a holder of that number of
shares of REIT Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading
on the NYSE, any national securities exchange or Nasdaq, the last
reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
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<PAGE> 35
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"EXCHANGING PARTNER"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding
the provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging
Partner within five (5) Business Days after the receipt by the Company
of such Notice of Exchange,
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<PAGE> 36
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of
the Company,
(b) would otherwise jeopardize the REIT status of the Company,
or
(c) would cause the acquisition of the REIT Stock by the
Limited Partner to be "integrated" with any other distribution of REIT
Stock by the Company for purposes of complying with the registration
provisions of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article
2, any person to whom OP Units have been pledged, in compliance with the terms
of the Lock-up Agreement, may exercise its Exchange Right prior to the date that
is one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
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<PAGE> 37
(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of
the Exchange Right, the Company shall reserve for issuance such number of shares
of REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable
upon exchange of OP Units (or the cash equivalent amount thereof if the Cash
Amount is paid) shall be computed on the basis of the aggregate amount of OP
Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
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<PAGE> 38
(A) a copy of the prospectus contained in the
Registration Statement on Form S-11 filed by the Company in
connection with the IPO, any prospectus contained in any
Registration Statement subsequently filed by the Company, and
any supplement or amendment thereto (each, a "PROSPECTUS"),
and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by
the Company with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited investor"
as defined in Rule 501 of the regulations promulgated under
the Securities Act.
(B) If such Exchanging Partner has retained or
retains a person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
(b) (i) Such Exchanging Partner understands that an investment in the
Company involves substantial risks.
-7-
<PAGE> 39
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of such Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws, except as provided in the Registration Rights
Agreement entered into by the Company and the Exchanging
Partner (the "REGISTRATION RIGHTS AGREEMENT").
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<PAGE> 40
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
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<PAGE> 41
4.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with
the consent of the Company by a vote of the Limited Partners in the same manner
as the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein, provided, however, that the Company shall vote its
limited partnership interests in proportion to the votes of the other Limited
Partners.
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<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By:
-----------------------------------
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By:
------------------------------
Name:
Title:
LIMITED PARTNERS:
---------------------------
Signature
---------------------------
Name (Please Print or Type)
-11-
<PAGE> 43
Exhibit A
Name and Address of Limited Partners
[To be attached]
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<PAGE> 44
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated: __________________________
_____________________________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
(Signature of Limited Partner)
_____________________________
(Street Address)
(City) (State) (Zip Code)
If REIT Stock is to be issued, issue to:
Name:
Limited Partner's social security or tax
identification number:
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<PAGE> 45
BATTLE FOWLER LLP
DRAFT - 7/24/97
ATTACHMENT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, limited liability companies, corporations and
other entities which are Holders or in which the Holders own direct or indirect
interests (the "PROPERTY PARTNERSHIPS") pursuant to Option or Contribution
Agreements (the "OPTION AGREEMENTS") among the Operating Partnership and the
Grantors named therein, and in connection therewith the Holders will receive
units of limited partnership interest in the Operating Partnership (such units
of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
<PAGE> 46
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating
to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement
or
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<PAGE> 47
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
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"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not
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delay, suspend or withdraw a Registration Statement for such reason for
more than 60 days or more often than twice during any period of 12
consecutive months.
(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration Statement
covering the Registrable Securities held by more than one Holder.
2.2 Expenses.
(i) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if any,
sales commissions, the fees and disbursements of counsel representing
such Holder and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that does
not, within 10 days after receipt of a reasonable request by the Company for
information in connection with the Shelf Registration Statement, provide such
information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
2.4 Effect of Material Breach. In the event that the Company shall
breach any of its material obligations hereunder in any material respect, any
Holder of Registrable Securities may demand that the Company file a registration
statement covering such Holder's Registrable Securities. The Company agrees to
file such registration statement within 60 days after receipt of such demand and
agrees to use its best efforts to procure the effectiveness of such registration
statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed pursuant
to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period set
forth in Section 2 hereof, a Shelf Registration Statement, which Shelf
Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects
with the requirements of the applicable form of registration
statement and include all financial statements required by the
SEC to be filed therewith.
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(ii) (A) Subject to Article III, Section (a)(ii)(B),
(I) prepare and file with the SEC such
amendments and post-effective amendments to each such
Registration Statement as may be necessary to keep
such Registration Statement effective for the
applicable period;
(II) cause each such Prospectus to be
supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule
424 or any similar rule that may be adopted under the
Securities Act;
(III) respond as promptly as practicable to
any comments received from the SEC with respect to
the Shelf Registration Statement, or any amendment,
post-effective amendment or supplement relating
thereto; and
(IV) comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by each Registration Statement
during the applicable period in accordance with the
intended method or methods of distribution by the
selling Holders thereof.
(B) (I) Each Holder shall promptly provide to the
Company such information as the Company reasonably
requests in order to identify such Holder and the
method of distribution in a post-effective amendment
to the Registration Statement or a supplement to the
Prospectus.
(II) Such Holder also shall notify the
Company in writing upon completion of any offer or
sale or at such time as such Holder no longer intends
to make offers or sales under the Registration
Statement.
(iii) Furnish to each Holder of Registrable Securities,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable
Securities; the Company consents to the use of the Prospectus,
including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary
Prospectus.
(iv) Use its reasonable efforts to register or qualify the
Registrable Securities by the time the applicable Registration
Statement is declared effective by the SEC under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
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Registrable Securities covered by a Registration Statement shall
reasonably request in writing, keep each such registration or
qualification effective during the period such Registration Statement
is required to be kept effective, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that
the Company shall not be required to
(A) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to
qualify but for this Article III, Section (a)(iv),
(B) subject itself to taxation in any such
jurisdiction, or
(C) submit to the general service of process in any
such jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and,
if requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become
effective and when any post-effective amendments and
supplements thereto become effective,
(B) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose,
(C) if the Company receives any notification with
respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and
(D) of the happening of any event during the period a
Registration Statement is effective which is of a type
specified in Article II, Section 2.1(iii) hereof or as a
result of which such Registration Statement or the related
Prospectus contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the
Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment.
(vii) Furnish to each Holder of Registrable Securities,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment
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thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested).
(viii) (A) Cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any Securities Act legend; and
(B) enable certificates for such Registrable
Securities to be issued for such numbers of shares of Common
Stock and registered in such names as the selling Holders may
reasonably request at least two business days prior to any
sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III,
Section (a)(ii)(B) hereof, upon the occurrence of any event
contemplated by Article III, Section (a)(v)(D) hereof, use its
reasonable efforts promptly to prepare and file a supplement or
prepare, file and obtain effectiveness of a post-effective amendment to
a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(x) Make available for inspection by representatives of the
Holders of the Registrable Securities and any counsel or accountant
retained by such Holders, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply
all information reasonably requested by any such representative,
counsel or accountant in connection with a Registration Statement;
provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies
such representatives, counsel or accountants in writing that such
records, documents or information are confidential shall not be
disclosed by such representatives, counsel or accountants unless
(A) the disclosure of such records, documents or
information is necessary to avoid or correct a material
misstatement or omission in a Registration Statement,
(B) the release of such records, documents or
information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, or
(C) such records, documents or information have been
generally made available to the public.
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(xi) Within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of
such document (not including any documents incorporated by reference
therein unless requested) to the Holders of Registrable Securities.
(xii) Use its reasonable efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar
securities issued by the Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities,
not later than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable Holders to consummate the disposition of such Registrable
Securities.
(b) The Company may require each Holder of Registrable Securities to
furnish to the Company in writing such information regarding the
proposed distribution by such Holder of such Registrable Securities as
the Company may from time to time reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations
with respect to the Registration Statement required to be filed
pursuant to Section 2 hereof and this Section 3, each Holder agrees
that
(i) it will not offer or sell its Registrable Securities under
the Registration Statement until it has received copies of the
supplemental or amended Prospectus contemplated by Article III, Section
(a)(ii) hereof and receives notice that any post-effective amendment
has become effective, and
(ii) upon receipt of any notice from the Company of the
happening of any event of the kind described in Article III, Section
(a)(v)(D) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such
Holder receives copies of the supplemented or amended Prospectus
contemplated by Article III, Section (a)(ix) hereof and receives notice
that any post-
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effective amendment has become effective, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
IV Indemnification; Contribution.
4.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder (within the meaning of Section 15 of the Securities
Act) as follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading or
(C) arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental
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agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of any such
amended or supplemental Prospectus by the Company, if such loss,
liability, claim, damage or expense would not have arisen had such
delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it
may have under the indemnity agreement provided in Section
4.1(a) or 4.1(b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the
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indemnified party results in the forfeiture by the
indemnifying party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than
the indemnification obligation provided under Section 4.1(a)
or 4.1(b) above.
(ii) If the indemnifying party so elects within a reasonable
time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved
by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however,
that, if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the
proviso to Section 4.1(c), such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's
defense, and counsel for the indemnified party or parties
shall be entitled to conduct the defense of such indemnified
party or parties, it being understood that both such counsel
will cooperate with each other to conduct the defense of such
action or proceeding as efficiently as possible.
(B) If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such
defense, after having received the notice referred to in
Section 4.1(c), the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified
party or parties as incurred.
(C) In such event, however, no indemnifying party
will be liable for any settlement effected without the written
consent of such indemnifying party, which consent may not be
unreasonably withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with
this Section 4(c), such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
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4.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 4 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one hand and the
selling Holders on the other (in such proportions that the
selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations.
(B) (I) The relative benefits to the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, the total proceeds
received by the indemnifying party and indemnified
parties in connection with the offering to which such
losses, claims, damages, liabilities or expenses
relate.
(II) The relative fault of the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether the action
in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact, has been made by,
or relates to information supplied by, such
indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section
4.4, no selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities of such selling Holder were
offered to the public exceeds the amount of any damages which
such selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
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(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any,
who controls a Holder within the meaning of Section 15 of the
Securities Act and directors and officers of a Holder shall have the
same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration
Statement and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act shall have the same rights
to contribution as the Company.
V Filing of Exchange Act Reports; Rule 144 Sales
5.1 The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act so as to
enable any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition by any
Holder of any Exchange Stock pursuant to Rule 144, the Company shall cooperate
with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Exchange
Stock.
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the outstanding
Registrable Securities; provided, however, that no amendment,
modification or supplement or waiver or consent to the departure with
respect to the provisions of Articles 2, 4 or 5 hereof shall be
effective as against any Holder unless consented to in writing by such
Holder.
(ii) Notice of any amendment, modification or supplement to
this Agreement adopted in accordance with this Section 6.1 shall be
provided by the Company to each Holder at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex,
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telecopier, or any courier guaranteeing overnight delivery, to the parties at
their respective addresses set forth opposite their signatures below or at such
other address as a party may indicate by written notice to the other party or
parties.
(ii) All such notices and communications shall be deemed to
have been duly given:
(A) at the time delivered by hand, if personally
delivered;
(B) three (3) business days after being deposited in
the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By: ________________________________________
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING
New York, New York 10036-4003 PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By: ________________________________________
Name:
Title:
HOLDERS:
[Address:] _____________________________________________
Signature
_____________________________________________
Name (Please Print or Type)
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<PAGE> 62
ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public pursuant to a public offering (the "Offering").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Company's Registration Statement on Form S-11
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that without the prior written consent of Merrill Lynch, the undersigned
will not (and, except as may be disclosed in the Prospectus, will not announce
or disclose any intention to) directly or indirectly sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition at any time in
the future) of, any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, including any units of limited
partnership interest (the "OP Units") in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership") beneficially
owned by the undersigned as of the date of the closing of the Company's initial
public offering, for a period of twenty-four (24) months after the later of (i)
date of the final Prospectus relating to the
<PAGE> 63
offering of the Shares to the public by the Underwriters and (ii) the date the
Offering is consummated and closed. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and _____________________,
its Transfer Agent, are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
letter agreement.
Very truly yours,
[INVESTOR]
By:____________________________
Name:
Title:
-2-
<PAGE> 64
ATTACHMENT 3
(CONTINUED)
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Tower Realty Operating Partnership, L.P.
120 West 46th Street, 24th Floor
New York, New York 10036
Dear Sirs,
Reference is made to the Option Agreement, dated _________, 1997 (the
"Option Agreement"), by and between the undersigned and Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Option Agreement.
In consideration of the execution and exercise of the Option Agreement
by the Operating Partnership, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned hereby
irrevocably agrees that without the prior written consent of the Operating
Partnership, the undersigned will not directly or indirectly sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose (or enter into any transaction or device which
is designed to, or could be expected to, result in the disposition at any time
in the future) of any any units of limited partnership interest (the "OP Units")
in the Operating Partnership, or any securities convertible into or exercisable
or exchangeable for OP Units, beneficially owned by the undersigned as of the
date hereof, for a period of twenty-four (24) months after the date hereof.
Prior to the expiration of such period, the undersigned will not publicly
announce or disclose any intention to do anything after the expiration of such
period which the undersigned is prohibited, as provided in the preceding
sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Operating Partnership is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By:________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.50
- --------------------------------------------------------------------------------
CONTRIBUTION AGREEMENT
by and between
ROBERT COX
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
Dated as of July 31, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS ............................................................................. -1-
1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP
UNITS........................................................................ -2-
1.1 CONTRIBUTION TRANSACTION............................................ -2-
1.2 ISSUANCE OF OP UNITS................................................ -3-
1.3 ADJUSTED CONSIDERATION.............................................. -3-
1.4 AUTHORIZATION....................................................... -3-
1.5 CONTRIBUTION OF CERTAIN RIGHTS...................................... -3-
1.6 PRORATIONS.......................................................... -3-
1.7 TREATMENT AS CONTRIBUTION........................................... -4-
2. CLOSING...................................................................... -4-
2.1 CONDITIONS PRECEDENT................................................ -4-
2.2 TIME AND PLACE...................................................... -5-
2.3 CLOSING DELIVERIES.................................................. -6-
2.4 CLOSING COSTS....................................................... -6-
3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES.................................. -7-
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP......................................................... -7-
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR....................... -7-
3.3 INDEMNIFICATION..................................................... -7-
4. COVENANTS.................................................................... -8-
4.1 COVENANTS OF CONTRIBUTOR............................................ -8-
5. RELEASES AND WAIVERS......................................................... -8-
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP............................ -9-
5.2 GENERAL RELEASE OF CONTRIBUTOR...................................... -9-
5.3 INTENTIONALLY OMITTED............................................... -9-
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT........................ -9-
6. POWER OF ATTORNEY............................................................ -9-
6.1 GRANT OF POWER OF ATTORNEY.......................................... -9-
6.2 LIMITATION ON LIABILITY............................................. -10-
7. MISCELLANEOUS................................................................ -11-
7.1 FURTHER ASSURANCES.................................................. -11-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
7.2 COUNTERPARTS........................................................ -11-
7.3 GOVERNING LAW....................................................... -11-
7.4 NOTICES............................................................. -11-
</TABLE>
EXHIBIT LIST
<TABLE>
<CAPTION>
SECTION FIRST
EXHIBITS REFERENCED
<S> <C>
A Constituent Interests of Contributor's Partnership Interest.......... Recital D
B Contribution and Assumption Agreement................................ 1.1
C Form of Quitclaim.................................................... 1.1
D Calculation of Number of OP Units.................................... 1.2
E Representations, Warranties and Indemnities of Contributor........... 3.2
Attachment 1......................................................... Exchange Rights Agreement
Attachment 2......................................................... Registration Rights Agreement
Attachment 3......................................................... Lock-Up Agreements
Attachment 4......................................................... List of Portfolio Agreements
</TABLE>
-ii-
<PAGE> 4
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"Contribution Agreement") is made and entered into as of July 31, 1997 by and
between Tower Realty Operating Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"), and Robert Cox, an individual (the
"Contributor").
RECITALS
A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office properties (the "Participating Properties") owned or managed
by Tower Equities & Realty Corp. or its affiliates through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively,
the "Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").
B. The Formation Transactions relate to the proposed initial public
offering (the "Public Offering") of the common stock, par value $.01 per share
(the "Common Stock") of Tower Realty Trust, Inc., a Maryland corporation (the
"Company"), which will operate as a self-administered and self-managed real
estate investment trust ("REIT") and will be the sole general partner of the
Operating Partnership.
C. The owners of the Property Interests and the partners and members of
the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "Cash Participants") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP Participants").
D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT A (the "Partnerships") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT A (the "Property" or the
"Properties"). As used herein, "Partnership Agreement" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.
E. The Contributor has previously contributed certain interests in the
Partnerships to the Operating Partnership in exchange for OP Units (as defined
below).
F. The Contributor desires to, and the Operating Partnership desires
the Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, as a
<PAGE> 5
partner (or member) of the Partnerships, including, without limitation, all of
its voting rights and interests in the capital, profits and losses of the
Partnerships or any property distributable therefrom, constituting all of its
interests in the Partnerships (such right, title and interest are hereinafter
collectively referred to as the "Partnership Interest"), in exchange for
partnership units in the Operating Partnership (the "OP Units"), on the terms
and subject to the conditions set forth herein.
G. The Operating Partnership desires to make, and the Contributor
desires to receive, a return of certain contributions previously made by the
Contributor to the Operating Partnership that relate to direct or indirect
interests in certain limited partnerships, limited liability companies and
certain other entities that do not relate to the Consolidation (the "Excluded
Interests").
NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:
ARTICLE 1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR
OP UNITS
1.1 CONTRIBUTION TRANSACTION
(a) At the Closing (as defined in ARTICLE 2.2 hereof) and
subject to the terms and conditions contained in this Contribution Agreement,
the Contributor shall transfer to the Operating Partnership, absolutely and
unconditionally, all of its Partnership Interest (as such term is defined in
Recital F herein) not previously contributed to the Operating Partnership. The
contribution of the Contributor's Partnership Interest shall be evidenced by a
"Contribution and Assumption Agreement" for each of the Partnerships in
substantially the form of EXHIBIT B attached hereto. Furthermore, the
Contributor shall execute and have duly acknowledged an individual quitclaim
deed for each property in the form of EXHIBIT C quitclaiming to the Operating
Partnership any direct or indirect ownership interest in and to the Properties.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the Agreement
of Limited Partnership of the Operating Partnership (the "OP Agreement") in
order to effect the transactions contemplated hereby.
(b) At the Closing, and subject to the terms and conditions
set forth in this Contribution Agreement, the Operating Partnership shall
transfer to the Contributor, absolutely and unconditionally, all of the Excluded
Interests (as such term is defined in Recital G herein) previously contributed
by the Contributor to the Operating Partnership.
-2-
<PAGE> 6
1.2 ISSUANCE OF OP UNITS
The Operating Partnership shall, in exchange for the
Partnership Interest and after taking into account the transfer of the Excluded
Interests to the Contributor, increase or decrease the number of OP Units issued
to the Contributor in accordance with EXHIBIT D hereto. The increase or decrease
of OP Units Issued to the Contributor shall be evidenced by either an amendment
(the "Amendment") to the OP Agreement or by certificates relating to such units
(the "Certificates") in either case, as shall be acceptable to the Contributor.
The parties shall take such additional actions and execute such additional
documentation as may be required by the Partnership Agreement and the OP
Agreement in order to effect the transactions contemplated hereby.
1.3 ADJUSTED CONSIDERATION
The Operating Partnership reserves the right not to acquire
any particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the number of OP Units to be received by the Contributor pursuant to this
Contribution Agreement may be reduced by an amount determined by Lawrence H.
Feldman, in his sole discretion, to reflect the reduction in total value of the
Partnership Interest ultimately contributed by the Contributor.
1.4 AUTHORIZATION
Contributor hereby authorizes Lawrence H. Feldman to make any
and all determinations to be made by him pursuant to ARTICLE 1.3 hereof, and any
and all such determinations shall be final and binding on all parties.
1.5 CONTRIBUTION OF CERTAIN RIGHTS
Effective upon the Closing, the Contributor hereby contributes
to the Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.
1.6 PRORATIONS
At the Closing, or as promptly as practicable following the
Closing, to the extent such matters are not the right or responsibility of all
tenants of a given Property, all revenue and all charges that are customarily
prorated in transactions of this nature, including accrued rent currently due
and payable, overpaid taxes or fees, real and personal property taxes, common
area maintenance charges and other similar periodic charges payable or
-3-
<PAGE> 7
receivable with respect to such Property shall be ratably prorated between the
partners of the Partnership which holds such Property prior to the Closing and
the Operating Partnership on and after the Closing, effective as of the Closing.
After providing for such prorations, (i) if any of the Partnerships has a
resultant cash surplus, the value of the Contributor's Partnership Interest
shall be increased in proportion to Contributor's ratable share of such cash
surplus and additional OP Units (based on the Mid-Point (as such term is defined
in Exhibit D attached hereto) of the proposed offering prices per share set
forth in the final preliminary prospectus relating to the offering of shares of
Common Stock ) shall be issued to the Contributor as a valuation adjustment to
the consideration to be received by the Contributor pursuant to this
Contribution Agreement, and (ii) if any of the Partnerships has a resultant cash
deficit, the value of the Contributor's Partnership Interest shall be reduced in
proportion to Contributor's ratable share of such cash deficit, and fewer OP
Units shall be issued to the Contributor as a valuation adjustment to the
consideration to be received by the Contributor pursuant to this Contribution
Agreement, unless such deficit is cured prior to the Closing.
1.7 TREATMENT AS CONTRIBUTION
The transfer, assignment and exchange of interests effectuated
with respect to the Operating Partnership, pursuant to this Contribution
Agreement, shall constitute a "Capital Contribution" pursuant to Article IV of
the OP Agreement and is intended to be governed by Section 721(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2. CLOSING
2.1 CONDITIONS PRECEDENT
The effectiveness of the Company's registration statement
filed with the Securities and Exchange Commission on Form S-11 (the
"Registration Statement") is a condition precedent to the obligations of all
parties to this Contribution Agreement to effect the transactions contemplated
by this Contribution Agreement on the Closing Date (as defined below).
The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:
(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and correct in all
material respects on the date such representations and warranties were made, and
shall be true and correct in all material respects on the Closing Date as if
made at and as of such date;
(b) Each of the obligations of the Contributor to be performed
by it shall have been duly performed by it on or before the Closing Date;
-4-
<PAGE> 8
(c) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents required to be
delivered pursuant to ARTICLE 2.3 hereof;
(d) The Contributor shall have obtained all necessary consents
or approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;
(e) The Contributor shall not have breached any of its
covenants contained herein in any material respect;
(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or governmental
or regulatory authority or instrumentality that prohibits the consummation of
the transactions contemplated hereby, and no litigation or governmental
proceeding seeking such an order shall be pending or threatened;
(g) There shall not have occurred between the date hereof and
the Closing Date any material adverse change in any of the Partnerships'
businesses;
(h) All existing management agreements with respect to the
Properties shall have been contributed to the Operating Partnership prior to or
simultaneously with the Closing; and
(i) All management functions with respect to the Properties
presently conducted by Tower Equities & Realty Corp. and its affiliates shall be
assumed by the Operating Partnership or Tower Equities Management, Inc.
2.2 TIME AND PLACE
The date, time and place of the transactions contemplated
hereunder shall be the day the Operating Partnership receives the proceeds from
the Public Offering from the underwriter(s), at 10:00 a.m. in the office of
Battle Fowler LLP, 75 East 55th Street, New York, New York 10022 (the "Closing"
or "Closing Date"). The transfers described in ARTICLE 1.1 of this Contribution
Agreement, and all closing deliveries, and the consummation of the Public
Offering, shall be deemed concurrent for all purposes.
-5-
<PAGE> 9
2.3 CLOSING DELIVERIES
At the Closing, the parties shall make, execute, acknowledge
and deliver, or cause to be made, executed, acknowledged and delivered through
the Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other
items (collectively, the "Closing Documents") necessary to carry out the
intention of this Contribution Agreement, which Closing Documents and other
items shall include, without limitation, the following:
(i) A Contribution and Assumption Agreement for each
Partnership;
(ii) An individual quitclaim deed for each Property,
fully executed and duly acknowledged from each of the individual
constituent partners and/or members of the Contributor, as required by
the Operating Partnership;
(iii) The Amendment or the Certificates evidencing
the transfer of OP Units to the Contributor;
(iv) American Land Title Assurances ("ALTA") policies
of title insurance with appropriate endorsements and levels of
reinsurance for the Properties issued as of the Closing Date or
endorsements or other assurances that the existing policy or policies
of title insurance are sufficient for purposes of this Contribution
Agreement, which the Contributor shall cause the title company to issue
to the Operating Partnership in a form acceptable to the Operating
Partnership (the "Title Policies") including satisfaction by the
Contributor of any and all title company requirements applicable to it;
(v) The Partnerships' books and records and
securities or other evidences of ownership held by the Contributor; and
(vi) An affidavit from the Contributor stating, under
penalty of perjury, the Contributor's United States Taxpayer
Identification Number and that the Contributor is not a foreign person
pursuant to section 1445(b)(2) of the Code and a comparable affidavit
satisfying California and any other withholding requirements.
(vii) The Exchange Rights Agreement, the Registration
Rights Agreement and the Lock-Up Agreements substantially in the form
attached hereto as ATTACHMENTS 1, 2, and 3, respectively.
-6-
<PAGE> 10
2.4 CLOSING COSTS
The Operating Partnership shall pay any documentary transfer
taxes, escrow charges, title charges and recording taxes or fees incurred in
connection with the transactions contemplated hereby.
ARTICLE 3. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP
The Operating Partnership hereby represents and warrants to
and covenants with the Contributor that:
(a) Organization; Authority. The Operating Partnership has
been duly formed and is validly existing with requisite power to enter this
Contribution Agreement and all agreements contemplated hereby. The persons and
entities executing this Contribution Agreement and all agreements contemplated
hereby on behalf of the Operating Partnership have the power and authority to
enter into this Contribution Agreement and such other contemplated agreements.
(b) Due Authorization. The execution, delivery and performance
by the Operating Partnership of its obligations under this Contribution
Agreement and all agreements contemplated hereby will not contravene any
provision of applicable law, the OP Agreement, charter, declaration of trust or
other constituent document of the Operating Partnership, or any agreement or
other instrument binding upon the Operating Partnership or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over the
Operating Partnership, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by the Operating Partnership of its obligations under this
Contribution Agreement and all other agreements contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR
The Contributor represents and warrants to and covenants with
the Operating Partnership as provided in EXHIBIT E attached hereto, and
acknowledges and agrees to be bound by the indemnification provisions contained
therein.
3.3 INDEMNIFICATION
The Operating Partnership shall indemnify and hold harmless
the Contributor (the "Indemnified Contributor Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable
-7-
<PAGE> 11
attorneys' fees, costs of investigation and remediation, costs of investigative
judicial or administrative proceedings or appeals therefrom and costs of
attachment or similar bonds (collectively, "Losses") asserted against, imposed
upon or incurred by the Indemnified Contributor Party in connection with: (i)
any breach of a representation or warranty of the Operating Partnership
contained in this Contribution Agreement; and (ii) all fees, costs and expenses
of the Operating Partnership in connection with the transactions contemplated by
this Contribution Agreement, including, without limitation, any and all costs
associated with the transfers contemplated herein.
ARTICLE 4. COVENANTS
4.1 Covenants of Contributor
(a) From the date hereof through the Closing, the Contributor
shall not:
(i) Sell or transfer all or any portion of the
Partnership Interest; or
(ii) Mortgage, pledge or encumber (or permit to
become encumbered) all or any portion of the Partnership Interest.
(b) From the date hereof through the Closing, the Contributor
shall permit each of the Partnerships to conduct its business in the ordinary
course, consistent with past practice, and shall not permit any of the
Partnerships to:
(i) Enter into any material transaction not in the
ordinary course of business;
(ii) Sell or transfer any assets of the Partnerships;
(iii) Mortgage, pledge or encumber (or permit to
become encumbered) any assets of the Partnerships, except (x) liens for
taxes not due, (y) purchase money security interests and (z) mechanics'
liens being disputed by any of the Partnerships in good faith and by
appropriate proceedings;
(iv) Amend, modify or terminate any material
agreements or other instruments to which any of the Partnerships is a
party; or
(v) Materially alter the manner of keeping the
Partnerships' books, accounts or records or the accounting practices
therein reflected.
(c) The Contributor shall use its good faith diligent efforts
to obtain any approvals, waivers or other consents of third parties required to
effect the transactions contemplated by this Contribution Agreement.
-8-
<PAGE> 12
ARTICLE 5. RELEASES AND WAIVERS
Each of the releases and waivers enumerated in this ARTICLE 5
shall become effective only upon the Closing of the contribution and exchange of
the Partnership Interest pursuant to ARTICLES 1 and 2 hereof.
5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP
As of the Closing, the Contributor irrevocably waives,
releases and forever discharges the Operating Partnership and the Operating
Partnership's affiliates, partners (including Lawrence H. Feldman), agents,
attorneys, successors and assigns of and from any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "Contributor Claims"), known or unknown,
suspected or unsuspected, arising out of or relating to any of the Partnership
Agreements, this Contribution Agreement or any other matter which exists at the
Closing, except for Contributor Claims arising from the breach of any
representation, warranty, covenant or obligation under this Contribution
Agreement.
5.2 GENERAL RELEASE OF CONTRIBUTOR
As of the Closing, the Operating Partnership irrevocably
waives, releases and forever discharges the Contributor and Contributor's
agents, attorneys, successors and assigns of and from any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses and
costs of any nature whatsoever (collectively, "Operating Partnership Claims"),
known or unknown, suspected or unsuspected, arising out of or relating to any of
the Partnership Agreements, this Contribution Agreement or any other matter
which exists at the Closing, except for Operating Partnership Claims arising
from the breach of any representation, warranty, covenant or obligation under
this Contribution Agreement or any supplemental representations and warranties
agreement entered into as of the Closing Date by and among the Contributor,
certain other continuing investors in the Operating Partnership and the
Operating Partnership.
5.3 INTENTIONALLY OMITTED
5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT
As of the Closing, the Contributor waives and relinquishes all
rights and benefits otherwise afforded to Contributor under the Partnership
Agreements including, without limitation, any right to consent to or approve of
the sale or contribution by the other partners (or members) of the Partnerships
of their partnership interests to the Company or the Operating Partnership.
-9-
<PAGE> 13
ARTICLE 6. POWER OF ATTORNEY
6.1 GRANT OF POWER OF ATTORNEY
Contributor does hereby irrevocably appoint the Operating
Partnership (or its designee) and each of them individually and any successor
thereof from time to time (such Operating Partnership or designee or any such
successor of any of them acting in his, her or its capacity as attorney-in-fact
pursuant hereto, the "Attorney-in-Fact") as the true and lawful attorney-in-fact
and agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including, without limitation, the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney-in-Fact a proxy (the
"Proxy") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.
Each of the Power of Attorney and Proxy and all authority
granted hereby shall be coupled with an interest and therefore shall be
irrevocable and shall not be terminated by any act of Contributor, by operation
of law or by the occurrence of any other event or events, and if any other such
act or events shall occur before the completion of the transactions contemplated
by this Contribution Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such other act
or events had not occurred and regardless of notice thereof. Contributor agrees
that, at the request of the Operating Partnership, it will promptly execute a
separate power of attorney and proxy on the same terms set forth in this ARTICLE
6, such execution to be witnessed and notarized. Contributor hereby authorizes
the reliance of third parties on each of the Power of Attorney and Proxy.
Contributor acknowledges that the Operating Partnership has,
and any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.
-10-
<PAGE> 14
6.2 LIMITATION ON LIABILITY
It is understood that the Attorney-in-Fact assumes no
responsibility or liability to any person by virtue of the Power of Attorney or
Proxy granted by Contributor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
Formation Transactions or the Public Offering, or the acquisition of the
Partnership Interest by the Operating Partnership and shall not be liable for
any error or judgment or for any act done or omitted or for any mistake of fact
or law except for its own gross negligence or bad faith. Contributor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney or Proxy created by Contributor hereby, as well as the cost and expense
of investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is due to
the gross negligence or bad faith of the Attorney-in-Fact. Contributor agrees
that the Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to Contributor hereunder, release, amend or
modify any other power of attorney or proxy granted by any other person under
any related agreement.
ARTICLE 7. MISCELLANEOUS
7.1 FURTHER ASSURANCES.
The Contributor shall take such other actions and execute such
additional documents following the Closing as the Operating Partnership may
reasonably request in order to effect the transactions contemplated hereby.
7.2 COUNTERPARTS
This Contribution Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.3 GOVERNING LAW
This Contribution Agreement shall be governed by the internal
laws of the State of New York, without regard to the conflicts of laws
provisions thereof.
-11-
<PAGE> 15
7.4 NOTICES
Any notice to be given hereunder by any party to the other
shall be given in writing by personal delivery or by registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed
communicated as of the date of personal delivery (including delivery by
overnight courier). Mailed notices shall be addressed as set forth below, but
any party may change the address set forth below by written notice to other
parties in accordance with this paragraph.
To the Contributor:
Robert Cox
c/o Feldman Equities
120 West 45th Street
New York, NY 10022
To the Operating Partnership:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, NY 10022
-12-
<PAGE> 16
IN WITNESS WHEREOF, the parties have executed this
Contribution Agreement as of the date first written above.
OPERATING PARTNERSHIP:
Tower Realty Operating Partnership, L.P.
By: Tower Realty Trust, Inc.
By: /s/Lawrence H. Feldman
----------------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board, Chief
Executive Officer and President
CONTRIBUTOR:
/s/ Robert Cox
---------------------------------------------------
Robert Cox
<PAGE> 17
EXHIBIT A
CONSTITUENT INTERESTS OF
ROBERT COX'S (THE "CONTRIBUTOR") PARTNERSHIP INTEREST
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PARTNERSHIPS IN WHICH CONTRIBUTOR PARTNERSHIPS IN WHICH CONTRIBUTOR PROPERTIES HELD BY THE PARTNERSHIPS
HOLDS A DIRECT INTEREST* HOLDS AN INDIRECT INTEREST
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2800 Associates, L.P. 2800 North Central
5750 Feldman, Ltd. 5750 Feldstein, Ltd. 5750 Major Blvd.
5750 Associates Limited Partnership
- -----------------------------------------------------------------------------------------------------------------
Terco Partners I, L.L.C. Maitland West Associates Limited Maitland West
Terco Partners II, L.L.C. Partnership
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------
* Corporations owned by Robert Cox that hold interests in any of the
Properties shall contribute the partnership interests held by such
corporations to the Operating Partnership.
A-1
<PAGE> 18
EXHIBIT B
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby assigns,
transfers, contributes and conveys to Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "Operating Partnership"), its entire legal
and beneficial right, title and interest in and to _____________________, a
__________________________ (the "Partnership"), including, without limitation,
all right, title and interest, if any, of the undersigned in and to the assets
of the Partnership and the right to receive distributions of money, profits and
other assets from the Partnership, presently existing or hereafter at any time
arising or accruing (such right, title and interest are hereinafter collectively
referred to as the "Partnership Interest"), TO HAVE AND TO HOLD the same unto
the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating
Partnership assumes all obligations in respect of the Partnership Interest.
The Partnership owns certain real property as described in
Attachment 1 attached hereto.
Executed: ___________ ___, 1997
By: _________________________________
Robert Cox
B-1
<PAGE> 19
EXHIBIT C
FORM OF QUITCLAIM
Order No.
Escrow No.
Loan No.
WHEN RECORDED MAIL TO:
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE
DOCUMENTARY TRANSFER TAX $ .........................
.......... Computed on the consideration or value of
property conveyed; OR
.......... Computed on the consideration or value
less liens or encumbrances remaining at
time of sale.
______________________________________________________
Signature of Declarant of Agent determining
tax -- Firm name
- --------------------------------------------------------------------------------
QUITCLAIM DEED
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to
Tower Realty Operating Partnership, L.P., a Delaware limited partnership
the real property in the City of ____________, County of _____________, State of
_____________, described as
Dated ___________________ ______________________________
______________________________
______________________________
C-1
<PAGE> 20
STATE OF NEW YORK )
)
COUNTY OF )
On __________________________________________________________________ before me,
______________________________________________________________________________ ,
personally appeared_____________________________________________________________
______________________________________________________________________________ ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature _________________________ (This area for official notarial seal)
C-2
<PAGE> 21
EXHIBIT D
CALCULATION OF NUMBER OF OP UNITS
The number of OP Units to be issued to Contributor shall be
calculated as follows:
1
$265,000 + (SRSE - MCU) x ---
MP
SRSE = Share of REIT Sponsor Equity as set forth below:
11.25% of the first $10.0 million of REIT Sponsor Equity;
10.875% of the next $1.0 million of REIT Sponsor Equity;
10.50% of the next $1.0 million of REIT Sponsor Equity;
10.125% of the next $1.0 million of REIT Sponsor Equity;
9.75% of the next $1.0 million of REIT Sponsor Equity;
9.375% of the next $1.0 million of REIT Sponsor Equity;
9.0% of the next $1.0 million of REIT Sponsor Equity;
8.625% of the next $1.0 million of REIT Sponsor Equity;
8.25% of the next $1.0 million of REIT Sponsor Equity;
7.875% of the next $1.0 million of REIT Sponsor Equity
and
7.5% of REIT Sponsor Equity above $19.0 million.
For the purpose of calculating REIT Sponsor Equity it is
assumed all shares of Common Stock and OP Units are issued at the Mid-Point (as
defined below).
IAD
REIT Sponsor Equity = (---------- - TNSU)
IADPS
Where:
IAD = Total estimated annual distributions to be made
by the Operating Partnership as set forth in the final preliminary
prospectus included in the Registration Statement on Form S-11 filed by
the Company with the Securities and Exchange Commission in connection
with the proposed public offering of shares of Common Stock (the
"Preliminary Prospectus").
IADPS = Estimated initial annual distribution per
share of Common Stock or OP Unit as set forth in the Preliminary
Prospectus.
TNSU = The total number of shares of Common Stock and
OP Units to be issued in the IPO to persons other than Lawrence H.
Feldman, Robert Cox, Joseph D. Kasman, Eric Reimer, Reuben Friedberg
and Robert Adams as set forth in
D-1
<PAGE> 22
the Preliminary Prospectus, other than the number of OP Units to be
issued to Robert Cox, Joseph D. Kasman, Eric Reimer and Robert Adams in
respect of the minimum contribution consideration to be received by
each of them in respect of their individual Contribution Agreements.
MCU = The total number of OP Units to be issued to
Contributor directly or indirectly under the Omnibus Management Company
Option Agreement (assuming all shares of Common Stock and OP Units are
issued at the Mid-Point (as defined below)).
MP or "Mid-Point" = the median of the proposed per
share price range for the Common Stock as set forth in the Preliminary
Prospectus.
D-2
<PAGE> 23
EXHIBIT E
REPRESENTATIONS, WARRANTIES AND INDEMNITIES
OF CONTRIBUTOR
ARTICLE 1. ADDITIONAL DEFINED TERMS
1.1 For purposes of this EXHIBIT E, the following terms have
the meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT E is attached:
ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental Entity.
CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively, "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.
CONTRIBUTION AGREEMENT: Means the Contribution Agreement to
which this EXHIBIT E is attached.
GOVERNMENTAL ENTITY: Means any government or agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
INDEMNIFYING PARTY: Means any party required to indemnify any
other party under ARTICLE 3.2 of this EXHIBIT E or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.
KNOWLEDGE: Means, with respect to any representation or
warranty so indicated, the actual knowledge, upon reasonable investigation and
inquiry in good faith, of the signatory to the Contribution Agreement.
LIENS: Means, with respect to any real and personal property,
all mortgages, pledges, liens, options, charges, security interests,
restrictions, prior assignments, encumbrances, covenants, encroachments,
assessments, rights of others, licenses, easements, liabilities or claims of any
kind or nature whatsoever, direct or indirect, including, without limitation,
interests in or claims to revenues generated by such property.
E-1
<PAGE> 24
PERMITTED LIENS: Means (a) Liens, or deposits made to secure
the release of such Liens, securing taxes, the payment of which is not
delinquent or the payment of which is actively being contested in good faith by
appropriate proceedings diligently pursued;
(b) Zoning laws and ordinances generally applicable to the
districts in which the Properties are located which are not violated by the
existing structures or present uses thereof;
(c) Liens imposed by laws, such as carriers', warehousemen's
and mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;
(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not have a
material adverse effect upon, or materially interfere with the use of, the
Properties; and
(e) any exceptions contained in the Title Policies.
PERSON: Means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.
PORTFOLIO AGREEMENTS: Means the agreements, including the
Contribution Agreement, listed on ATTACHMENT 1 hereto, which contemplate the
transfer of partnership and/or limited liability company membership interests in
certain of the Participating Partnerships and LLCs from any entity directly or
indirectly owned by Contributor to the Company and the Operating Partnership.
PROSPECTUS: Means the Company's Form S-11 Registration
Statement.
REIT STOCK: Shall have the meaning set forth in the OP
Agreement.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
The Contributor represents and warrants to the Operating
Partnership as set forth below in this ARTICLE 2. Notwithstanding any other
provision of the Contribution Agreement or this EXHIBIT E, the Contributor makes
representations, warranties and indemnities only with respect to: (i) the
Properties identified on EXHIBIT A to the Contribution Agreement (the "Property"
or the "Properties"), and (ii) the interests in the Partnerships to be
transferred by the Contributor.
E-2
<PAGE> 25
2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and (B)
has all requisite power and authority to own, lease or operate its property and
to carry on its business as presently conducted and, to the extent required
under applicable law, is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.
2.2 DUE AUTHORIZATION. The execution, delivery and performance
of the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered by
or on behalf of the Contributor pursuant to this Contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.
2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.
2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is
the sole owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.
2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes
all of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of all
security interests, mortgages, pledges, liens, encumbrances, claims and equities
to the Operating Partnership.
E-3
<PAGE> 26
2.6 NO VIOLATION. None of the execution, delivery or
performance of the Contribution Agreement and the transactions contemplated
hereby does or will, with or without the giving of notice, lapse of time, or
both, (i) violate, conflict with, result in a breach of, or constitute a default
under or give to others any right of termination or cancellation of (A) the
organizational documents, including the charters and bylaws, if any, of the
Contributor, (B) any material agreement, document or instrument to which the
Contributor is a party or by which the Contributor or its Property is bound or
(C) any term or provision of any judgment, order, writ, injunction, or decree of
any governmental or regulatory authority binding on the Contributor or by which
the Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.
2.7 NON-FOREIGN STATUS. The Contributor is not a foreign
person, foreign corporation, foreign partnership, foreign trust or foreign
estate (as defined in the Code), and is, therefore, not subject to the
provisions of the Code relating to the withholding of sales proceeds to foreign
persons.
2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions. If Contributor fails to provide
such certificates or affidavits, the Operating Partnership may withhold a
portion of any payments otherwise to be made to the Contributor as required by
the Code or New York law.
2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her
or its understanding that the offering and sale of the OP Units to be acquired
pursuant to the Contribution Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended, and the rules and
regulations in effect thereunder (the "Act"). In furtherance thereof, the
Contributor represents and warrants to the Company as follows:
2.9.1 INVESTMENT. The Contributor is acquiring the OP
Units solely for his, her or its own account for the purpose of investment and
not as a nominee or agent for any other person and not with a view to, or for
offer or sale in connection with, any distribution of any thereof. The
Contributor agrees and acknowledges that he, she or it will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (hereinafter, "Transfer") any of the OP Units unless (i) the Transfer
is pursuant to an effective registration statement under the Act and
qualification or other compliance under applicable blue sky or state securities
laws, or (ii) counsel for the Contributor (which counsel shall be reasonably
acceptable to the Operating Partnership) shall have furnished the Operating
Partnership with an opinion, reasonably satisfactory in form and substance to
the Operating Partnership to the effect that no such registration is required
because of the availability of an exemption from registration under the Act and
qualification or other compliance under applicable blue sky or state securities
laws.
E-4
<PAGE> 27
2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the Contributor
has previously invested in securities similar to the OP Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Contribution Agreement. The Contributor is able to bear
the economic risk of holding the OP Units for an indefinite period and is able
to afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.
2.9.3 HOLDING PERIOD. The Contributor acknowledges
that he, she or it has been advised that (i) the OP Units and the common stock
of the Company into which the OP Units may be exchanged in certain circumstances
(the "Common Stock") must be held indefinitely, and the Contributor must
continue to bear the economic risk of the investment in the OP Units (and any
Common Stock that might be exchanged therefor) unless they are subsequently
registered under the Act or an exemption from such registration is available,
(ii) a restrictive legend in the form hereafter set forth shall be placed on the
certificates representing the OP Units (and any Common Stock that might be
exchanged therefor), and (iii) a notation shall be made in the appropriate
records of the Operating Partnership (and the Company) indicating that the OP
Units (and any Common Stock that might be exchanged therefor) are subject to
restrictions on transfer.
2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is defined
in Rule 501(a) of Regulation D under the Act) and as such:
(i) is a director or executive officer of the
Company; or
(ii) has an individual net worth, or joint net
worth with his or her spouse, in excess of $1,000,000; or
(iii) had an individual annual adjusted gross
income in excess of $200,000 in each of the two most recent years and reasonably
expects to have annual adjusted gross income in excess of $200,000 in the
current year; or
E-5
<PAGE> 28
(iv) had a joint income with his spouse in excess
of $300,000 in each of the two most recent years and reasonably expects to have
an annual adjusted gross income, with his spouse, in excess of $300,000 in the
current year.
If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).
2.9.5 LEGENDING. Each certificate representing the OP
Units (and any Common Stock that might be exchanged therefor) shall bear the
following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY
E-6
<PAGE> 29
PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO
BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK WHICH CAUSES OR WILL
CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON STOCK IN
EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING
THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH
HOLDER OF COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH
A COPY MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION.
2.10 LITIGATION. There are no Claims which could reasonably be
anticipated to result in damages in excess of $50,000 pending or, to Knowledge,
threatened that directly or indirectly affect the Contributor, the Partnerships,
the Properties or the Formation Transactions, nor has any such claim been
pending or, to Knowledge, threatened as of the Closing.
2.11 NO BROKERS. Neither the Contributor nor any of its
respective officers, directors or employees has employed or made any agreement
with any broker, finder or similar agent or any person or firm which will result
in the obligation of the Operating Partnership or any of its affiliates to pay
any finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.
2.12 SOLVENCY. The Contributor has been and will be solvent at
all times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.
E-7
<PAGE> 30
2.13 NO MISREPRESENTATIONS. No representation, warranty or
statement made, or information provided, by the Contributor in the Contribution
Agreement or in any other document or instrument furnished or to be furnished by
or on behalf of the Contributor pursuant hereto or as contemplated hereby (i)
contains or will contain any untrue statement of a material fact or (ii) omits
or will omit to state a material fact necessary to make the statements contained
herein or therein not misleading. For purposes of the preceding sentence,
materiality shall be determined with reference to the total portfolio of real
properties and other interests to be transferred pursuant to the Operating
Partnership pursuant to the Formation Transactions.
ARTICLE 3. INDEMNIFICATION
3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR
BREACH.
(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT E or in any Schedule or certificate delivered pursuant
hereto shall survive the Closing.
(b) Notwithstanding anything to the contrary in the
Contribution Agreement or this EXHIBIT E, no party hereto shall be liable under
this EXHIBIT E or the Contribution Agreement for monetary damages (or otherwise)
for breach of any of its representations and warranties contained in this
EXHIBIT E or the Contribution Agreement, or in any Schedule, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this ARTICLE 3.
3.2 GENERAL INDEMNIFICATION
(a) The Contributor shall indemnify and hold harmless the
Operating Partnership, the Company, and their affiliates and each of their
respective directors, officers, employees, agents, representatives and
affiliates (each of which is an "Indemnified Party") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation, costs of investigative, judicial or administrative proceedings or
appeals therefrom, and costs of attachment or similar bonds (collectively,
"Losses"), asserted against, imposed upon or incurred by the Indemnified Party
in connection with or as a result of any breach of a representation or warranty
of the Contributor contained in the Contribution Agreement or in any Schedule,
certificate or affidavit delivered by the Contributor pursuant to the
Contribution Agreement.
E-8
<PAGE> 31
(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as a
result of:
(i) all fees and expenses of the Contributor in
connection with the transactions contemplated by the Contribution
Agreement;
(ii) any liabilities or obligations incurred,
arising from or out of, in connection with or as a result of the
failure of the Contributor to obtain all consents required to
consummate the transactions contemplated by the Contribution Agreement;
or
(iii) any breach of any representation, warranty
or covenant set forth in the Contribution Agreement.
3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy
its obligations hereunder by the prompt delivery (paid promptly as and when
expenses are incurred) to an Indemnified Party of OP Units, subject to the
limits on ownership and transfer of REIT Stock set forth in the Company's
articles of incorporation. Any OP Units delivered to an Indemnified Party
hereunder shall be valued based upon the initial public offering price of the
Company's Common Stock.
3.4 NOTICE AND DEFENSE BY CLAIMS. As soon as reasonably
practicable after receipt by the Indemnified Party of notice of any liability or
claim incurred by or asserted against the Indemnified Party that is subject to
indemnification under this ARTICLE 3, the Indemnified Party shall give notice
thereof to the Contributor. The Indemnified Party may at its option demand
indemnity under this ARTICLE 3 as soon as a claim has been threatened by a third
party, regardless of whether an actual Loss has been suffered, so long as the
Indemnified Party shall in good faith determine that such claim is not frivolous
and that the Indemnified Party may be liable for, or otherwise incur, a Loss as
a result thereof and shall give notice of such determination to the Contributor.
The Indemnified Party shall permit the Contributor, at its option and expense,
to assume the defense of any such claim by counsel selected by the Contributor
and reasonably satisfactory to the Indemnified Party, and to settle or otherwise
dispose of the same; PROVIDED, HOWEVER, that the Indemnified Party may at all
times participate in such defense at its expense; and PROVIDED FURTHER, HOWEVER,
that the Contributor shall not, in defense of any such claim, except with the
prior written consent of the Indemnified Party in its sole and absolute
discretion, consent to the entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff in question to the Indemnified Party and its affiliates a
release of all liabilities in respect of such claims, or that does not result
only in the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall have
the right to undertake the
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defense, compromise or settlement of such liability or claim on behalf of and
for the account of the Contributor.
3.5 LIMITATIONS ON INDEMNIFICATION UNDER ARTICLE 3.
Notwithstanding anything contained herein to the contrary, the Contributor shall
not be liable or obligated to make payments under this ARTICLE 3 with respect to
any Property or Partnership Interest to the extent such payments in the
aggregate would exceed the value of the OP Units (based upon the initial public
offering price of the Common Stock) received by the Contributor at the Closing.
Notwithstanding anything contained herein to the contrary, the Indemnified
Parties shall look first to the Contributor's OP Units for indemnification under
this ARTICLE 3 and then to the Contributor's other assets.
3.6 LIMITATION PERIOD.
(a) Notwithstanding the foregoing, any claim for
indemnification under ARTICLE 3.2 hereof must be asserted in writing by the
Indemnified Party, stating the nature of the Losses and the basis for
indemnification therefor within one year after the Closing.
(b) If so asserted in writing prior to the applicable
expiration date, such claims for indemnification shall survive until resolved by
mutual agreement between the Contributor and the Indemnified Party or by
judicial determination. Any claim for indemnification not so asserted in writing
prior to the applicable expiration date shall not thereafter be asserted and
shall forever be waived.
3.7 RESERVATION OF CONTRIBUTOR RIGHTS. Notwithstanding
anything else in this Contribution Agreement to the contrary, the Contributor
reserves unto itself all rights and remedies (including rights to seek
contribution) against any third party indemnitors, prior property owners or
occupants, and contributors to any contamination, for which the Partnerships
have been indemnified by the Contributor hereunder. To the extent the
Contributor's rights against any such third party owners, occupants, indemnitors
or contributors may be materially prejudiced by actions or inactions by any
owner or occupant of the Properties after the Closing, the Contributor's
indemnity obligation shall be reduced in accordance with the effect of the
actions or inactions which so prejudiced the Contributor's rights.
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ATTACHMENT 1
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
__________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, together with certain other limited
partners, has formed the Operating Partnership
pursuant to the Agreement of Limited Partnership of
the Operating Partnership dated __________ __, 1997
(as such agreement may be amended or amended and
restated from time to time, the "PARTNERSHIP
AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited
Partners (as defined below) directly or indirectly
hold units of limited partnership interest ("OP
UNITS") in the Operating Partnership.
(c) The Operating Partnership has agreed to provide the
Limited Partners with certain direct or indirect
rights to exchange their OP Units for cash or, at the
election of the Company, for shares of the Company's
common stock, par value $0.01 per share (the "REIT
STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
<PAGE> 34
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Stock in REIT
Stock or makes a distribution to all holders of its outstanding REIT Stock in
REIT Stock; (ii) subdivides its outstanding REIT Stock; or (iii) combines its
outstanding REIT Stock into a smaller number of shares of REIT Stock, the
Exchange Factor shall be adjusted by multiplying the Exchange Factor by a
fraction, the numerator of which shall be the number of shares of REIT Stock
issued and outstanding on the record date for such dividend, contribution,
subdivision or combination assuming for such purpose that such dividend,
distribution, subdivision or combination has occurred as of such time, and the
denominator of which shall be the actual number of shares of REIT Stock
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Exchange Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of Merrill Lynch, Pierce, Fenner & Smith, Incorporated
and/or the Operating Partnership
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
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<PAGE> 35
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to
the product of the number of OP Units offered for exchange by an Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company or the Operating Partnership issues to all holders
of REIT Stock rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase REIT Stock,
or any other securities or property (collectively, the "rights"), then the REIT
Stock Amount shall also include such rights that a holder of that number of
shares of REIT Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading
on the NYSE, any national securities exchange or Nasdaq, the last
reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
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<PAGE> 36
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"EXCHANGING PARTNER"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding
the provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging
Partner within five (5) Business Days after the receipt by the Company
of such Notice of Exchange,
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<PAGE> 37
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of
the Company,
(b) would otherwise jeopardize the REIT status of the Company,
or
(c) would cause the acquisition of the REIT Stock by the
Limited Partner to be "integrated" with any other distribution of REIT
Stock by the Company for purposes of complying with the registration
provisions of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article
2, any person to whom OP Units have been pledged, in compliance with the terms
of the Lock-up Agreement, may exercise its Exchange Right prior to the date that
is one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
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<PAGE> 38
(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of
the Exchange Right, the Company shall reserve for issuance such number of shares
of REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable
upon exchange of OP Units (or the cash equivalent amount thereof if the Cash
Amount is paid) shall be computed on the basis of the aggregate amount of OP
Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
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<PAGE> 39
(A) a copy of the prospectus contained in the
Registration Statement on Form S-11 filed by the Company in
connection with the IPO, any prospectus contained in any
Registration Statement subsequently filed by the Company, and
any supplement or amendment thereto (each, a "PROSPECTUS"),
and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by
the Company with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited investor"
as defined in Rule 501 of the regulations promulgated under
the Securities Act.
(B) If such Exchanging Partner has retained or
retains a person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such
representation and
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
(b) (i) Such Exchanging Partner understands that an investment in the
Company involves substantial risks.
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<PAGE> 40
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of such Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws, except as provided in the Registration Rights
Agreement entered into by the Company and the Exchanging
Partner (the "REGISTRATION RIGHTS AGREEMENT").
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<PAGE> 41
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
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<PAGE> 42
4.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with
the consent of the Company by a vote of the Limited Partners in the same manner
as the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein, provided, however, that the Company shall vote its
limited partnership interests in proportion to the votes of the other Limited
Partners.
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By: ______________________________________________
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc., its general partner
By: _________________________________________
Name:
Title:
LIMITED PARTNERS:
_______________________________
Signature
_______________________________
Name (Please Print or Type)
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<PAGE> 44
Exhibit A
Name and Address of Limited Partners
[To be attached]
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<PAGE> 45
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated: __________________________
_________________________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
(Signature of Limited Partner)
__________________________________
(Street Address)
(City) (State) (Zip Code)
If REIT Stock is to be issued, issue to:
Name:
Limited Partner's social security or tax
identification number:
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<PAGE> 46
BATTLE FOWLER LLP
DRAFT - 7/24/97
ATTACHMENT 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, limited liability companies, corporations and
other entities which are Holders or in which the Holders own direct or indirect
interests (the "PROPERTY PARTNERSHIPS") pursuant to Option or Contribution
Agreements (the "OPTION AGREEMENTS") among the Operating Partnership and the
Grantors named therein, and in connection therewith the Holders will receive
units of limited partnership interest in the Operating Partnership (such units
of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
<PAGE> 47
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating
to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement
or
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(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
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"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not
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delay, suspend or withdraw a Registration Statement for such reason for
more than 60 days or more often than twice during any period of 12
consecutive months.
(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration Statement
covering the Registrable Securities held by more than one Holder.
2.2 Expenses.
(i) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if any,
sales commissions, the fees and disbursements of counsel representing
such Holder and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the
Shelf Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that does
not, within 10 days after receipt of a reasonable request by the Company for
information in connection with the Shelf Registration Statement, provide such
information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
2.4 Effect of Material Breach. In the event that the Company shall
breach any of its material obligations hereunder in any material respect, any
Holder of Registrable Securities may demand that the Company file a registration
statement covering such Holder's Registrable Securities. The Company agrees to
file such registration statement within 60 days after receipt of such demand and
agrees to use its best efforts to procure the effectiveness of such registration
statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed pursuant
to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period set
forth in Section 2 hereof, a Shelf Registration Statement, which Shelf
Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects
with the requirements of the applicable form of registration
statement and include all financial statements required by the
SEC to be filed therewith.
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(ii) (A) Subject to Article III, Section (a)(ii)(B),
(I) prepare and file with the SEC such
amendments and post-effective amendments to each such
Registration Statement as may be necessary to keep
such Registration Statement effective for the
applicable period;
(II) cause each such Prospectus to be
supplemented by any required prospectus supplement,
and as so supplemented to be filed pursuant to Rule
424 or any similar rule that may be adopted under the
Securities Act;
(III) respond as promptly as practicable to
any comments received from the SEC with respect to
the Shelf Registration Statement, or any amendment,
post-effective amendment or supplement relating
thereto; and
(IV) comply with the provisions of the
Securities Act with respect to the disposition of all
securities covered by each Registration Statement
during the applicable period in accordance with the
intended method or methods of distribution by the
selling Holders thereof.
(B) (I) Each Holder shall promptly provide to the
Company such information as the Company reasonably
requests in order to identify such Holder and the
method of distribution in a post-effective amendment
to the Registration Statement or a supplement to the
Prospectus.
(II) Such Holder also shall notify the
Company in writing upon completion of any offer or
sale or at such time as such Holder no longer intends
to make offers or sales under the Registration
Statement.
(iii) Furnish to each Holder of Registrable Securities,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and
such other documents as such Holder may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable
Securities; the Company consents to the use of the Prospectus,
including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary
Prospectus.
(iv) Use its reasonable efforts to register or qualify the
Registrable Securities by the time the applicable Registration
Statement is declared effective by the SEC under all applicable state
securities or "blue sky" laws of such jurisdictions as any Holder of
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Registrable Securities covered by a Registration Statement shall
reasonably request in writing, keep each such registration or
qualification effective during the period such Registration Statement
is required to be kept effective, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that
the Company shall not be required to
(A) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to
qualify but for this Article III, Section (a)(iv),
(B) subject itself to taxation in any such
jurisdiction, or
(C) submit to the general service of process in any
such jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and,
if requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become
effective and when any post-effective amendments and
supplements thereto become effective,
(B) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose,
(C) if the Company receives any notification with
respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and
(D) of the happening of any event during the period a
Registration Statement is effective which is of a type
specified in Article II, Section 2.1(iii) hereof or as a
result of which such Registration Statement or the related
Prospectus contains any untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the
Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment.
(vii) Furnish to each Holder of Registrable Securities,
without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment
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thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested).
(viii) (A) Cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any Securities Act legend; and
(B) enable certificates for such Registrable
Securities to be issued for such numbers of shares of Common
Stock and registered in such names as the selling Holders may
reasonably request at least two business days prior to any
sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III,
Section (a)(ii)(B) hereof, upon the occurrence of any event
contemplated by Article III, Section (a)(v)(D) hereof, use its
reasonable efforts promptly to prepare and file a supplement or
prepare, file and obtain effectiveness of a post-effective amendment to
a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(x) Make available for inspection by representatives of the
Holders of the Registrable Securities and any counsel or accountant
retained by such Holders, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply
all information reasonably requested by any such representative,
counsel or accountant in connection with a Registration Statement;
provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies
such representatives, counsel or accountants in writing that such
records, documents or information are confidential shall not be
disclosed by such representatives, counsel or accountants unless
(A) the disclosure of such records, documents or
information is necessary to avoid or correct a material
misstatement or omission in a Registration Statement,
(B) the release of such records, documents or
information is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction, or
(C) such records, documents or information have been
generally made available to the public.
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(xi) Within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus, provide copies of
such document (not including any documents incorporated by reference
therein unless requested) to the Holders of Registrable Securities.
(xii) Use its reasonable efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar
securities issued by the Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities,
not later than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to
enable Holders to consummate the disposition of such Registrable
Securities.
(b) The Company may require each Holder of Registrable Securities to
furnish to the Company in writing such information regarding the
proposed distribution by such Holder of such Registrable Securities as
the Company may from time to time reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations
with respect to the Registration Statement required to be filed
pursuant to Section 2 hereof and this Section 3, each Holder agrees
that
(i) it will not offer or sell its Registrable Securities under
the Registration Statement until it has received copies of the
supplemental or amended Prospectus contemplated by Article III, Section
(a)(ii) hereof and receives notice that any post-effective amendment
has become effective, and
(ii) upon receipt of any notice from the Company of the
happening of any event of the kind described in Article III, Section
(a)(v)(D) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such
Holder receives copies of the supplemented or amended Prospectus
contemplated by Article III, Section (a)(ix) hereof and receives notice
that any post-
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effective amendment has become effective, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
IV Indemnification; Contribution.
4.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder (within the meaning of Section 15 of the Securities
Act) as follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading or
(C) arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental
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agency or body, commenced or threatened, in each case whether or not a
party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of any such
amended or supplemental Prospectus by the Company, if such loss,
liability, claim, damage or expense would not have arisen had such
delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it
may have under the indemnity agreement provided in Section
4.1(a) or 4.1(b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the
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indemnified party results in the forfeiture by the
indemnifying party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than
the indemnification obligation provided under Section 4.1(a)
or 4.1(b) above.
(ii) If the indemnifying party so elects within a reasonable
time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved
by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however,
that, if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the
proviso to Section 4.1(c), such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's
defense, and counsel for the indemnified party or parties
shall be entitled to conduct the defense of such indemnified
party or parties, it being understood that both such counsel
will cooperate with each other to conduct the defense of such
action or proceeding as efficiently as possible.
(B) If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such
defense, after having received the notice referred to in
Section 4.1(c), the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified
party or parties as incurred.
(C) In such event, however, no indemnifying party
will be liable for any settlement effected without the written
consent of such indemnifying party, which consent may not be
unreasonably withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with
this Section 4(c), such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred
thereafter in connection with such action or proceeding.
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4.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 4 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one hand and the
selling Holders on the other (in such proportions that the
selling Holders are severally, not jointly, responsible for
the balance), in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable
considerations.
(B) (I) The relative benefits to the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, the total proceeds
received by the indemnifying party and indemnified
parties in connection with the offering to which such
losses, claims, damages, liabilities or expenses
relate.
(II) The relative fault of the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether the action
in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact, has been made by,
or relates to information supplied by, such
indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section
4.4, no selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities of such selling Holder were
offered to the public exceeds the amount of any damages which
such selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
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(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any,
who controls a Holder within the meaning of Section 15 of the
Securities Act and directors and officers of a Holder shall have the
same rights to contribution as such Holder, and each director of the
Company, each officer of the Company who signed the Registration
Statement and each Person, if any, who controls the Company within the
meaning of Section 15 of the Securities Act shall have the same rights
to contribution as the Company.
V Filing of Exchange Act Reports; Rule 144 Sales
5.1 The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act so as to
enable any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition by any
Holder of any Exchange Stock pursuant to Rule 144, the Company shall cooperate
with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Exchange
Stock.
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the
outstanding Registrable Securities; provided, however, that no
amendment, modification or supplement or waiver or consent to the
departure with respect to the provisions of Articles 2, 4 or 5 hereof
shall be effective as against any Holder unless consented to in writing
by such Holder.
(ii) Notice of any amendment, modification or supplement to
this Agreement adopted in accordance with this Section 6.1 shall be
provided by the Company to each Holder at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex,
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telecopier, or any courier guaranteeing overnight delivery, to the parties at
their respective addresses set forth opposite their signatures below or at such
other address as a party may indicate by written notice to the other party or
parties.
(ii) All such notices and communications shall be deemed to
have been duly given:
(A) at the time delivered by hand, if personally
delivered;
(B) three (3) business days after being deposited in
the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By: ___________________________________
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING
New York, New York 10036-4003 PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc.,
its general partner
By: ___________________________________
Name:
Title:
HOLDERS:
[Address:] _______________________________________
Signature
_______________________________________
Name (Please Print or Type)
-17-
<PAGE> 63
ATTACHMENT 3
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public pursuant to a public offering (the "Offering").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Company's Registration Statement on Form S-11
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned hereby irrevocably
agrees that without the prior written consent of Merrill Lynch, the undersigned
will not (and, except as may be disclosed in the Prospectus, will not announce
or disclose any intention to) directly or indirectly sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition at any time in
the future) of, any shares of Common Stock, or any securities convertible into
or exercisable or exchangeable for Common Stock, including any units of limited
partnership interest (the "OP Units") in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership") beneficially
owned by the undersigned as of the date of the closing of the Company's initial
public offering, for a period of twenty-four (24) months after the later of (i)
date of the final Prospectus relating to the
<PAGE> 64
offering of the Shares to the public by the Underwriters and (ii) the date the
Offering is consummated and closed. Prior to the expiration of such period, the
undersigned will not publicly announce or disclose any intention to do anything
after the expiration of such period which the undersigned is prohibited, as
provided in the preceding sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and _________________, its
Transfer Agent, are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
letter agreement.
Very truly yours,
[INVESTOR]
By: ____________________________
Name:
Title:
-2-
<PAGE> 65
ATTACHMENT 3
(CONTINUED)
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Tower Realty Operating Partnership, L.P.
120 West 46th Street, 24th Floor
New York, New York 10036
Dear Sirs,
Reference is made to the Option Agreement, dated _________, 1997 (the
"Option Agreement"), by and between the undersigned and Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership").
Capitalized terms used but not otherwise defined in this letter agreement will
have the meaning set forth in the Option Agreement.
In consideration of the execution and exercise of the Option Agreement
by the Operating Partnership, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the undersigned hereby
irrevocably agrees that without the prior written consent of the Operating
Partnership, the undersigned will not directly or indirectly sell, offer to
sell, solicit an offer to buy, contract to sell, grant any option to purchase,
or otherwise transfer or dispose (or enter into any transaction or device which
is designed to, or could be expected to, result in the disposition at any time
in the future) of any any units of limited partnership interest (the "OP Units")
in the Operating Partnership, or any securities convertible into or exercisable
or exchangeable for OP Units, beneficially owned by the undersigned as of the
date hereof, for a period of twenty-four (24) months after the date hereof.
Prior to the expiration of such period, the undersigned will not publicly
announce or disclose any intention to do anything after the expiration of such
period which the undersigned is prohibited, as provided in the preceding
sentence, from doing during such period.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Operating Partnership is hereby
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this letter agreement.
Very truly yours,
[INVESTOR]
By: ____________________________
Name:
Title:
<PAGE> 1
Exhibit 10.51
CONTRIBUTION AGREEMENT
BY AND AMONG
TOWER REALTY OPERATING PARTNERSHIP, L.P.
AND
JOSEPH KASMAN
Dated as of July 31, 1997
<PAGE> 2
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") dated as of the 31st day of
July, 1997 is entered into by and among, TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "Operating Partnership"), and JOSEPH
KASMAN (the "Contributor").
R E C I T A L S:
A. The Contributor is the owner of interests, directly or indirectly, in
one or more partnerships (collectively, the "Partnership"), each of which
partnerships is described on Schedule A hereto.
B. The Operating Partnership desires to acquire through a contribution to
capital from the Contributor, and the Contributor desires to contribute to the
Operating Partnership, on the terms and conditions set forth herein, all cash,
instruments, securities, funds and other property, including all accrued amounts
and amounts receivable by the Contributor, accrued or receivable before or after
the date hereof (the "Distribution") that the Contributor receives from time to
time from the Partnership in exchange for units or limited partnership interests
("OP Units") in the Operating Partnership.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and the Contributor agree as follows:
ARTICLE I
CONTRIBUTION OF Distribution AND EXCHANGE FOR OP UNITS
1.1 Contribution Transaction. Subject to the terms and conditions
contained in this Contribution Agreement, the Contributor shall transfer to the
Operating Partnership, absolutely and unconditionally, all of its Distribution
immediately upon receipt by the Contributor of the Distribution. The parties
shall take such additional actions and execute such additional documentation as
may be required by the agreement of limited partnership dated as of [ ],
19[ ] of the Partnership (the "Partnership Agreement") and the agreement of
limited partnership dated as of March 24, 1997 of the Operating Partnership (the
"OP Agreement") in order to effect the transactions contemplated hereby from
time to time.
1.2 Exchange of OP Units. The Operating Partnership shall, in exchange for
the Distribution, transfer to the Contributor, upon receipt of the Distribution,
OP Units at the rate
<PAGE> 3
of one OP Unit for every $25 in fair market value of the Distribution (the
"Consideration"). The transfer of the OP Units to the Contributor shall be
evidenced by an amendment (the "Amendment") to the OP Agreement or Exhibit A
thereto as and when necessary. The parties shall take such additional actions
and execute such additional documentation as may be required by the Partnership
Agreement and the OP Agreement in order to effect the transactions contemplated
hereby.
1.3 Termination of Obligation to Contribute Distribution. The
Contributor's obligation to contribute the Distribution shall terminate upon the
earlier of (i) the occurrence of the Company's contemplated initial public
offering, (ii) the second anniversary of the date of execution of this Agreement
and (iii) the repayment in full or conversion of all Notes issued pursuant to
the Purchase Agreement dated as of March 31, 1997, among Tower Realty Trust,
Inc. (the "Company"), the Operating Partnership and the investors signatory
thereto, as supplemented, amended or otherwise modified by each of the
Supplement No. 1, Supplement No. 2, Supplement No. 3 and Supplement No. 4
thereto and as the same may be further supplemented, amended or otherwise
modified hereafter.
1.4 Additional Documents. At the closing of the Company's contemplated
initial public offering, (the "IPO"), Contributor will enter into with the
Operating Partnership, the Company or the Underwriters, as applicable, for the
IPO a lock-up agreement, exchange rights agreement and registration rights
agreement substantially in the same form as those entered into by Lawrence H.
Feldman at the closing of the IPO.
ARTICLE II
CLOSING
2.1 Closing Deliveries. The parties shall make, execute, acknowledge and
deliver, or cause to be made, executed, acknowledged and delivered through the
Attorney-in-Fact (as designated in Section 5.1 below), the legal documents and
other items (collectively, the "Closing Documents") necessary to carry out the
intention of this Contribution Agreement.
2.2 Closing Costs. The Operating Partnership shall pay any documentary
transfer taxes, escrow charges, title charges and recording taxes or fees
incurred in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE CONTRIBUTOR
As a material inducement to the Operating Partnership to enter into this
Agreement and to consummate the transactions contemplated hereby, the
Contributor hereby makes to the Operating Partnership, with respect to the
Partnership and the Distribution, each of the
2
<PAGE> 4
representations and warranties set forth in this Article III, which
representations and warranties (unless otherwise noted) are true as of the date
hereof. As a condition to the Operating Partnership's obligation to consummate
the contribution of the Distribution to the capital of the Operating
Partnership, such representations and warranties must be true as of each date
the Contributor contributes an Distribution to the Operating Partnership in
exchange for OP Units.
3.1 Title to Distribution.
(a) The Contributor owns beneficially and of record, free and clear
of any claim, lien, pledge, voting agreement, option, charge, security interest,
mortgage, deed of trust, encumbrance, right of assignment, purchase right or
other rights of any nature whatsoever (each, an "Encumbrance"), and has full
power and authority to convey free and clear of any Encumbrances, the
Distribution and, the Operating Partnership, upon receipt of the Distribution
and issuance of OP Units to the Contributor as contemplated herein, will
acquire, as a contribution to its capital, good and valid title thereto, free
and clear of any Encumbrance, except Encumbrances created in favor of the
Operating Partnership by the transactions contemplated hereby.
(b) There are no agreements, instruments or understandings with
respect to the Distribution except as set forth in the Partnership Agreement.
3.2 Organization, Authority; No Conflicts.
(a) If the Contributor is not a natural person, the Contributor is a
corporation, limited partnership, general partnership, limited liability company
or trust duly organized, validly existing and in good standing, under the laws
of the state of its organization.
(b) Such Contributor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be executed
and delivered by or on behalf of such Contributor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of such
Contributor's Distribution to the Operating Partnership in accordance with
this Agreement.
(c) All applicable corporate, partnership, limited liability
company, trust or other action necessary for such Contributor to execute and
deliver this Agreement, the Closing Documents and each other agreement, document
and instrument executed by or on behalf of Contributor pursuant to this
Agreement, and to perform the transactions contemplated hereby and thereby, has
been taken, or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of such
Contributor pursuant
3
<PAGE> 5
to this Agreement constitutes, or when executed and delivered will constitute,
the legal, valid and binding obligation of such Contributor, each enforceable in
accordance with its respective terms.
(e) The execution, delivery and performance of this Agreement, the
Closing Documents and each other agreement, document and instrument to be
executed and delivered by or on behalf of such Contributor:
(i) does not and will not violate such Contributor's charter
and/or bylaws, partnership agreement, operating agreement or declaration
of trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to such Contributor or require such
Contributor to obtain any approval, consent or waiver of, or make any
filing, with, any person or authority (Governmental or otherwise) that has
not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate an obligation under or give
rise to a right of termination of, any indenture, deed of trust, mortgage,
loan or credit agreement or any other agreement, contract, instrument,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Contributor is a party or
by which the property of such Contributor is bound or affected, or result
in the creation of any Encumbrance on any of the property or assets of the
Partnership.
3.3 Litigation.
(a) The Contributor knows of no litigation or proceeding, whether
judicial, administrative or arbitral, pending or overtly threatened, affecting
all or any portion of the Distribution or such Contributor's ability to
consummate the transactions contemplated hereby.
(b) Such Contributor knows of no outstanding order, writ, injunction
or decree of any court, government, governmental entity or authority or
arbitration against or affecting all or an portion of the Distribution, which in
any such case would impair such Contributor's ability to enter into and perform
all of its obligations under this Agreement.
3.4 No Other Agreements. The Contributor has made no agreement with, and
will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber the Distribution or restricting in any way such Contributor's
ability to contribute the Distribution to the capital of the Operating
Partnership or to enter into any agreement with respect to the Distribution.
3.5 No Brokers. The Contributor has not entered into, and covenants that
it will not enter into, any agreement, arrangement or understanding with any
person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4
<PAGE> 6
3.6 Investment Representations and Warranties.
(a) (i) The Contributor, by reason of its business and financial
experience, together with the business and financial experience of those
persons, if any, retained by it to represent or advise it with respect to its
investment in OP Units,
(A) has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions of
this type that it is capable of evaluating the merits and risks of,
and of making an informed investment decision with respect to, an
investment in OP Units,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting its
interests, and
(C) is capable of bearing the economic risk of such
investment.
(ii) (A) The Contributor is an "accredited investor" as
defined in Rule 501 of the regulations promulgated under the Securities
Act of 1933, as amended (the "Securities Act").
(B) If the Contributor has retained or retains a person
to represent or advise it with respect to its investment in OP
Units, the Contributor will advise the Operating Partnership of such
retention and, at the Operating partnership's request, the
Contributor shall,
(I) acknowledge in writing such representation,
and
(II) cause such representative or advisor to
deliver a certificate to the Operating Partnership containing
such representations as may be reasonably requested by the
Operating Partnership.
(b) (i) The Contributor understands that an investment in the
Operating Partnership involves substantial risks.
(ii) The Contributor has been given the opportunity to make a
thorough investigation of the proposed activities of the Operating
Partnership.
(iii) The Contributor has been afforded the opportunity to
obtain any additional information requested by it.
(iv) The Contributor has had an opportunity to ask questions
of and receive answers from representatives of the Operating Partnership
concerning the Operating Partnership and its proposed activities and the
terms and conditions of an investment in OP Units.
5
<PAGE> 7
(c) (i) The OP Units to be issued to the Contributor will be
acquired by the Contributor for its own account, for investment only and not
with a view to, or with any intention of, a distribution or resale thereof, in
whole or in part, or the grant of any participation therein.
(ii) The Contributor was not formed for the specific purpose
of acquiring an interest in the Operating Partnership.
(d) (i) The Contributor acknowledges that
(A) the OP Units to be issued to the Contributor have
not been registered under the Securities Act or state securities
laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state
securities laws and, if such OP Units are represented by
certificates, such certificates will bear a legend to such effect,
(B) the Operating Partnership's reliance on such
exemptions is predicated in part on the accuracy and completeness of
the representations and warranties of the Contributor contained
herein,
(C) the OP Units to be issued to the Contributor at the
Closing may not be resold or otherwise distributed unless registered
under the Securities Act and applicable state securities laws, or
unless an exemption from registration is available,
(D) there is no public market for the OP Units, and
(E) the Operating Partnership has no obligation or
intention to register such OP Units under the Securities Act or any
state securities laws or to take any action that would make
available any exemption from the registration requirements of such
laws.
(ii) The Contributor hereby acknowledges that because of the
restrictions on transfer or assignment of such OP Units to be issued
hereunder, which will be set forth in the OP Agreement and in the lock-up
agreement referred to in Section 1.4, such Contributor may have to bear
the economic risk of the investment commitment evidenced by this Agreement
and any OP Units issued hereunder for an indefinite period of time.
(e) The address previously provided by the Contributor to the
Operating Partnership is the address of the Contributor's principal place of
business or, if a natural person, the address of the Contributor's residence,
and the Contributor has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal place of business or residence is situated.
6
<PAGE> 8
3.7 Covenant to Remedy Breaches. The Contributor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Contributor hereunder,
(b) to satisfy all covenants of the Contributor hereunder, and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Contributor hereunder upon its learning of same.
3.8 Actions Prior to Closing. From the date hereof through the term of
this Agreement, the Contributor shall not:
(a) Sell or transfer all or any portion of its interest in the
Partnership, except for a sale or transfer to the Operating Partnership, or
(b) Mortgage, pledge or encumber (or permit to become encumbered)
all or any portion of the Distribution.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE OPERATING PARTNERSHIP
As a material inducement to the Contributor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Contributor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of each date the Contributor
contributes an Distribution to the Operating partnership in exchange for OP
Units.
4.1 Authority.
(a) The Operating Partnership is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant to
this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
7
<PAGE> 9
(iii) to issue OP Units to the Contributor pursuant to and in
accordance with the terms of this Agreement.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the OP Agreement;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority (governmental
or otherwise) that has not been obtained or made and which does not remain
in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust, mortgage,
loan or credit agreement, any other material agreement, contract,
instrument, lease, permit or authorization, or any order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Operating Partnership is a party or by which the property of the Operating
Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Contributor to pay any finder's fee, brokerage commission or similar payment
in connection with the transactions contemplated hereby.
ARTICLE V
POWER OF ATTORNEY
5.1 Grant of Power of Attorney. The Contributor does hereby irrevocably
appoint each of the Operating Partnership (or its designee), Lawrence Feldman
and Robert Cox, and each of them individually and any successor thereof from
time to time (such Operating Partnership or designee, any of such named
individuals or an such successor of any of them acting in his, her or its
capacity as attorney-in-fact pursuant hereto, the "Attorney-in-Fact") as the
true and lawful attorney-in-fact and agent of the Contributor, to act in the
name, place and stead of the Contributor to make, execute, acknowledge and
deliver all such other contracts,
8
<PAGE> 10
orders, other writings (including without limitation the execution of any
Closing Documents or other documents relating to the acquisition by the
Operating Partnership of the Distribution), to provide information to the
Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could the Contributor if personally present
and acting.
The Power of Attorney and all authority granted hereby shall be coupled
with an interest and therefore shall be irrevocable and shall not be terminated
by any act of the Contributor, by operation of law or by the occurrence of any
other event or events, and if any other such act or events shall occur before
the completion of the transactions contemplated by this Contribution Agreement,
the Attorney-in-Fact shall nevertheless be authorized and directed to complete
all such transactions as if such other act or events had not occurred and
regardless of notice thereof. The Contributor agrees that, at the request of the
Operating Partnership, it will promptly execute a separate power of attorney on
the same terms set forth in this ARTICLE 5, such execution to be witnessed and
notarized. The Contributor hereby authorizes the reliance of third parties on
the Power of Attorney.
The Contributor acknowledges that the Operating Partnership and each other
Attorney-in-Fact has, and any designee or successor thereof acting, as
Attorney-in-Fact may have, an economic interest in the transactions contemplated
by this Contribution Agreement.
5.2 Limitation on Liability. It is understood that the Attorney-in-Fact
assumes no responsibility or liability to any person by virtue of the Power of
Attorney granted by the Contributor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
transactions contemplated hereby or the IPO, or the acquisition of the
Distribution by the Operating Partnership and shall not be liable for any error
or judgment or for any act done or omitted or for any mistake of fact or law
except for its own gross negligence or bad faith. The Contributor agrees to
indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact harmless
against any loss, claim, damage or liability incurred on its part arising out of
or in connection with it acting as the Attorney-in-Fact under the Power of
Attorney created by the Contributor hereby, as well as the cost and expense of
investigating, and defending against any such loss, claim, damage or liability,
except to the extent such loss, claim, damage or liability is due to the gross
negligence or bad faith of the Attorney-in-Fact. The Contributor agrees that the
Attorney-in-Fact may consult with counsel of its own choice (who may be counsel
for the Operating Partnership or its successors or affiliates), and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. It is understood that the Attorney-in-Fact may, without breaching
any express or implied obligation to Contributor hereunder, release, amend or
modify any power of attorney or proxy granted by any other person under any
related agreement.
9
<PAGE> 11
ARTICLE VI
MISCELLANEOUS
6.1 Amendment.
(a) This Agreement may only be amended by a written agreement duly
executed by the Contributor and the Operating Partnership.
(b) No waiver of any provision of this Agreement shall be valid
unless in writing and signed by the party against whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same
instrument, and
(c) shall be covered in all respects, including validity,
interpretation and effect, by the laws of the State of New York.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Contributor,
or by any Contributor without the prior written consent of the Operating
Partnership, and any attempted assignment without such consent shall be void and
of no effect; provided, further, however, that the Operating Partnership may
assign all or any portion of this Agreement and the Closing Documents and any
agreement contemplated hereunder or thereunder to the Company or to an affiliate
of the Operating Partnership or the Company without the consent of the
Contributor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiaries. No provision of this Agreement is intended,
nor shall it be interpreted, to provide or create any third party beneficiary
right or any other right of any kind in any customer, affiliate, stockholder,
partner, director, officer or employee of any party hereto or any other person
or entity, provided, however, that Article V and Sections 6.3 of this Agreement
shall be enforceable by and shall inure to the benefit of the persons described
therein.
10
<PAGE> 12
6.6 Severability.
(a) If any provision of this Agreement, or the application thereof,
is for any reason held to any extent to be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies.
(a) The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
(b) It is accordingly agreed that the parties shall be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any federal or state
court located in the State of New York (as to which the parties agree to submit
to jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices, Exercise of Option. Any notice or demand which must or may be
given under this Agreement or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given
(i) when physically received by personal delivery (which shall
include the confirmed receipt of a telecopied facsimile transmission),
(ii) three (3) business days after being deposited in the
United States certified or registered mail, return receipt requested,
postage prepaid, or
(iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day
delivery service (such as Federal Express);
addressed and delivered or telecopied in the case of a notice to the Operating
Partnership to the following address and telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
11
<PAGE> 13
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212) 768-9010
Telecopy: (212) 768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212) 856-6996
Telecopy: (212) 856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Contributor, to the address and telecopy number set forth under the
Contributor's name on the signature page hereof.
6.9 Confidentiality.
(a) The Contributor shall treat as strictly confidential the fact
that the Company is contemplating an offering of its Common Stock until such
time as the Company has filed Registration Statement relating, thereto with the
Securities and Exchange Commission, and shall not communicate at any time the
terms of this Agreement to any person other than counsel or advisors to the
Contributor who agree to keep such terms confidential.
(b) The Contributor shall treat all information received from the
Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate the same only to
counsel to the Contributor who agree to keep such information confidential.
6.10 Computation of Time. Any time period provided for herein which shall
end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00 p.m. of
the next fall business day. All times are New York City time.
6.11 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Operating
Partnership and the Contributor set forth in this Agreement shall survive the
consummation of the transactions contemplated hereby.
6.12 Time of the Essence. Time is of the essence with respect to all
obligations of the Contributor under this Agreement.
12
<PAGE> 14
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
------------------------------
Name: Lawrence H. Feldman
Title: President
CONTRIBUTOR'S ADDRESS: CONTRIBUTOR:
JOSEPH KASMAN
By: /s/ Joseph Kasman
------------------------------------
Name:
Title:
13
<PAGE> 15
SCHEDULE A
Maitland Property Investors, Ltd.
Maitland Associates, Ltd.
Tower 45 Associates Limited Partnership
D/F Portfolio Associates, Limited Partnership
2800 Associates, L.P.
5750 Associates Limited Partnership
Maitland West Associates Limited Partnership
Corporate Center Associates, Limited Partnership
Mountainside Plaza Associates, Limited Partnership
Warner Ranch Plaza Associates, Limited Partnership
Lakeside Plaza Associates, Limited Partnership
FSA Associates, L.P.
<PAGE> 1
Exhibit 10.52
OPTION AGREEMENT
This Option Agreement (this "AGREEMENT") dated as of the 8th day of
May, 1997 is entered into by and among TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and Stanley B.
Grey (the "GRANTOR").
R E C I T A L S:
(i) The Grantor owns direct or indirect interests in Tower 45 Associates Limited
Partnership (the "PARTNERSHIP").
(ii) The Operating Partnership desires to acquire from the Grantor, and
the Grantor desires to grant to the Operating Partnership, an option to acquire,
on the terms and conditions set forth herein, all interests owned by the Grantor
and any other direct or indirect interests the Grantor may have in the
Partnership or in the property located at 120 West 45th Street, New York, New
York. (Such property and all personal property related thereto or to the
operation thereof is hereinafter referred to as the Partnership's "PROPERTY,"
and all of such direct or indirect interests of the Grantor in the Partnership
or Property are referred to collectively as the Grantor's "PROPERTY INTERESTS").
(iii) The Operating Partnership desires to acquire the Property
Interests in connection with (i) the ongoing formation of Tower Realty Trust,
Inc., a Maryland corporation (the "COMPANY"), which intends to qualify as a real
estate investment trust and which is the sole general partner as well as a
limited partner of the Operating Partnership, and (ii) the proposed initial
public offering ("IPO") and concurrent private placement (collectively, the
"OFFERINGS") of shares of the Company's common stock, par value $0.01 per share
("COMMON STOCK").
NOW, THEREFORE, in consideration of $35,000 irrevocably and
indefeasibly paid on the date hereof by the Operating Partnership to the
Grantor, the mutual covenants and conditions set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Operating Partnership and the Grantor agree as follows:
<PAGE> 2
ARTICLE I.: THE OPTION
A. Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to acquire all the
Grantor's right, title and interest in the Grantor's Property Interests on the
terms and conditions set forth herein.
B. Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on September 30, 1997 (the "OPTION TERMINATION DATE"). Subject to the
foregoing, if the Operating Partnership does not exercise the Option by the
Option Termination Date, the Option shall be deemed terminated and shall be of
no further force or effect and the Grantor of the Option shall have no further
obligations hereunder.
C. Acquisition Consideration. The consideration (the "ACQUISITION
CONSIDERATION") to be received by the Grantor shall be $25,000 in cash.
ARTICLE II.: CLOSING PROCEDURES
A. Contribution of Property Interests. Upon the Operating Partnership's
exercise of the Option, the Grantor shall, in accordance with Section 2.2
hereof, transfer, assign, and convey to the Operating Partnership and the
Operating Partnership shall accept from the Grantor, all right, title and
interest in the Grantor's Property Interests, free and clear of all
encumbrances, in exchange for the Grantor's Acquisition Consideration.
B. Closing; Conditions to Obligations. 1. (i) The Operating Partnership
shall exercise the Option by delivering to the Grantor prior to the
Option Termination Date a notice (the "OPTION NOTICE"), which notice
shall state the date (the "CLOSING DATE") of the closing of the
transactions contemplated by Section 2.1 (the "CLOSING"), which date
shall be no less than 3 business days and no more than 30 days
following the date of such Option Notice.
(ii) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO, or such other place as may be agreed upon
by the parties hereto.
(iii) Following delivery of an Option Notice, the Operating
Partnership and the Grantor will at or prior to the
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<PAGE> 3
Closing execute and deliver all closing documents (the "CLOSING
DOCUMENTS") required by the Operating Partnership pursuant to Section
2.3 and, pending the Closing, deposit such Closing Documents in escrow
with Commonwealth Land Title Insurance Company, as escrow agent of the
Operating Partnership (the "ESCROW AGENT").
2. The following deliveries shall be made at the Closing:
(a) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee, the Acquisition Consideration;; and
(b) upon receipt of the consideration set forth in clause (i)
above, the Escrow Agent will release the Closing Documents to the
Operating Partnership and deliver to the Grantor the Acquisition
Consideration.
C. Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following (the
"CLOSING DOCUMENTS"):
1. An assignment of the Grantor's Property Interests (the "ASSIGNMENT")
in the form attached hereto as Exhibit A.
2. An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended.
3. Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Property Interests to the Operating Partnership and to otherwise
effect the transfer contemplated hereby.
D. Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees (provided, however, that the
Operating Partnership agrees to pay the Grantor's reasonable legal fees and
expenses incurred with respect to documents, agreements or instruments
requrested pursuant to Section 2.3(c)), arising from the transfer of the
Property Interests to the Operating Partnership pursuant to the exercise by the
Operating Partnership of the Option. The Operating Partnership has paid to the
attorneys for the Grantor and Michael Zerner, a grantor under a similar option
agreement, $10,000 in respect of their legal fees incurred through the date
hereof.
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<PAGE> 4
ARTICLE III.:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTORS
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership, with respect only to the
Property Interest, each of the representations and warranties and covenants set
forth in this Article III, which representations and warranties (unless
otherwise noted) are true as of the date hereof. As a condition to the Operating
Partnership's obligation to consummate the transfer of the Grantor's Property
Interests to the Operating Partnership after the exercise of the Option, such
representations and warranties must be true, and such covenants must have been
complied with, as of the Closing Date.
A. Authority; No Conflicts. The Grantor has full right, authority,
power and capacity:
(i) to execute and deliver this Agreement, and each Closing
Document;
(ii) to perform the transactions contemplated by this
Agreement; and
(iii) to transfer, assign, convey and deliver all of such
Grantor's Property Interests to the Operating Partnership in accordance
with this Agreement.
B. No Other Agreements. Prior to the exercise of the Option, the
Grantor has made no agreement with, and will not enter into any agreement with,
and has no obligation (absolute or contingent) to, any other person or entity to
sell, transfer, dispose of or in any way encumber any of the Grantor's Property
Interests or restricting in any way the Grantor's ability to transfer the
Property Interests to the Operating Partnership or to enter into any agreement
with respect to the Grantor's Property Interests.
C. No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
ARTICLE IV.:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING
PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby,
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<PAGE> 5
the Operating Partnership hereby makes to the Grantor each of the
representations and warranties and covenants set forth in this Article IV. As a
condition to the Grantor's obligation to consummate the transfer of the Property
Interests to the Operating Partnership after the exercise of the Option, such
representations and warranties must be true, and such covenants must have been
complied with, as of the Closing Date.
A. Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement; and
(ii) to perform the transactions contemplated by this
Agreement.
B. No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
the Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V.: MISCELLANEOUS
A. Amendment. (a) Any amendment hereto shall be effective only against
those parties hereto who have acknowledged in writing their consent to such
amendment.
(b) No waiver of any provisions of this Agreement shall be valid unless
in writing and signed by the party against whom enforcement is sought.
B. Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
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<PAGE> 6
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
C. Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
D. Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
E. Third Party Beneficiary. No provision of this Agreement is intended,
nor shall it be interpreted, to provide or create any third party beneficiary
right or any other right of any kind in any customer, affiliate, stockholder,
partner, director, officer or employee of any party hereto or any other person
or entity, provided, however, that Article V and Section 5.3 of this Agreement
shall be enforceable by and shall inure to the benefit of the persons described
therein.
F. Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
G. Equitable Remedies. (a) The parties hereto agree that irreparable
damage would occur in the event that any of the
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<PAGE> 7
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.
(b) It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
H. Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
120 West 45th Street, 24th Floor
New York, New York 10036-4003
Attention: Lawrence H. Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice
to the Grantor, to
-------------------------
-------------------------
-------------------------
with a copy to:
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<PAGE> 8
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attention: Michael Blumenthal, Esq.
Phone: (212)702-5700
Telecopy: (212)702-5941
I. Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel, accountants
or advisors to the Grantor who agree to keep such terms confidential and any
lender holding a lien on any Property Interests.
(b) The Grantor shall treat all information received from the Operating
Partnership or its counsel, accountants or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate same only to
counsel to the Grantor who agrees to keep such information confidential.
J. Computation of Time. Any time period provided for herein which shall
end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00 p.m. of
the next full business day. All times are New York City time.
K. Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Operating
Partnership and the Grantor set forth in this Agreement shall survive the
consummation of the transactions contemplated hereby.
L. Time of the Essence. Time is of the essence with respect to all
obligations under this Agreement.
M. No Consent. Nothwithstanding anything to the contrary herein,
nothing in this Agreement shall be construed to permit a transfer, prior to the
exercise of the Option, of the Property without the consent of the Grantor, or
to imply that any such consent would be required.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
-8-
<PAGE> 9
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
---------------------------
Name:
Title:
GRANTOR:
/s/Stanley B. Grey
----------------------------------------
Stanley B. Grey
-9-
<PAGE> 10
EXHIBIT A
ASSIGNMENT
In exchange for $25,000, the receipt and sufficiency of which
is hereby acknowledged, Stanley B. Grey (the "Assignor") hereby assigns,
transfers and conveys to Tower Realty Operating Partnership, L.P., a Delaware
limited partnership (the "Operating Partnership"), his entire right, title and
interest in and to all interests directly or indirectly held by him in Tower 45
Associates Limited Partnership, a New York limited partnership, including Dana
II Associates and Tower 45 Ventures, L.P. (collectively, the "Partnership"), or
in the property located at 120 West 45th Street, New York, New York (the
"Interests"), including, without limitation, all rights to receive distributions
of money, profits and other assets from or relating to the Partnership,
presently existing or hereafter arising or accruing, TO HAVE AND TO HOLD the
same unto the Operating Partnership, its successors and assigns, forever. This
Assignment is made by Assignor without recourse, covenant, representation or
warranty, express or implied, oral or written, except that the undersigned
represents and warrants that he has not transferred, sold, pledged or
hypothecated, or otherwise disposed of or encumbered, the Interests. The
undersigned hereby releases the Partnership and its general partner Tower 45,
Inc. [add general partners of Dana II Associates and Tower 45 Ventures, L.P.]
(collectively, the "GP") (but only in its capacity as a general partner of the
Partnership and in connection with the Partnership) from any and all liabilities
or obligations now or hereafter owing to the undersigned, arising out of and
pursuant to the Agreement of Limited Partnership of the Partnership. The
Operating Partnership hereby assumes all liabilities or obligations in respect
of the Interests. The Operating Partnership, the GP and the Partnership hereby
release the Assignor from any and all liabilities and obligations arising from
the Assignor's ownership of the Interests, and agree to indemnify and hold
harmless Assignor against any liability or obligation in respect thereof. The
Operating Partnership, and the GP acknowledge that the Grantor does not owe the
Partnership any outstanding capital contributions, fees or any other money of
any nature whatsoever.
<PAGE> 11
Upon the execution and delivery of this Assignment, the
undersigned withdraws from the Partnership for all purposes.
Dated: _______________, 1997
----------------------------------------
Stanley B. Grey
Accepted and agreed:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By:_____________________________
Lawrence H. Feldman
President
Agreed:
TOWER 45 ASSOCIATES LIMITED PARTNERSHIP
By: TOWER 45, INC., its
general partner
By:___________________________________
Lawrence H. Feldman
President
TOWER 45, INC.
By:____________________________________
Lawrence H. Feldman
President
[Add signature blocks for Dana II Associates and Tower 45 Ventures, L.P. general
partners.]
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<PAGE> 1
Exhibit 10.53
OPTION AGREEMENT
This Option Agreement (this "AGREEMENT") dated as of the 8th day of
May, 1997 is entered into by and among TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and Michael C.
Zerner (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns direct or indirect interests in Tower 45 Associates
Limited Partnership (the "PARTNERSHIP").
B. The Operating Partnership desires to acquire from the Grantor, and
the Grantor desires to grant to the Operating Partnership, an option to acquire,
on the terms and conditions set forth herein, all interests owned by the Grantor
and any other direct or indirect interests the Grantor may have in the
Partnership or in the property located at 120 West 45th Street, New York, New
York. (Such property and all personal property related thereto or to the
operation thereof is hereinafter referred to as the Partnership's "PROPERTY,"
and all of such direct or indirect interests of the Grantor in the Partnership
or Property are referred to collectively as the Grantor's "PROPERTY INTERESTS").
C. The Operating Partnership desires to acquire the Property Interests
in connection with (i) the ongoing formation of Tower Realty Trust, Inc., a
Maryland corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner as well as a limited
partner of the Operating Partnership, and (ii) the proposed initial public
offering ("IPO") and concurrent private placement (collectively, the
"OFFERINGS") of shares of the Company's common stock, par value $0.01 per share
("COMMON STOCK").
NOW, THEREFORE, in consideration of $35,000 irrevocably and
indefeasibly paid on the date hereof by the Operating Partnership to the
Grantor, the mutual covenants and conditions set forth herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Operating Partnership and the Grantor agree as follows:
<PAGE> 2
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to acquire all the
Grantor's right, title and interest in the Grantor's Property Interests on the
terms and conditions set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on September 30, 1997 (the "OPTION TERMINATION DATE"). Subject to the
foregoing, if the Operating Partnership does not exercise the Option by the
Option Termination Date, the Option shall be deemed terminated and shall be of
no further force or effect and the Grantor of the Option shall have no further
obligations hereunder.
1.3 Acquisition Consideration. The consideration (the "ACQUISITION
CONSIDERATION") to be received by the Grantor shall be $25,000 in cash.
ARTICLE II: CLOSING PROCEDURES
2.1 Contribution of Property Interests. Upon the Operating
Partnership's exercise of the Option, the Grantor shall, in accordance with
Section 2.2 hereof, transfer, assign, and convey to the Operating Partnership
and the Operating Partnership shall accept from the Grantor, all right, title
and interest in the Grantor's Property Interests, free and clear of all
encumbrances, in exchange for the Grantor's Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor
prior to the Option Termination Date a notice (the "OPTION NOTICE"),
which notice shall state the date (the "CLOSING DATE") of the closing
of the transactions contemplated by Section 2.1 (the "CLOSING"), which
date shall be no less than 3 business days and no more than 30 days
following the date of such Option Notice.
(ii) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO, or such other place as may be agreed upon
by the parties hereto.
(iii) Following delivery of an Option Notice, the Operating
Partnership and the Grantor will at or prior to the
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<PAGE> 3
Closing execute and deliver all closing documents (the "CLOSING
DOCUMENTS") required by the Operating Partnership pursuant to Section
2.3 and, pending the Closing, deposit such Closing Documents in escrow
with Commonwealth Land Title Insurance Company, as escrow agent of the
Operating Partnership (the "ESCROW AGENT").
(b) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered
to the Escrow Agent or its designee, the Acquisition
Consideration;; and
(ii) upon receipt of the consideration set forth in clause (i)
above, the Escrow Agent will release the Closing Documents to the
Operating Partnership and deliver to the Grantor the Acquisition
Consideration.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following (the
"CLOSING DOCUMENTS"):
(a) An assignment of the Grantor's Property Interests (the
"ASSIGNMENT") in the form attached hereto as Exhibit A.
(b) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended.
(c) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Property Interests to the Operating Partnership and to otherwise
effect the transfer contemplated hereby.
2.4 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees (provided, however, that the
Operating Partnership agrees to pay the Grantor's reasonable legal fees and
expenses incurred with respect to documents, agreements or instruments
requrested pursuant to Section 2.3(c)), arising from the transfer of the
Property Interests to the Operating Partnership pursuant to the exercise by the
Operating Partnership of the Option. The Operating Partnership has paid to the
attorneys for the Grantor and Stanley B. Grey, a grantor under a similar option
agreement, $10,000 in respect of their legal fees incurred through the date
hereof.
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<PAGE> 4
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTORS
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership, with respect only to the
Property Interest, each of the representations and warranties and covenants set
forth in this Article III, which representations and warranties (unless
otherwise noted) are true as of the date hereof. As a condition to the Operating
Partnership's obligation to consummate the transfer of the Grantor's Property
Interests to the Operating Partnership after the exercise of the Option, such
representations and warranties must be true, and such covenants must have been
complied with, as of the Closing Date.
3.1 Authority; No Conflicts. The Grantor has full right, authority,
power and capacity:
(i) to execute and deliver this Agreement, and each Closing
Document;
(ii) to perform the transactions contemplated by this
Agreement; and
(iii) to transfer, assign, convey and deliver all of such
Grantor's Property Interests to the Operating Partnership in accordance
with this Agreement.
3.2 No Other Agreements. Prior to the exercise of the Option, the
Grantor has made no agreement with, and will not enter into any agreement with,
and has no obligation (absolute or contingent) to, any other person or entity to
sell, transfer, dispose of or in any way encumber any of the Grantor's Property
Interests or restricting in any way the Grantor's ability to transfer the
Property Interests to the Operating Partnership or to enter into any agreement
with respect to the Grantor's Property Interests.
3.3 No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
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<PAGE> 5
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING
PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties and covenants set forth in this Article IV. As a condition to the
Grantor's obligation to consummate the transfer of the Property Interests to the
Operating Partnership after the exercise of the Option, such representations and
warranties must be true, and such covenants must have been complied with, as of
the Closing Date.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement; and
(ii) to perform the transactions contemplated by this
Agreement.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
the Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
ARTICLE V: MISCELLANEOUS
5.1 Amendment. (a) Any amendment hereto shall be effective only against
those parties hereto who have acknowledged in writing their consent to such
amendment.
(b) No waiver of any provisions of this Agreement shall be valid unless
in writing and signed by the party against whom enforcement is sought.
5.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
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<PAGE> 6
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
5.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that this Agreement may not be assigned (except by operation of law) by
the Operating Partnership without the prior written consent of the Grantor, or
by the Grantor without the prior written consent of the Operating Partnership,
and any attempted assignment without such consent shall be void and of no
effect; provided, further, however, that the Operating Partnership may assign
all or any portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
5.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
5.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Section 5.3 of
this Agreement shall be enforceable by and shall inure to the benefit of the
persons described therein.
5.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible,
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<PAGE> 7
the economic, business and other purposes of the void or unenforceable provision
and to execute any amendment, consent or agreement deemed necessary or desirable
by the Operating Partnership to effect such replacement.
5.7 Equitable Remedies. (a) The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached.
(b) It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
5.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
120 West 45th Street, 24th Floor
New York, New York 10036-4003
Attention: Lawrence H. Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
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<PAGE> 8
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)858-7823
and addressed and delivered or telecopied, in the case of a notice
to the Grantor, to
-------------------------
-------------------------
-------------------------
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attention: Michael Blumenthal, Esq.
Phone: (212)702-5700
Telecopy: (212)702-5941
5.9 Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement to any person other than counsel, accountants
or advisors to the Grantor who agree to keep such terms confidential and any
lender holding a lien on any Property Interests.
(b) The Grantor shall treat all information received from the Operating
Partnership or its counsel, accountants or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate same only to
counsel to the Grantor who agrees to keep such information confidential.
5.10 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
5.11 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Operating
Partnership and the Grantor set forth in this Agreement shall survive the
consummation of the transactions contemplated hereby.
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<PAGE> 9
5.12 Time of the Essence. Time is of the essence with respect to all
obligations under this Agreement.
5.13 No Consent. Nothwithstanding anything to the contrary herein,
nothing in this Agreement shall be construed to permit a transfer, prior to the
exercise of the Option, of the Property without the consent of the Grantor, or
to imply that any such consent would be required.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
---------------------------
Name: Lawrence H. Feldman
Title: President
GRANTOR:
/s/ Michael C. Zerner
----------------------------------------
Michael C. Zerner
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<PAGE> 10
EXHIBIT A
ASSIGNMENT
In exchange for $25,000, the receipt and sufficiency of which
is hereby acknowledged, Michael C. Zerner (the "Assignor") hereby assigns,
transfers and conveys to Tower Realty Operating Partnership, L.P., a Delaware
limited partnership (the "Operating Partnership"), his entire right, title and
interest in and to all interests directly or indirectly held by him in Tower 45
Associates Limited Partnership, a New York limited partnership, including Dana
II Associates and Tower 45 Ventures, L.P. (collectively, the "Partnership"), or
in the property located at 120 West 45th Street, New York, New York (the
"Interests"), including, without limitation, all rights to receive distributions
of money, profits and other assets from or relating to the Partnership,
presently existing or hereafter arising or accruing, TO HAVE AND TO HOLD the
same unto the Operating Partnership, its successors and assigns, forever. This
Assignment is made by Assignor without recourse, covenant, representation or
warranty, express or implied, oral or written, except that the undersigned
represents and warrants that he has not transferred, sold, pledged or
hypothecated, or otherwise disposed of or encumbered, the Interests. The
undersigned hereby releases the Partnership and its general partner Tower 45,
Inc. [add general partners of Dana II Associates and Tower 45 Ventures, L.P.]
(collectively, the "GP") (but only in its capacity as a general partner of the
Partnership and in connection with the Partnership) from any and all liabilities
or obligations now or hereafter owing to the undersigned, arising out of and
liabilities or pursuant to the Agreement of Limited Partnership of the
Partnership. The Operating Partnership hereby assumes all obligations in respect
of the Interests. The Operating Partnership, the GP and the Partnership hereby
release the Assignor from any and all liabilities and obligations arising from
the Assignor's ownership of the Interests, and agree to indemnify and hold
harmless Assignor against any liability or obligation in respect thereof. The
Operating Partnership, Partnership and the GP acknowledge that the Grantor does
not owe the Partnership any outstanding capital contributions, fees or any other
money of any nature whatsoever.
Upon the execution and delivery of this Assignment, the
undersigned withdraws from the Partnership for all purposes.
Dated: _______________, 1997
<PAGE> 11
------------------------------
Michael C. Zerner
Accepted and agreed:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By:_____________________________
Lawrence H. Feldman
President
Agreed:
TOWER 45 ASSOCIATES LIMITED PARTNERSHIP
By: TOWER 45, INC., its
general partner
By:___________________________________
Lawrence H. Feldman
President
TOWER 45, INC.
By:____________________________________
Lawrence H. Feldman
President
[Add signature blocks for Dana II Associates and Tower 45
Ventures, L.P. general partners.]
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<PAGE> 1
Exhibit 10.54
(1) Tower Realty Trust, Inc.
120 West 45th Street, 24th Floor
New York, New York 10036
July 28, 1997
General Electric Capital Corporation
GEBAM, Inc.
General Electric Real Estate Equities, Inc.
GENEL Company, Inc.
c/o General Electric Capital Corporation
125 Park Avenue, 9th Floor
New York, NY
Attention: Mr. Fred Grand
Gentlemen:
This letter agreement (the "Agreement") sets forth certain agreements
which are binding, subject to and in accordance with the terms of this
Agreement, between (i) Tower Realty Trust, Inc., a Maryland corporation (the
"Company"), (ii) Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "Operating Partnership"), (iii) General Electric Capital
Corporation, a New York corporation ("GECC"), (iv) General Electric Real Estate
Equities, Inc., a Delaware Corporation ("GEREE"), (v) GENEL Company, Inc., an
Oregon corporation ("GENEL"), and (vi) GEBAM, Inc., a Delaware corporation
("GEBAM" and, together with GECC, GEREE, and GENEL, "GE"), with respect to (x)
certain indebtedness owed by affiliates of the Company to GECC and (y) certain
equity and other interests owned by GEREE and GEBAM, respectively, in the
several partnerships and properties set forth on Schedule A attached hereto,
which properties are owned or will be owned, directly or indirectly, by the
Company or the Operating Partnership (2) upon the consummation of the Company's
proposed initial public offering of securities (the "IPO"). The Company, the
Operating Partnership, GECC, GEREE, GENEL, and GEBAM are collectively referred
to herein as the "Parties."
The following numbered paragraphs reflect the agreement of the Parties
with respect to the matters described therein, and shall constitute a legally
binding and enforceable agreement and commitment on the part of each of the
Parties.
1. Conditions to Closing. The consummation of the transactions
contemplated by this Agreement are subject to the satisfaction of the following
conditions:
(a) The consummation of the Company's IPO (the date of which is referred
to herein as the "IPO Closing Date");
(b) The IPO Closing Date occurring on or before September 30, 1997 (the
"End Date"), provided that the Company may, in its sole and absolute discretion,
extend the End Date for up to an additional 90 days at any time by providing
notice to GECC on or before the End Date (it being understood that, if the End
Date is extended as provided herein, time is of the essence with respect to the
consummation of the transactions contemplated hereby on or before such extended
End Date);
<PAGE> 2
(c) Each of the Properties set forth on Schedule A (collectively, the
"Properties") is acquired directly or indirectly by the Company or the Operating
Partnership in connection with the IPO;
(d) The Company, the Operating Partnership and each of the borrowers set
forth on Schedule B hereto shall have executed and delivered to GE and their
respective officers, directors, stockholders, partners and members, a release
reasonably satisfactory to the Parties, which will be negotiated in good faith
and fair dealing promptly after the date hereof;
(e) GE shall have executed and delivered to the Company, the Operating
Partnership, each of the borrowers set forth on Schedule B hereto and their
respective officers, directors, stockholders, partners and members, a release
reasonably satisfactory to the Parties, which will be negotiated in good faith
and fair dealing promptly after the date hereof; and
(f) The Parties shall have executed and delivered to each other all other
documents and instruments contemplated by this Agreement.
2. Prepayment/Repayment of Indebtedness. (a) On the IPO Closing Date, the
principal amount of all indebtedness owed to GECC, on and as of the IPO Closing
Date, by each of the borrowers set forth on Schedule B attached hereto shall be
repaid or prepaid in full, as the case may be, in connection with the Company's
or the Operating Partnership's direct or indirect acquisition of the Properties.
GECC hereby consents to such repayment or prepayment of indebtedness as
described herein and, except as provided in this Agreement and in consideration
of the monies and stock to be received hereunder, hereby waives any and all
repayment and prepayment, make-whole and other penalties and/or required
payments to GECC under the applicable notes and loan and security documents
relating to the prepayment and/or repayment of any such indebtedness.
(b) In connection with the prepayment and/or repayment or indebtedness
described in paragraph 2(a) above, the Operating Partnership or its designee
shall pay to GECC all amounts due and owing to GECC, as of the IPO Closing Date,
under the Loan, Building Loan and Security Agreement (including, without
limitation, Section 2.8 thereof), dated July 21, 1995, between GECC and 286
Madison, L.P., 290 Madison, L.P., 292 Madison, L.P., East Broadway 5151 Limited
Partnership, and Magnolia Associates, Ltd., as modified by the First
Modification to Loan, Building Loan and Security Agreement, dated as of December
13, 1996.
(c) At the request of the Company, GECC shall deliver to the Company
pay-off letters in respect of all indebtedness to be prepaid or repaid to GECC
as set forth in paragraph 2(a) above, as well as all amounts to be paid to GECC
as contemplated by paragraph 2(b) above.
3. Transfer of Interests in 5750 Associates, L.P. (a) On the IPO Closing
Date, GEBAM shall transfer and assign to the Operating Partnership, and the
Operating Partnership shall purchase from GEBAM, free and clear of any and all
liens, mortgages and other encumbrances, all of GEBAM's right, title, and
interest in and to 5750 Associates, Limited Partnership, a Florida limited
partnership ("5750 Associates"), including, but not limited to all of GEBAM's
rights and interests under the Limited Partnership Agreement of 5750 Associates,
Limited Partnership, dated October 1996 (the "5750 Partnership Agreement"),
including all rights, preferences and interests in respect of Sharing Ratios (as
defined in the 5750 Partnership Agreement), pursuant to a purchase agreement in
form and substance
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<PAGE> 3
reasonably satisfactory to the Parties, which will be negotiated in good faith
and fair dealing promptly after the date hereof. GEBAM represents and warrants
that it is, or will be as of the IPO Closing Date, the sole record and
beneficial owner of a 75% limited partner interest in 5750 Associates.
(b) In consideration of GEBAM's transfer and assignment of all of its
right, title, and interest in and to 5750 Associates as set forth in paragraph
3(a) above, the Operating Partnership shall pay to GEBAM on the IPO Closing Date
$1,275,000 in cash, plus the additional consideration described in paragraph
6(a)(2) below.
4. Transfer of Interests in Tower 45 Associates Limited Partnership. (a)
On the IPO Closing Date (3), GEREE shall transfer and assign to the Operating
Partnership, and the Operating Partnership shall purchase from GEREE, free and
clear of any and all liens, pledges, mortgages and other encumbrances, all of
GEREE's right, title, and interest in and to Tower 45 Associates Limited
Partnership, a New York limited partnership ("Tower 45 Associates"), including,
but not limited to, all of GEREE's rights and interests under the Amended and
Restated Agreement of Limited Partnership of Tower 45 Associates, dated as of
November 13, 1987, pursuant to a purchase agreement in form and substance
reasonably satisfactory to the Parties, which will be negotiated in good faith
and fair dealing promptly after the date hereof. GEREE represents and warrants
that it is, or will be as of the IPO Closing Date, the sole record and
beneficial owner of a 10.833% Class A limited partner interest in Tower 45
Associates.
(b) In consideration of GEREE's transfer and assignment of all its right,
title and interest in and to Tower 45 Associates as set forth in paragraph 4(a)
above, the Operating Partnership shall pay to GEREE on the IPO Closing Date
$325,000 in cash and one unit of limited partnership interest (an "OP Unit") in
the Operating Partnership (which will be subject to a two-year lock-up agreement
(required by reason of New York State transfer taxes) in form and substance
reasonably satisfactory to the Parties, which will be negotiated in good faith
and fair dealing promptly after the date hereof), plus the additional
consideration described in paragraph 6(a)(2) below.
5. Additional Transfers. (a) On the IPO Closing Date, GEREE shall transfer
and assign to the Operating Partnership, and the Operating Partnership shall
acquire from GEREE, all of GEREE's right, title, and interest in and to (i) the
Assignment Agreement, dated as of September 29, 1989, by and between Dana II
Associates Limited Partnership ("Dana II") and GEREE, and (ii) the Pledge and
Security Agreement, made as of September 29, 1989, between Dana II and GEREE
(the "Pledge Agreement") and the Collateral (as defined in the Pledge
Agreement"), in each case, free and clear of any and all liens, pledges,
mortgages and other encumbrances, pursuant to an assignment agreement in form
and substance reasonably satisfactory to the Parties, which will be negotiated
in good faith and fair dealing promptly after the date hereof.
(b) On the IPO Closing Date, GENEL shall transfer and assign to the
Operating Partnership, and the Operating Partnership shall acquire from GENEL,
(i) all of GENEL's right, title, and interest in and to the Security Agreement,
dated April 15, 1996, by and between Edward Feldman and GENEL (the "GENEL/Edward
Feldman Security Agreement") and the Collateral (as defined in the GENEL/Edward
Feldman Security Agreement), in each case, free and clear of any and all liens,
pledges, mortgages and other encumbrances, and (ii) all of GENEL's right, title,
and interest in and to the Security Agreement, dated April 15, 1996, by and
between Lawrence Feldman and GENEL (the "GENEL/Lawrence Feldman Security
Agreement") and the Collateral (as defined in the GENEL/Lawrence Feldman
Security Agreement), in each case, free and clear of any and all liens, pledges,
mortgages and other encumbrances,
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<PAGE> 4
in each case, pursuant to an assignment agreement in form and substance
reasonably satisfactory to the Parties, which will be negotiated in good faith
and fair dealing promptly after the date hereof. In consideration of GENEL's
transfer and assignment of all its right, title and interest in and to the
GENEL/Edward Feldman Security Agreement, the Collateral (as defined in the
GENEL/Edward Feldman Security Agreement), the GENEL/Lawrence Feldman Security
Agreement and the Collateral (as defined in the GENEL/Lawrence Feldman Security
Agreement). as set forth in this paragraph 5(b), the Operating Partnership shall
pay to GENEL on the IPO Closing Date $90,000 in cash. Such amount shall be
applied by GENEL to reduce amounts outstanding under either, or both (in GENEL's
sole discretion), the McClintock Loan or the Crossing Loan (as such terms are
defined in the GENEL/Lawrence Feldman Security Agreement).
(c) Each of GEBAM, GEREE, GENEL and GECC represents and warrants to the
Company and the Operating Partnership that it does not hold any direct or
indirect interests in any of the partnerships (collectively, the "Partnerships")
that own the Properties, including, without limitation, pledges, liens or
security interests in any of the equity interests in the Partnerships, that are
not being transferred to the Company or the Operating Partnership or canceled
and terminated pursuant to this Agreement, provided, that, to the extent any
such entity does hold any such direct or indirect interest, such interest in its
entirety shall be transferred and assigned to the Operating Partnership or
released in all respects, as the case may be. The Company and the Operating
Partnership represent and warrant to GE that, to the best of their knowledge,
none of GEBAM, GEREE, GENEL or GECC holds any direct or indirect interests in
any of the Partnerships that own the Properties, including, without limitation,
pledges, liens or security interests in any of the equity interests in the
Partnerships, that are not being transferred to the Company or the Operating
Partnership or canceled and terminated pursuant to this Agreement.
6. Additional Consideration. (a) As additional consideration for and a
material inducement to GEBAM, GEREE, GENEL and GECC entering into the Agreement
and effectuating the transactions contemplated by paragraphs 2, 3, 4 and 5 above
and 6(b) and (c) below, the Operating Partnership agrees to pay to GEBAM, GEREE,
GENEL and GECC (as designated by GECC) on the IPO Closing Date the following:
(1) an aggregate amount equal to $6,175,000 in cash; and
(2) such additional consideration set forth and described on
Schedule C attached hereto and made part hereof (the "Additional
Consideration"). Up to $1,500,000 of any Additional Consideration shall be paid
in cash. Any Additional Consideration in excess of $1,500,000 shall be paid in
shares of common stock, par value $.01 per share, of the Company (the "Common
Sock"), valued at MP (as defined on Schedule C) per share. If GE receives a
portion of the Additional Consideration in shares of Common Stock, GE shall
transfer to the Company an undivided percentage interest in the interests and
assets transferred hereunder, as reasonably determined by the Company, that
corresponds to the percentage of the Additional Consideration that will be paid
in shares of Common Stock. The balance of the interests and assets shall be
transferred by GE to the Operating Partnership for cash.
In connection with any issuance by the Company of shares of Common Stock
to GE hereunder, (i) the Company and GECC (or its designee) shall enter into a
registration rights agreement, in form and substance reasonably satisfactory to
the Parties, which will be negotiated in good faith and fair dealing promptly
after the date hereof and which shall include a provision that within (4) 30
days after the first anniversary of the IPO Closing Date the Company shall file
a "shelf" registration statement providing for
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<PAGE> 5
the sale by GE of any shares of Common Stock acquired by GE pursuant to this
Agreement, and (ii) the recipient of such shares of Common Stock shall execute
and deliver to the Company a lock-up letter, effective for a one-year period in
from and substance reasonably satisfactory to the Parties, which will be
negotiated in good faith and fair dealing promptly after the date hereof.
(b) Following the consummation of the transactions set forth in paragraph
2(a) above, and in consideration of, among other things, the payments made to
GECC under paragraph 6(a) above, all amounts owed or otherwise payable at any
time to GECC under:
(i) the Loan Agreement, made as of April 26, 1996 (the "Loan
Agreement"), by and between Maitland Property Investors, Ltd., Maitland
Associates, Ltd., and GECC, including, but not limited to, GECC's right to
receive payment of the Profit Participation (as defined in Loan Agreement) under
Section 3 of the Loan Agreement; and
(ii) the Promissory Note, dated August 18, 1993 (the "Note"), made
by Maitland West Associates Limited Partnership in favor of GECC, including but
not limited to GECC's right to receive payment of the Profit Participation (as
defined in the Note) under section 3(d) of the Note;
in each case, shall be deemed paid and satisfied in full, and GECC
shall thereafter have no further right to receive any such payments thereunder,
except with respect to any rights of indemnification (5) relating to
environmental matters as provided for in the Loan Agreement.
(c) On the IPO Closing Date, GECC, as lender, shall execute and deliver to
the Company and the Operating Partnership a written consent, in the form of
Exhibit A attached hereto, with respect to the transfer of certain general and
limited partner interests in 2800 Associates, L.P. to the Operating Partnership.
7. Representations and Warranties. Each of the Parties represents and
warrants to the other that it has the requisite power and authority to execute
and deliver this Agreement, and to perform its obligations hereunder, and this
Agreement has been duly authorized, executed and delivered by it and is binding
and enforceable against it in accordance with its terms. The representations and
warranties of the respective Parties set forth herein shall survive the
consummation of the transactions contemplated by this Agreement.
In addition, each of GECC, GEREE, GENEL and GEBAM, for itself, represents
and warrants to the Company and the Operating Partnership, if GE receives Common
Stock as contemplated hereby, that
(a) it, by reason of its business and financial experience, (i) has such
knowledge sophistication and experience in financial and business matters and in
making decisions of this type that it is capable of evaluating the merits and
risks of and of making an informed decision with respect to the transactions
contemplated by this Agreement including, without limitation, the receipt of
Common Stock; (ii) is capable of bearing the economic risk of the transactions
contemplated by this Agreement including, without limitation, the receipt of
Common Stock; and (iii) is an "accredited investor" as defined in Rule 501 of
the regulations promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
(b) it (i) understands that an investment in the Company involves
substantial risks; and (ii) has had an opportunity to ask questions of and
receive answers from representatives of the Company concerning
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<PAGE> 6
the Company and its proposed activities and the terms and conditions of an
investment in the Common Stock;
(c) it was not formed for the specific purpose of acquiring an interest in
the Company;
(d) it acknowledges that (i) the Common Stock to be issued to it has not
been registered under the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the Securities Act and
applicable state securities laws and such Common Stock will bear a legend to
such effect; (ii) the Company's reliance on such exemptions is predicated in
part on the accuracy and completeness of the representations and warranties of
such party contained herein; (iii) the Common Stock to be issued to such party
may not be resold or otherwise distributed unless registered under the
Securities Act and applicable state securities laws, or unless an exemption from
registration is available; (iv) there is presently no public market for the
Common Stock; and (v) other than as set forth in this Agreement, the Company has
no obligation or intention to register such Common Stock under the Securities
Act or any state securities laws or to take any action that would make available
any exemption from the registration requirements of such laws.
8. Further Assurances. At any time and from time to time after the date
hereof, each of GECC, GEREE, GENEL and GEBAM agrees and covenants to take such
actions and to execute and deliver such further acts, assignments, transfers,
conveyances, consents and assurances as the Company or the Operating Partnership
may reasonably request to more effectively vest in the Company or the Operating
Partnership, as the case may be, good and valid title to any interest, right or
other asset transferred or assigned to the Company or the Operating Partnership
as contemplated hereby and to effect the purpose and intent of this Agreement
(it being understood that in taking such actions or executing and delivering
such documents, GE shall not be required to make any representations or
warranties other than as set forth in this Agreement or the purchase agreements
contemplated hereby).
9. Expenses. The Operating Partnership agrees to pay (on or prior to the
End Date, as the same may be extended pursuant to Section 1(b) hereof) up to
$20,000 of the legal fees of counsel for GE incurred in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, whether or not such transactions are
consummated.
10. Consent to Assignment of Management Agreement. GE hereby consents to
the assignment by Tower Equities of Arizona, L.L.C. ("TEA") to Tower Equities
Management, Inc. ("TEMI") of the management agreement with respect to the
property known as 2800 North Central Avenue, Phoenix, AZ. The Company and the
Operating Partnership represent and warrant to GE that the management of both
TEA and TEMI consists of Messrs. Lawrence H. Feldman, Robert Cox, Eric Reimer,
and Scott Jensen.
11. Prior Agreements and Understandings. This Agreement supersedes any and
all prior agreements, understandings or arrangements, whether written or oral,
and any and all such prior agreements, understandings and arrangements shall,
upon the execution and delivery hereof, be terminated and null and void, without
further force and effect.
12. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and assigns.
-6-
<PAGE> 7
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement.
14. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its
conflicts of law principles.
16. Notices. All notices, consents, waivers, and other communications
pursuant to this Agreement shall be in writing and will be deemed to have been
duly given when (a) delivered by hand (with written confirmation of receipt),
(b) sent by telecopier (with written confirmation of receipt), provided that a
copy is mailed by registered mail, return receipt requested, or (c) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
telecopier numbers set forth below (or to such other addresses and telecopier
numbers as a party may designate by notice to the other parties):
General Electric Capital Corporation
GEBAM, Inc.
General Electric Real Estate Equities, Inc.
GENEL Company, Inc.
c/o General Electric Capital Corporation
125 Park Avenue, 9th Floor
New York, New York
Attention: Mr. Fred Grand
Telecopier No.: (212) 850-(6)5850
The Company and the Operating Partnership
c/o Tower Realty Trust, Inc.
120 West 45th Street, 24th Floor
New York, New York 10036
Attention: Lawrence H. Feldman
Telecopier No.: (212) 768-9479
17. Confidentiality. The Parties agree to maintain the confidentiality of
the terms and conditions of this Agreement; provided that (i) GE may disclose
such terms and conditions to its representatives if such representatives agree
to keep such information confidential and (ii) the Company and the Operating
Partnership may disclose such terms and conditions in the registration statement
filed with the Securities and Exchange Commission in connection with the IPO
(such disclosure shall be subject to the prior written approval of GECC, which
shall not be unreasonably withheld or delayed).
-7-
<PAGE> 8
If the foregoing accurately sets forth our agreement with respect to the
matters set forth herein, please sign the enclosed copy of this Agreement and
return the executed original to the undersigned at the above-referenced address.
Very truly yours,
TOWER REALTY TRUST, INC.
By:
----------------------------------
Name:
Title:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc.,
its general partner
By:
-----------------------------
Name:
Title:
AGREED TO AND ACCEPTED BY:
GENERAL ELECTRIC CAPITAL CORPORATION GEBAM, INC.
By: /s/ Robert Forster By: /s/ Robert Forster
---------------------------------- ----------------------------------
Name: Robert Forster Name: Robert Forster
Title: Authorized Representative Title: Authorized Representative
GENERAL ELECTRIC REAL GENEL COMPANY, INC.
ESTATE EQUITIES, INC.
By: /s/ Robert Forster By: /s/ Robert Forster
---------------------------------- ----------------------------------
Name: Robert Forster Name: Robert Forster
Title: Authorized Representative Title: Authorized Representative
Date: July 28, 1997
------
-8-
<PAGE> 9
If the foregoing accurately sets forth our agreement with respect to the
matters set forth herein, please sign the enclosed copy of this Agreement and
return the executed original to the undersigned at the above-referenced address.
Very truly yours,
TOWER REALTY TRUST, INC.
By: /s/ Lawrence H. Feldman
----------------------------------
Name:
Title:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc.,
its general partner
By: /s/ Lawrence H. Feldman
----------------------------
Name:
Title:
AGREED TO AND ACCEPTED BY:
GENERAL ELECTRIC CAPITAL CORPORATION GEBAM, INC.
By: By:
---------------------------------- ----------------------------------
Name: Name:
Title: Title:
GENERAL ELECTRIC REAL GENEL COMPANY, INC.
ESTATE EQUITIES, INC.
By: By:
---------------------------------- ----------------------------------
Name: Name:
Title: Title:
Date: July 28, 1997
------
-8-
<PAGE> 10
If the number of shares obtained pursuant to the foregoing formula results in a
fraction of a share of Common Stock, the value of such fraction of a share of
Common Stock shall be paid to GE in cash.
EXHIBIT A
CONSENT OF LENDER
The undersigned, in its capacity as lender to 2800 Associates, L.P., a
Delaware limited partnership (the "Partnership"), under the Loan Agreement dated
as of May 8, 1996 between the Partnership and the undersigned, hereby consents
to the transfer and assignment by (i) 2800 Company, L.L.C. of its limited
partnership interest in the Partnership to Tower Realty Operating Partnership,
L.P. (the "Operating Partnership") or any other entity directly or indirectly
wholly owned by the Operating Partnership and/or Tower Realty Trust, Inc. and
(ii) 2800 Feldman, Inc. of its general partner interest in the Partnership to
the Operating Partnership or any other entity directly or indirectly wholly
owned by the Operating Partnership and/or Tower Realty Trust, Inc.
GENERAL ELECTRIC CAPITAL
CORPORATION
By:_____________________________
Its:____________________________
Date:_______________, 1997
<PAGE> 11
- ---------------DELETIONS---------------
(1) BF LLP Revised Draft 7/28/97
(2) following its formation and
(3) and concurrent with the consummation of the IPO
(4) 15
(5) pursuant to Section __ of
(6) 6850
(7) (ii)
<PAGE> 12
This redline draft, generated by CompareRite(TM) - The Instant Redliner, shows
the differences between-
original document: :C:\SHADOW\DOCSNY\LIOVINE\CPR\F8BQ09_.WPD
and revised document: C:\SHADOW\DOCSNY\LIOVINE\CPR\F8BQ10_.WPD
CompareRite found 10 change(s) in the text
Deletions appear as Normal endnotes surrounded by ( )
Additions appear as Double Underline text
<PAGE> 13
Schedule A
<TABLE>
<CAPTION>
Property/Location Current Owner GE Relationship
----------------- ------------- ---------------
<S> <C> <C>
Tower 45 Tower 45 Associates Limited Partnership Limited Partner
New York, NY
Maitland Forum Maitland Property Investors, Ltd. Lender
Maitland, Fl
Maitland West Maitland West Associated Limited Partnership Lender
Maitland, Fl
5750 Major Blvd. 5750 Associates, Limited Partnership Limited Partner
Orlando, FL
MOT Portfolio
- -------------
286 Madison Avenue 286 Madison, L.P.* Lender
290 Madison Avenue 290 Madison, L.P.* Lender
292 Madison Avenue 292 Madison, L.P.* Lender
New York, NY
5151 East Broadway East Broadway 5151* Lender
Tucson, AZ
One Orlando Center Magnolia Associates Limited Partnership* Lender
Orlando, FL
</TABLE>
- ----------
* D/F Portfolio Associates Limited Partnership is a 99% limited partner in
the limited partnership.
A-1
<PAGE> 14
Schedule B
Indebtedness to be Prepaid or Repaid to GECC
Borrower Estimated Principal Amount Outstanding
As of June 30, 1997, subject to confirmation
286 Madison, L.P.,
290 Madison, L.P.,
292 Madison, L.P.,
East Broadway 5151 Limited
Partnership, and
Magnolia Associates, Ltd. $106,038,758.50
Maitland Property Investors, Ltd. $ 28,874,820.00
Maitland West Associates Limited
Partnership $ 3,346,268.20
B-1
<PAGE> 15
Consent of Lawrence H. Feldman
Reference is made to the letter agreement, dated the date hereof (the
"Letter Agreement"), among General Electric Capital Corporation, GEBAM, Inc.,
General Electric Real Estate Equities, Inc., GENEL Company, Inc., Tower Realty
Trust, Inc., and Tower Realty Operating Partnership, L.P. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to such terms in the
Letter Agreement.
The undersigned, in his capacity as the president of the general partner
and president of the limited partner of 5750 Associates, Limited Partnership, a
general partner and a limited partner of Dana II Associates Limited Partnership
and president of the general partner and a limited partner of Tower 45
Associates Limited Partnership, hereby (a) consents to the transactions
contemplated by the Letter Agreement and (b) represents and warrants that all
other consents necessary to approve such transactions have been obtained, or
will be obtained or waived prior to the IPO Closing Date.
/s/ Lawrence H. Feldman
----------------------------------
Lawrence H. Feldman
Dated: July 28, 1997
--
<PAGE> 16
Schedule C
Additional Consideration
GE shall as described in Section 6(a)(2) of this Agreement, receive
$1,500,000 in cash and a number of shares of Common Stock of the Company,
determined pursuant to the following formula:
(V x RSE) - $1,500,000
----------------------
MP
provided, that if the number of shares of Common Stock determined pursuant to
the foregoing formula is less than or equal to zero, GE shall not be entitled to
any shares of Common Stock;
where:
V = .10, for such portion of RSE that is less than or equal
to $15 million; and
.15, for such portion of RSE that is greater than $15
million but less than or equal to $25 million; and
.20, for such portion of RSE that is greater than $25
million but less than or equal to $40 million; and
.25, for such portion of RSE that is greater than $40
million.
RSE = The difference between (1) the value of the aggregate
number of shares of Common Stock issued or to be issued
by the Company and units of limited partnership interest
("OP Units") issued or to be issued by the Operating
Partnership as of the IPO Closing Date (other than to
the Company) and (2) the value of the sum of (i) the
aggregate number of shares of Common Stock issued or to
be issued by the Company as of the IPO Closing Date and
(ii) the aggregate number of OP Units issued or to be
issued by the Operating Partnership to continuing
investors (other than the REIT Sponsors) as of the IPO
Closing Date; provided, that, for this purpose each
share of Common Stock and OP Unit shall be valued at MP;
provided, further, any shares issued to Morgan Stanley
Asset Management, Inc. or Dreyfus Realty Advisors (or
any entity advised by either of them) shall be included
in clause (7)(i) above.
REIT
Sponsors = Lawrence H. Feldman, Robert L. Cox, Joseph D. Kasman,
Scott Jensen, Eric Reimer and Reuben Friedberg,
including their direct or indirect interests in any
affiliates controlled by any of them (but excluding, in
any respect, Clifford Stein and Reid Berman).
MP = The mid-point of the per share price range set forth in
the preliminary prospectus used in connection with the
IPO, which preliminary prospectus is declared effective
by the Securities and Exchange Commission. It is the
intention of the Parties that the term preliminary
prospectus used in this definition shall mean that
preliminary prospectus in which the REIT Sponsor equity
is last determined.
<PAGE> 17
If the number of shares obtained pursuant to the foregoing formula results in a
fraction of a share of Common Stock, the value of such fraction of a share of
Common Stock shall be paid to GE in cash.
EXHIBIT A
CONSENT OF LENDER
The undersigned, in its capacity as lender to 2800 Associates, L.P., a
Delaware limited partnership (the "Partnership"), under the Loan Agreement dated
as of May 8, 1996 between the Partnership and the undersigned, hereby consents
to the transfer and assignment by (i) 2800 Company, L.L.C. of its limited
partnership interest in the Partnership to Tower Realty Operating Partnership,
L.P. (the "Operating Partnership") or any other entity directly or indirectly
wholly owned by the Operating Partnership and/or Tower Realty Trust, Inc. and
(ii) 2800 Feldman, Inc. of its general partner interest in the Partnership to
the Operating Partnership or any other entity directly or indirectly wholly
owned by the Operating Partnership and/or Tower Realty Trust, Inc.
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Robert Forster
-----------------------------
Its: Authorized Representative
Date: 7-28, 1997
<PAGE> 1
Exhibit 10.55
CONTRIBUTION AGREEMENT
(OP Units)
BY AND AMONG
TOWER REALTY TRUST, INC.
TOWER REALTY OPERATING PARTNERSHIP, L.P.
AND
DRA OPPORTUNITY FUND
Dated as of May 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
CONTRIBUTION OF PARTNERSHIP INTERESTS
1.1 Contribution Transaction .................................................... 2
1.2 Consideration to be Paid to Contributor ..................................... 2
1.3 Adjustments Relating to the Allocation of the Consideration ................. 7
1.4 Deferred Management Fee ..................................................... 8
1.5 Additional Consideration .................................................... 9
1.6 Contribution of Certain Rights .............................................. 10
1.7 Payment of Debt ............................................................. 11
1.8 Treatment as Contribution ................................................... 11
1.9 Additional Documents ........................................................ 11
1.10 Appointment of Observer ..................................................... 11
1.11 Option to Purchase Property Interests for Increased Price; Termination of
Agreement ................................................................... 11
ARTICLE II
CLOSING
2.1 Conditions Precedent ........................................................ 12
2.2 Time and Place .............................................................. 14
2.3 Closing Deliveries .......................................................... 14
2.4 Closing Costs ............................................................... 15
2.5 Good Faith Efforts .......................................................... 16
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CONTRIBUTOR
3.1 Title to Interests .......................................................... 16
3.2 Organization; Authority; No Conflicts ....................................... 17
3.3 Litigation .................................................................. 19
3.4 No Other Agreements ......................................................... 19
3.5 No Brokers .................................................................. 19
3.6 Investment Representations and Warranties. .................................. 19
3.7 Legends. .................................................................... 21
3.8 Covenant to Remedy Breaches. ................................................ 22
3.9 Actions Prior to Closing. ................................................... 23
3.10 Certain ERISA Matters. ...................................................... 23
3.11 Principal Purpose. .......................................................... 23
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY AND THE OPERATING PARTNERSHIP
4.1 Authority ................................................................... 23
4.2 No Brokers .................................................................. 24
4.3 Sale of Property ............................................................ 24
4.4 Allocation of Built-in Gain ................................................. 25
4.5 REIT Sponsors ............................................................... 25
ARTICLE V
MISCELLANEOUS
5.1 Amendment ................................................................... 25
5.2 Entire Agreement; Counterparts; Applicable Law .............................. 25
5.3 Assignability ............................................................... 26
5.4 Titles ...................................................................... 26
5.5 Third Party Beneficiary ..................................................... 26
5.6 Severability ................................................................ 26
5.7 Equitable Remedies .......................................................... 26
5.8 Notices ..................................................................... 27
5.9 Waiver of Rights; Consents with Respect to Partnership Interests ............ 27
5.10 Releases and Waivers ........................................................ 30
5.11 Confidentiality ............................................................. 30
5.12 Computation of Time ......................................................... 31
5.13 Legal Fees and Expenses ..................................................... 31
5.14 Termination ................................................................. 31
5.15 Survival .................................................................... 31
5.16 Time of the Essence ......................................................... 31
</TABLE>
EXHIBITS
A. Partnership & Interests
B. Contribution and Assumption Agreement
C. Customary Closing Cost Splits
D. Model for Consideration Calculation
E. Exchange Rights Agreement
F. Registration Rights Agreement
G. Lock-Up Agreement
H. Existing Properties
iii
<PAGE> 4
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "AGREEMENT") is dated as of the 1st
day of May, 1997 and is entered into by and among TOWER REALTY TRUST, INC., a
Maryland corporation (the "COMPANY"), TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and DRA
OPPORTUNITY FUND, a Delaware corporation ("CONTRIBUTOR").
R E C I T A L S:
B. Contributor owns a membership interest in Corporate Center, L.L.C.
("CC LLC") and a limited partnership interest in Corporate Center Associates,
Limited Partnership (collectively with CC LLC, the "PARTNERSHIP") described on
EXHIBIT A attached hereto and made a part hereof, which Partnership owns direct
or indirect interests in certain properties (the "PROPERTIES") also set forth on
EXHIBIT A.
C. The Company and the Operating Partnership desire to acquire through
a contribution to capital from Contributor, and Contributor desires, among other
things, to contribute to the Company and the Operating Partnership, on the terms
and conditions set forth herein, all of Contributor's right, title and interest
as a member and a limited partner of the Partnership (collectively, the
"PROPERTY INTERESTS") in exchange for one or more of the following: (a) cash,
(b) units of limited partnership interest ("OP UNITS") in the Operating
Partnership, and (c) shares of common stock, par value $0.01 per share (the
"COMMON STOCK") of the Company, as hereinafter provided.
D. The Company and the Operating Partnership desire to acquire the
Property Interests in connection with the intended initial public offering (the
"IPO") of shares of Common Stock by the Company.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company, the
Operating Partnership and Contributor agree as follows:
<PAGE> 5
ARTICLE II
CONTRIBUTION OF PARTNERSHIP INTERESTS
1.1 Contribution Transaction. (a) At the Closing (as hereinafter
defined) and subject to the terms and conditions contained in this Agreement,
Contributor shall transfer to the Company and the Operating Partnership,
absolutely and unconditionally and free and clear of all Encumbrances (as
defined in Section 3.1(a)), all of the Property Interests. The contribution of
Contributor's Property Interests shall be evidenced by a Contribution and
Assumption Agreement in substantially the form of EXHIBIT B attached hereto and
made a part hereof. The portion of the Property Interests that will be
contributed to the Company, if any, will be determined as set forth in Section
1.2(d) hereof.
(b) The parties shall take such additional actions and execute
such additional documentation as may be required by either (i) the
Partnership Agreement (as hereinafter defined) or (ii) the Agreement of
Limited Partnership dated as of March 24, 1997 of the Operating
Partnership (the "OP AGREEMENT") in order to effect the transactions
contemplated hereby.
(c) Contributor hereby subscribes for and agrees to accept the
issuance of the Common Stock and the OP Units specified by it pursuant
to the terms of this Agreement, and, if Contributor receives OP Units,
accepts, subject to the provisions of this Contribution Agreement, the
terms and conditions of the OP Agreement, including, without
limitation, the power of attorney granted therein, and agrees to
execute and deliver at the Closing such other documents and agreements
as may be reasonably required by the Company under the OP Agreement to
effect the admission of Contributor as a limited partner in the
Operating Partnership.
(d) As used herein, the term "PARTNERSHIP AGREEMENT" shall
mean collectively, the Operating Agreement of Corporate Center, L.L.C.
("CC LLC") among Contributor, Corporate-Feldman, L.L.C. (C-F LLC") and
Corporate-Partners, L.L.C. ("C-P LLC") and the Amended, Restated and
Reconstituted Agreement of Limited Partnership of Corporate Center
Associates, Limited Partnership, dated as of September 13, 1995, among
CC LLC, Contributor, C-F LLC and C-P LLC.
1.2 Consideration to be Paid to Contributor. Subject to Sections 1.3
and 1.5 hereof, the Company and the Operating Partnership (as the case may be)
shall, in exchange for the Property Interests (and Contributor's obligations
hereunder), pay to Contributor the amount determined as follows:
(a) The amount (the "CONSIDERATION") that Contributor would receive
under the Partnership Agreement if:
-2-
<PAGE> 6
(i) the Partnership were to sell all of the Properties, free and
clear of all Encumbrances, for an aggregate of $51,000,000, and in the event the
Closing occurs after September 13, 1997, $54,000,000), in each case minus the
outstanding principal amount of the loan relating to the Properties (the "MMLIC
LOAN") from The Minnesota Mutual Life Insurance Company ("MMLIC") and
(ii) the Partnership were to dissolve and distribute the proceeds of
the sale referred to in clause (i) above and any undistributed cash (in
accordance with the procedures and priorities stated in the Partnership
Agreement) to be calculated as of, and assuming such sale was effective as of,
the Closing Date, taking into account disposition costs and other similar costs
(excluding real estate brokerage commissions) associated with such liquidation,
as follows:
(A) the actual cost of any transfer taxes, documentary stamps
and other closing costs which are normally payable by a seller in the
relevant market, as more particularly described on EXHIBIT C attached
hereto and made a part hereof, and
(B) if actually paid, the product of the assumption fee
payable to MMLIC in connection with the assumption or deemed assumption
of the MMLIC Loan, times a fraction, the numerator of which shall be
the number of full or partial months from December 28, 1995 to the
Closing, and the denominator of which shall be 120.
(b)(i) (A) The following shall be apportioned (ratably based upon the
number of days prior to and after the Closing Date to which any of the following
amounts relates) between the Partnership as it was composed immediately prior to
the Closing (the "PREVIOUS PARTNERSHIP") and the Operating Partnership at the
Closing, as of the close of business of the day immediately preceding the
Closing Date (the "APPORTIONMENT DATE"), and amounts apportioned to the Previous
Partnership shall be allocated between the Operating Partnership and Contributor
in accordance with the applicable provisions of the Partnership Agreement,
assuming that Contributor directly or indirectly holds the interests in the
Partnership held by Contributor immediately prior to the Closing Date and the
Operating Partnership directly or indirectly holds all other interests in the
Partnership:
(I) water rates and charges, sewer taxes and rents and
electricity and other utility charges, except those required to be paid
directly by tenants to the entity imposing same, based upon the per
diem charges obtained by using the most recent period for which
readings of such utility services shall then be available;
(II) fuel oil and liquid propane gas, if any, at the cost
per gallon most recently charged to the Previous Partnership or its
relevant subsidiary entity
-3-
<PAGE> 7
which is the direct owner of the applicable Property, based on the
supplier's measurements thereof taken within one (1) business day (to
the extent practicable) of the Apportionment Date;
(III) rents, if, as and when collected in accordance with the
provisions of Section 1.2(b)(ii);
(IV) business, occupancy and sales taxes, if any;
(V) real and personal property taxes and assessments (or
installments thereof), on the basis of the fiscal year for which
payable, except those required to be paid directly by tenants to the
entity imposing same; if the Apportionment Date shall be prior to the
date on which the real or personal property tax rate is fixed, the
apportionment of real or personal property taxes, as the case may be,
shall be made on the basis of the tax rate for the preceding year
applied to the latest assessed valuation and after the real or personal
property taxes, as the case may be, are finally fixed, and Contributor
and the Operating Partnership shall make a recalculation of the
apportionment of same and the Operating Partnership and the Previous
Partnership, as the case may be, shall promptly make an appropriate
payment to the other based on such recalculation;
(VI) payments to the lender under the MMLIC Loan documents,
including, without limitation, tax and insurance escrows (which shall
be treated as Capital Event Proceeds under the Partnership Agreement)
and interest payments;
(VII) all other payables and receivables of the Previous
Partnership and its subsidiary entities and the general partner
thereof, if any, not otherwise apportioned herein; and
(VIII) all other payments made by or on behalf of the Previous
Partnership, any general partner thereof or any subsidiary entity for
liabilities or obligations relating to a period which extends in part
prior to and in part beyond the Closing Date.
(B) If, on the Closing Date, all or any portion of any Properties
shall be or shall have been affected by assessments that are, or which may
become, payable in annual installments, of which the first installment is then a
charge or lien or has been paid or if any of the improvements to be paid for
thereby are in place or commenced, then for purposes of this Agreement only the
installment which shall then be due and payable shall be apportioned between the
Previous Partnership and the Operating Partnership and all of the unpaid
installments of any such assessments, including those which are to become due
-4-
<PAGE> 8
and payable after the date hereof, shall not be deemed to be due and payable and
shall continue to be liens upon such Properties, it being understood and agreed
that the Operating Partnership shall be responsible for the period from and
after the Apportionment Date and the Previous Partnership shall be responsible
for the period prior to the Apportionment Date, regardless of when such
installments are due and payable.
(C) To the extent that any refund of real property taxes, water
rates and charges or sewer taxes and rents made after the Closing Date is
applicable to a period before the Closing Date, such refund shall be payable to
the Previous Partnership within 10 business days from the date of receipt
thereof, subject to the reasonable costs incurred in obtaining same and to
tenants having a right to any portion of such refunds, and the Operating
Partnership shall indemnify the Previous Partnership from and against all
claims, damages and expenses incurred by the Previous Partnership if any claim
by any tenant is made that the Operating Partnership's pursuit of such refunds
was inadequate or insufficient.
(D) Contributor and the Operating Partnership agree that
(I) in the event that there have been underbillings of
operating expenses, due to underestimating, resulting in underpayments
by tenants applicable to a period before the Closing Date, the
Operating Partnership shall directly or indirectly bill such tenants
for such underpayments (or Contributor may so bill) and any amounts
directly or indirectly paid to the Operating Partnership (or
Contributor) in respect thereof shall be deemed paid to the Previous
Partnership (less any costs incurred in connection with the collection
of same), and
(II) in the event that there have been overbillings of
operating expenses or real estate tax contributions resulting in
overpayments by tenants applicable to a period before the Closing Date,
the Previous Partnership shall indemnify the Operating Partnership and
the Partnership and hold the Operating Partnership and the Partnership
harmless from and against claims, damages and expenses incurred,
directly or indirectly, by the Operating Partnership for Contributor's
ratable share incurred as a result of such overbillings.
(E) Within 10 business days following the Closing and periodically
thereafter, for a period of up to 120 days, if additional adjustments are
necessary, the Operating Partnership shall prepare a schedule demonstrating the
computation of the Closing Date reimbursement adjustments, including detailed
supporting schedules for each of the line items appearing in such computation.
If Contributor disputes the amount of the adjustments, then the Operating
Partnership and Contributor shall make a good faith effort to resolve such
dispute. If the Operating Partnership and Contributor are unable to resolve such
disagreement within a reasonable period of time (not to exceed 20 days), either
the
-5-
<PAGE> 9
Operating Partnership or Contributor may pursue all remedies available pursuant
to applicable law.
(ii) (A) Subject to Section 1.2(b)(ii)(B) and (C), if the Operating
Partnership shall directly or indirectly receive rents under any lease after the
Closing Date from tenants which are thirty-one (31) days or more in arrears in
the payment of rent as of the Closing Date, the same shall be allocated first,
to the payment of current rent then due for the month in which the rent is
received, second, to the payment of rent due for the month prior to the month in
which the rent is received and such allocation shall continue by month in
reverse chronological order until all arrearages have been paid. For example, if
the Operating Partnership shall directly or indirectly receive two (2) months'
rent on January 15 under a lease which is in arrears for the months of October,
November, December and January, the two months' rent shall first be applied to
rent due for the month of January, second to rent due for the month of December,
and the months of October and November shall remain in arrears. With respect to
rents due for the month during which the Closing occurs, the Operating
Partnership shall render an accounting to Contributor, and the amount of such
rents shall be apportioned between the Previous Partnership and the Operating
Partnership based upon the Apportionment Date.
(B) Subject to the provisions of the last sentence of this clause
(B), at the end of the fiscal year with respect to which any additional rent is
payable under a lease, there shall be a calculation of the amount of each of
such additional rents to which each of the Previous Partnership and the
Partnership is entitled, based upon the Apportionment Date, with the Previous
Partnership being entitled to an amount equal to the amount of additional rent
multiplied by a fraction, expressed as a percentage, the numerator of which is
the number of days in said fiscal year with respect to which additional rent
under such lease was payable prior to the Closing Date, and the denominator of
which is the total number of days in said fiscal year during which additional
rent under such lease was payable, and the Operating Partnership shall be
entitled to the remaining portion of such additional rent. Anything to the
contrary contained in this clause (B) notwithstanding, with respect to tenants
which are 31 days or more in arrears in the payment of additional rent under
leases as of the Closing Date, the provisions of Section 1.2(b)(ii)(A) shall
apply as if such arrearage were for rents and not for additional rent.
(C) If there shall be any change in the assessed value of any
Property or in the base amounts utilized in the calculation of any additional
rents generated by any Property, or for any other reason, so that any tenant
shall be required to pay additional rents with respect to any period prior to
the Closing Date, the Operating Partnership shall bill or cause to be billed
such tenants therefor and shall use commercially reasonable efforts to collect
the amount thereof, for a period of up to 120 days following the Closing Date,
and any such amounts directly or indirectly received by the Operating
Partnership, less the reasonable third-party costs incurred in collecting such
additional rents, shall be paid by the Operating Partnership to the Previous
Partnership promptly after receipt.
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<PAGE> 10
(c) Attached hereto as EXHIBIT D, and made a part hereof, is a model of
the calculations described in Section 1.2(a) utilizing an assumed date for the
sale of the Properties of March 31, 1997. This model shall govern the
determination of the Consideration and shall be utilized by the parties as a
methodology for performing the calculation set forth in Section 1.2(a); any
ambiguity in the provisions set forth in Section 1.2(a) shall be resolved by
Ernst & Young LLP (or, if Ernst & Young LLP shall not be available, such other
accounting firm of nationally recognized standing as shall be chosen by the
Operating Partnership and Contributor within two business days after receipt of
notice of such unavailability) by reference to such model.
(d) The Consideration shall be paid to the Contributor in the form of a
combination of (i) cash, (ii) shares of Common Stock and (iii) OP Units in the
percentages set forth in a written notice from the Contributor to the Operating
Partnership and the Company that must be received on or before April 29, 1997.
In the event no timely election is made, Contributor will receive the
Consideration in the following proportion: 50% in cash, and 50% through the
issuance of Common Stock. In the event Contributor elects to receive all or a
portion of the Consideration in respect of its contribution of Property
Interests in shares of Common Stock, Contributor shall transfer to the Company
an undivided percentage interest in the Property Interests that corresponds to
the percentage of the Consideration that will be paid in shares of Common Stock.
The balance of the Property Interests shall be contributed to the Operating
Partnership.
(e) For purposes of this Agreement, each share of Common Stock and each
OP Unit shall be valued based on the mid-point of the price range (the
"MID-POINT PURCHASE PRICE") per share of Common Stock set forth in the
Preliminary Prospectus (as defined below). For purposes of this Agreement, the
term "PRELIMINARY PROSPECTUS" means the last preliminary prospectus of the
Company circulated to investors in connection with the IPO, or any subsequent
preliminary prospectus which is included in a subsequent amendment to the
Company's Registration Statement on Form S-11 which is declared effective by the
Securities and Exchange Commission. It is the intention of the parties that the
definition shall mean that preliminary prospectus in which REIT Sponsor equity
is last determined. For purposes of this Agreement, the term "REIT SPONSORS"
shall mean Lawrence H. Feldman, Robert L. Cox, Joseph D. Kasman, Scott Jensen,
Eric Reimer and Reuben Friedberg, including their direct or indirect interests
in any affiliates controlled by any of them.
1.3 Adjustments Relating to the Allocation of the Consideration. (a) In
the event Contributor elects to receive more than fifty percent (50%) of the
Consideration in the form of OP Units and/or shares of Common Stock, then the
number of OP Units or shares of Common Stock to be received by Contributor (as
designated by Contributor) shall be increased based upon the following:
IP x C x 0.5 x 0.07 x 1
--
MP
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<PAGE> 11
where:
IP = the difference between (1) the aggregate percentage of the
Consideration that Contributor elects to receive in the form
of OP Units and shares of Common Stock and (2) 50% (expressed
as a decimal fraction);
C = the amount of the Consideration (without regard to any
adjustments made pursuant to this Section 1.3 or Section 1.5);
and
MP = the Mid-Point Purchase Price.
For example, if (i) Contributor elects to receive 70% of the Consideration in
the form of OP Units and shares of Common Stock, (ii) the amount of the
Consideration is $51,000,000, and (iii) the Mid-Point Purchase Price is $25,
then the aggregate number of OP Units or shares of Common Stock to be received
by Contributor shall be increased by 14,280.
(b) In the event Contributor elects to receive less than fifty percent
(50%) of the Consideration in the form of OP Units and/or shares of Common
Stock, then the cash portion of the Consideration shall be reduced by an amount
determined as follows:
IP x C x 0.5 x 0.07
where:
IP = the difference between (1) the aggregate percentage of the
Consideration that Contributor elects to receive in cash and
(2) 50% (expressed as a decimal fraction); and
C = the amount of the Consideration (without regard to any
adjustments made pursuant to this Section 1.3 or Section 1.5).
For example, if (i) Contributor elects to receive 70% of the Consideration in
the form of cash, and (ii) the amount of the Consideration is $51,000,000, then
the cash portion of the Consideration shall be reduced by $378,000.
(c) The adjustments to the Consideration set forth in Section 1.3(a)
and (b) shall be made after the calculation of the Consideration pursuant to
Section 1.2(a), and without further recomputation pursuant to Section 1.2(a).
(d) Notwithstanding the foregoing provisions of this Section 1.3, in
the event that adjustments to the Consideration are required to be made as a
result of a violation or potential violation of the limitation on ownership
contained in clause (1) of the legend contained in Section 3.7(b) hereof, such
adjustment to the Consideration shall not be deemed to have been made at the
election of Contributor, and no further adjustment shall be made pursuant to
Section 1.3(b) hereof.
1.4 Deferred Management Fee and Amendments to Management Agreements. In
addition to Contributor's foregoing obligations, Contributor and/or its
affiliates, as the case may
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be, shall at the Closing agree to amend each of the Management Agreements (as
defined below) to provide that the Management Agreements shall not be terminated
during the period commencing on the Closing Date and ending on the second
anniversary of the Closing Date unless either (i) Contributor or its affiliates
pays to Tower Equities Management, Inc., a Delaware corporation and the
management affiliate of the Company and the Operating Partnership ("TEMI"), the
applicable management company the Cancellation Payment (as hereinafter defined)
prior to such cancellation or (ii) such cancellation is made either (1) pursuant
to Sections 7(a)(i), (ii), (iv), (v), (vi) or (vii) or 7(b) of the Mountainside
Agreement or pursuant Section 7(a)(ii), (iii), (v), (vi), (vii) or (viii) or
7(b) of the Lakeside Agreement or the Warner Agreement, as the case may be, or
(2) upon an Uncured Default Event (as defined below) or (3) because TEMI fails
to be the exclusive property manager of all of the McClintock Fountain, Union
Crossing and Cobblestone Plaza properties (collectively, the "MANAGEMENT
AGREEMENT AMENDMENTS"). As used herein, the phrase "CANCELLATION PAYMENT" shall
mean a payment equal to the number derived by multiplying (A) the average
management fee paid during the twelve consecutive (12) months immediately
preceding the effective date of such cancellation by (B) a fraction the a
numerator of which equals the number of months from the effective date of such
cancellation through the second anniversary of the date hereof and (y) a
denominator equal to twelve (12). As used herein, the term "MANAGEMENT
AGREEMENTS" means, collectively, that certain Property Management Agreement
dated as of January __, 1995 between Mountainside Plaza Associates, Limited
Partnership and Tower Equities of Arizona, L.L.C. ("TEA") (the "MOUNTAINSIDE
AGREEMENT"); that certain Property Management Agreement dated as of May 12, 1995
between Lakeside Plaza Associates, Limited Partnership and TEA (the "LAKESIDE
AGREEMENT"); and that certain Property Management Agreement dated as of May 12,
1995 between Warner Ranch Associates, Limited Partnership and TEA (the "WARNER
AGREEMENT"). As used herein, the term "UNCURED DEFAULT EVENT" means the
occurrence of two Uncured Defaults (as defined below) which occur during any
60-day period provided that the corresponding notices of default are not less
than 30 days apart or the occurrence of three Uncured Defaults which occur
during any 12 consecutive month period. As used herein, an "UNCURED DEFAULT"
means one particular, specifically identified obligation of the manager under
the respective Management Agreement that is breached and is not cured within ten
days' written notice thereof, provided, however, that such ten-day cure period
shall be extended one day for each day of delay attributable to the events
described in Section 7(d) of that certain Property Management Agreement dated as
of December 10, 1996 between East Broadway 5151 Limited Partnership and TEA. At
the Closing, Contributor shall, or shall cause its affiliates to, enter into
amended and restated Management Agreements with TEMI, that reflect the current
terms of such agreements as modified as set forth above.
1.5 Additional Consideration. In the event (a) the Closing occurs on or
before September 13, 1997 and (b) the product of (i) the Mid-Point Purchase
Price and (ii) the aggregate number of shares of Common Stock and OP Units
issued or to be issued to the REIT Sponsors (but specifically excluding any
shares of Common Stock or OP Units issued or to be issued to Morgan Stanley
Asset Management Inc. or any entity advised thereby) as of the Closing of the
IPO, exceeds $20,000,000, then Contributor shall receive the following number of
additional shares of
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<PAGE> 13
Common Stock or OP Units (determined as a percentage to be designated by
Contributor prior April 29, 1997, and as computed by Merrill Lynch, Pierce,
Fenner & Smith, Incorporated):
0.027793 x {REIT Sponsor Equity -
[(FFO(n)/(FFO(t)) x REIT Sponsor Equity] - $20,000,000},
--------------------------------------------------------
Mid-Point Purchase Price
where REIT Sponsor Equity = The aggregate number of shares of Common
Stock and OP Units issued or to be issued to
the REIT Sponsors, times the Mid-Point
Purchase Price.
FFO(n) = Estimated 1997 funds from operations
relating to any properties (the "NEW
PROPERTIES") directly or indirectly acquired
or to be acquired as of the Closing Date by
the Company, other than properties set forth
on Exhibit H hereto. Funds from operations
for the New Properties shall be equal to NOI
for the New Properties, minus the debt
service allocable to the New Properties. The
debt service allocable to the New Properties
shall be equal to the amount of principal
and interest payments on all indebtedness
for money borrowed of the Company on a
consolidated basis, times the NOI for the
New Properties, divided by the NOI for all
properties directly or indirectly owned by
the Company.
FFO(t) = Estimated 1997 funds from operations
relating to all properties directly or
indirectly owned or to be owned as of the
Closing Date by the Company. Funds from
operations shall be equal to NOI for all
such properties, minus the Company's debt
service. The Company's debt service shall be
equal to the amount of principal and
interest payments on all indebtedness for
money borrowed of the Company on a
consolidated basis.
NOI = The net cash flow (determined after giving
effect to the "straight lining" of rents
over applicable rental periods) after
operating expenses for the applicable
properties.
1.6 Contribution of Certain Rights. Except as provided in Section
5.10(a), effective upon the Closing, Contributor hereby contributes to the
Operating Partnership all of its rights and interests, if any, including rights
to indemnification in favor of Contributor, if any, under the agreements
pursuant to which Contributor or its affiliates initially acquired the Property
Interests transferred pursuant to this Agreement.
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<PAGE> 14
1.7 Payment of Debt. Effective upon the Closing, the Operating
Partnership shall cause the Partnership to maintain any and all outstanding debt
encumbering the Properties.
1.8 Treatment as Contribution. The transfer, assignment and exchange of
interests effectuated with respect to the Operating Partnership, pursuant to
this Agreement, shall constitute a "CAPITAL CONTRIBUTION" pursuant to Article 4
of the OP Agreement and is intended to be governed by Section 721(a) of the
Internal Revenue Code of 1986, as amended (the "CODE"). The transfer, assignment
and exchange of interests effectuated with respect to the Company pursuant to
this Agreement is intended to be governed by Section 351 of the Internal Revenue
Code of 1986, as amended (the "CODE").
1.9 Additional Documents. At the Closing of the IPO, Contributor shall
enter into with the Operating Partnership, the Company or the underwriters for
the IPO (as the case may be) an exchange rights agreement, a registration rights
agreement and a lock-up agreement, substantially in the same form as those
attached hereto as EXHIBITS E, F and G, respectively.
1.10 Appointment of Observer. Effective on and for each year after the
IPO, until the aggregate number of OP Units and shares of Common Stock held by
Contributor and Office Invest Sub LLC is less than 50% of the number of OP Units
and shares of Common Stock held by Contributor and Office Invest Sub LLC,
immediately following the IPO, the Company, on behalf of itself and the
Operating Partnership, will afford one person selected by Contributor and DD
Investment Partners, L.P. ("DDI"), full Board observation rights, including (i)
full and timely notice of all meetings of the Board of Directors and each of its
committees, (ii) copies of all written and other materials disseminated to
members of the Board or its committees, (iii) the right to attend in person or
by telephone all meetings of the Board or its committees, (iv) the right to
receive all reports concerning the business and financing of the Company and the
Operating Partnership that are prepared or otherwise provided to the Company and
the Operating Partnership, (v) the right to consult at least once per calendar
quarter, if requested by DDI, with the management personnel of the Company
concerning the finances and operations of the Company and the Operating
Partnership and (vi) the right to receive in advance written notice from the
Company of any acquisition or divestiture by the Company or the Operating
Partnership (subject to the requirements of applicable securities laws).
1.11 Option to Purchase Property Interests for Increased Price;
Termination of Agreement. (a) At any time after the date hereof and on or prior
to December 13, 1997, in connection with the formation of a private real estate
investment trust by the Company (a "PRIVATE REIT"), upon ten business days
notice to Contributor, the Company and the Operating Partnership shall have the
right to purchase the Property Interests and to pay to Contributor in cash the
amount (the "PRIVATE REIT CONSIDERATION") that Contributor would receive under
the Partnership Agreement if:
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<PAGE> 15
(i) the Partnership were to sell all of the Properties, free and clear
of all liens, mortgages and other encumbrances, for $54,000,000, minus
the outstanding principal amount of the MMLIC Loan; and
(ii) the Partnership were to dissolve and distribute the proceeds of
the sale referred to in clause (i) above (in accordance with the
procedures and priorities stated in the Partnership Agreement) to be
calculated as of, and assuming such sale was effective as of, the
closing date for such Private REIT (the "PRIVATE REIT CLOSING DATE"),
taking into account disposition costs and other similar costs
(excluding real estate brokerage commissions) associated with such
liquidation, as follows:
(A) the actual cost of any transfer taxes, documentary stamps
and other closing costs which are normally payable by a seller in the
relevant market, as more particularly described on EXHIBIT C attached
hereto and made a part hereof, and
(B) if actually paid, the product of the assumption fee
payable to MMLIC in connection with the assumption or deemed assumption
of the MMLIC Loan, times a fraction, the numerator of which shall be
the number of full or partial months from December 28, 1995 to the
Closing, and the denominator of which shall be 120.
(b) In the event the Company and the Operating Partnership exercise the
option set forth in Section 1.11(a), then (i) the obligation to make any payment
in respect of the Consideration or issue any shares of Common Stock or OP Units
pursuant to Section 1.2 hereof or any other provision of this Agreement and the
obligations under Sections 1.3 and 1.10 hereof shall terminate, and shall be of
no further force and effect; and (ii) Contributor and the Operating Partnership
shall make or cause to be made the apportionments and allocations set forth in
Section 1.2(b) hereof.
ARTICLE II
CLOSING
2.1 Conditions Precedent. (a) The obligation of the parties to
consummate the transactions contemplated hereby, other than those set forth in
Section 1.11 hereof, are subject to the closing of the IPO (the "IPO CLOSING"),
including, without limitation, the requirement that at or prior to Closing the
direct and indirect holders (other than Contributor) of interests in the
Partnership shall have transferred such interests to the Company or Operating
Partnership in connection with the IPO. If the Company and the Operating
Partnership are unable to consummate the IPO Closing on or before December 13,
1997, this Agreement shall terminate and be of no force and effect, the parties
hereto shall be relieved of any obligations hereunder.
(b) The obligation of the Company and the Operating Partnership to
consummate the transactions contemplated hereby shall be subject to the
following additional conditions:
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<PAGE> 16
(i) the representations and warranties of Contributor contained in
this Agreement shall have been true and correct in all material
respects on the date such representations and warranties were made, and
shall be true and correct in all material respects on the Closing Date
as if made at and as of such date; provided, however, that in the event
that the Closing relates to the transactions set forth in Section 1.11
hereof, the representations and warranties set forth in Sections 3.6
and 3.7 hereof need not be true and correct;
(ii) each of the obligations of Contributor to be performed by it
shall have been duly performed by it on or before the Closing Date;
(iii) the Company and the Operating Partnership shall have received a
certificate of an executive officer of Contributor certifying as to
clauses (i) and (ii) above;
(iv) concurrently with the Closing, Contributor shall have executed
and delivered to the Operating Partnership the documents required to be
delivered pursuant to Section 2.3 hereof;
(v) Contributor shall have obtained all necessary consents or
approvals of governmental authorities or third parties to the
consummation of the transactions contemplated hereby;
(vi) no order, statute, rule, regulation, executive order, injunction,
stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or
governmental or regulatory authority or instrumentality that prohibits
the consummation of the transactions contemplated hereby, and no
litigation or governmental proceeding seeking such an order shall be
pending or threatened; and
(vii) there shall not have occurred between the date hereof
and the Closing Date any material adverse change in the Partnership's
businesses.
The foregoing conditions may be waived by the Company and the
Operating Partnership in their sole and absolute discretion.
(c) The obligation of Contributor to consummate the transactions
contemplated hereby shall be subject to the following additional conditions:
(i) the representations and warranties of the Company and
the Operating Partnership contained in this Agreement shall have been
true and correct in all material respects on the date such
representations and warranties were made, and shall be true and correct
in all material respects on the Closing Date as if made at and as of
such date;
(ii) each of the obligations of the Company and the Operating
Partnership to be performed by either of them shall have been duly
performed by it on or before the Closing Date;
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<PAGE> 17
(iii) Contributor shall have received a certificate of an
executive officer of the Company certifying as to clauses (i) and (ii)
above;
(iv) concurrently with the Closing, the Company and the
Operating Partnership shall have executed and delivered to the
Operating Partnership the documents required to be delivered by them
pursuant to Section 2.3 hereof;
(v) the Company and the Operating Partnership shall have
obtained all necessary consents or approvals of governmental
authorities or third parties to the consummation of the transactions
contemplated hereby;
(vi) no order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted,
entered, promulgated or enforced by any court of competent jurisdiction
or governmental or regulatory authority or instrumentality that
prohibits the consummation of the transactions contemplated hereby, and
no litigation or governmental proceeding seeking such an order shall be
pending or threatened;
(vii) there shall not have occurred between the date hereof
and the Closing Date any material adverse change in the businesses
(other than the Partnership's business) proposed to be acquired and
operated by the Operating Partnership in following the IPO or the
formation of the Private REIT, as applicable
(viii) Contributor shall have received the Consideration or
the Private REIT Consideration, as applicable; and
(ix) the Closing shall have occurred under the Contribution
Agreement dated as of the date hereof among the Company, the Operating
Partnership and Office Invest Sub LLC.
The foregoing conditions may be waived by Contributor in its sole
and absolute discretion.
2.2 Time and Place. The date, time and place of the transactions
contemplated hereunder shall be the day of the IPO Closing or the formation of
the Private REIT, as the case may be, at 10:00 a.m. in the office of Battle
Fowler LLP, 75 East 55th Street, New York, New York 10022 (the "CLOSING" or
"CLOSING DATE"). The transfers described in Article I hereof and all closing
deliveries shall be deemed concurrent for all purposes and shall occur
immediately after the closing of the IPO.
2.3 Closing Deliveries. At the Closing, the parties shall make,
execute, acknowledge and deliver, or cause to be made, executed, acknowledged
and delivered, the legal documents and other items (collectively, the "CLOSING
DOCUMENTS") necessary to carry out the intention of this
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<PAGE> 18
Agreement, which Closing Documents and other items shall include, without
limitation, the following:
(a) a Contribution and Assumption Agreement in substantially
the form of EXHIBIT B attached hereto and made a part hereof;
(b) the Amendment evidencing the transfer of OP Units to
Contributor;
(c) the Management Agreement Amendments;
(d) an Exchange Rights Agreement in substantially the form of
EXHIBIT E attached hereto and made a part hereof;
(e) a Registration Rights Agreement in substantially the form
of EXHIBIT F attached hereto and made a part hereof;
(f) a Lock-Up Agreement in substantially the form of EXHIBIT G
attached hereto and made a part hereof;
(g) the Partnership's books and records and securities or
other evidences of ownership held by Contributor, provided, however, that
Contributor shall continue to have reasonable access to inspect the same from
time to time;
(h) an affidavit from Contributor, stating under penalty of
perjury Contributor's United States taxpayer identification number and that
Contributor is not a foreign person pursuant to section 1445(b)(2) of the Code
and a comparable affidavit satisfying any other withholding requirements;
(i) secretary's certificates from each of the Company (on its
own behalf and as general partner of the Operating Partnership) and Contributor
certifying as to each of the Company's, the Operating Partnership's and
Contributor's respective organizational documents and resolutions or other
actions authorizing the consummation of the transactions contemplated hereby;
and
(j) customary opinions of counsel relating to the organization
and good standing of Contributor, on the one hand, and the Company and the
Operating Partnership, on the other, authorization of the transactions
contemplated hereby, due execution, delivery and enforceability of this
Agreement and such other matters as shall be reasonably requested by the party
or parties receiving such opinion.
Notwithstanding the foregoing, in the event of a Closing resulting
from the exercise of the option set forth in Section 1.11 hereof, Contributor
shall not be required to deliver the documents set forth in Section 2.3(d), (e)
and (f) above.
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<PAGE> 19
2.4 Closing Costs. The Operating Partnership shall pay any documentary
transfer taxes, escrow charges, title charges and recording taxes or fees
incurred in connection with the transactions contemplated hereby
(notwithstanding the allocation of such expenses as provided in connection with
the calculation of the Consideration).
2.5 Good Faith Efforts. Each of the parties hereto agrees to proceed in
good faith to facilitate the IPO. The Company has and agrees to continue to
diligently pursue the IPO until the earlier to occur of (i) December 13, 1997,
and (ii) the date upon which the Company sends written notice to Contributor
that it reasonably believes that the IPO cannot be completed by December 13,
1997 (a "REIT TERMINATION NOTICE"). The Company shall provide Contributor with
monthly progress reports in writing with respect to the IPO.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CONTRIBUTOR
As a material inducement to the Company and the Operating Partnership
to enter into this Agreement and to consummate the transactions contemplated
hereby, Contributor hereby makes to the Company and the Operating Partnership,
with respect to the Property Interests, each of the representations and
warranties set forth in this Article III, which representations and warranties
(unless otherwise noted) are true as of the date hereof. As a condition to the
Operating Partnership's obligation to consummate the contribution of
Contributor's Property Interests to the capital of the Operating Partnership,
such representations and warranties must be true as of the Closing Date.
3.1 Title to Interests.
(a) Contributor owns beneficially and of record, free and clear of
any claim, lien, pledge, voting agreement, option, charge, security interest,
mortgage, deed of trust, encumbrance, right of assignment, purchase right or
other rights of any nature whatsoever (except for any of the foregoing given in
respect of the mortgage indebtedness encumbering the Properties or arising under
the Partnership Agreement (any of the foregoing, a "PERMITTED PLEDGE")) (each,
an "ENCUMBRANCE"), and has full power and authority to convey free and clear of
any Encumbrances, its Property Interests and, upon delivery of a Contribution
and Assumption Agreement by Contributor conveying its Property Interests and
delivery of the Consideration by the Company and the Operating Partnership for
such Property Interests as herein provided, the Company and the Operating
Partnership will acquire, as a contribution to its capital, good and valid title
to the Property Interests, free and clear of any Encumbrance, except
Encumbrances created in favor of the Company or the Operating Partnership by the
transactions contemplated hereby.
(b) Contributor will fund before the same is past due all capital
contributions and advances to the Partnership that are required to be funded or
advanced prior to the Closing.
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<PAGE> 20
(c) In making the representations in this Section 3.1
regarding the absence of Encumbrances, Contributor may assume that all consents
and waivers of rights required to be received under the Partnership Agreement
have been given by all other partners or members of the Partnership, as the case
may be.
3.2 Organization; Authority; No Conflicts
(a) Contributor is a corporation duly organized, validly existing
and in good standing under the laws of the state of its organization.
(b) Contributor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of Contributor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver the Property
Interests to the Company and the Operating Partnership in accordance
with this Agreement.
(c) (i) All applicable corporate, partnership, limited liability
company, trust or other action necessary for such Contributor to execute and
deliver this Agreement, the Closing Documents and each other agreement, document
and instrument executed by or on behalf of Contributor pursuant to this
Agreement, and to perform the transactions contemplated hereby and thereby, has
been taken, or will be taken prior to the Closing Date.
(ii) Except for any that have been obtained, no approval,
authorization or consent of the shareholders, limited partners, members (other
than a managing member) or beneficiaries of Contributor is or was required for
the execution, delivery and performance described in paragraph (c)(i) above.
(d) This Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of
Contributor pursuant to this Agreement constitute, or when executed and
delivered will constitute, the legal, valid and binding obligation of
Contributor, each enforceable in accordance with its respective terms, subject,
however, as to enforceability to applicable bankruptcy, insolvency, moratorium,
fraudulent conveyance, and other similar laws of general applicability and to
general principles of equity (whether interpreted in a proceeding at law or in
equity).
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution,
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<PAGE> 21
delivery and performance of this Agreement, the Closing Documents and each other
agreement, document and instrument to be executed and delivered by or on behalf
of such Contributor:
(i) does not and will not violate Contributor's partnership
agreement or operating agreement, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to Contributor or require
Contributor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which
Contributor is a party or by which the property of Contributor is bound
or affected, or result in the creation of any Encumbrance on any of the
property or assets of the Partnership.
(f) In making the representations set forth in this Section
3.2, Contributor may assume
(i) that all consents and waivers of rights required to be
received under the Partnership Agreement have been given by all other
partners or members of the Partnership, as the case may be;
(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released; and
(iii) that MMLIC has given all necessary consents and
approvals.
(g) Notwithstanding anything to the contrary contained in this
Agreement, Contributor
(i) makes no representation or warranty regarding the
necessity of receiving the consent or approval of MMLIC to the
transactions contemplated hereby,
(ii) hereby delegates to the Company and the Operating
Partnership all necessary authority to act on their own behalf and on
behalf of Contributor to obtain any such required consent or approval
(including the right to pursue all available remedies), and
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(iii) agrees to exercise commercially reasonable efforts in
concert with the Company and the Operating Partnership to procure any
such required consent or approval,
provided, however, that in the case of (ii) and (iii), neither the Company nor
the Operating Partnership may obligate Contributor to make any payment or
perform or refrain from performing any action in connection therewith.
3.3 Litigation.
(a) Contributor knows of no litigation or proceeding, whether
judicial, administrative or arbitral, pending or overtly threatened, affecting
all or any portion of Contributor's Property Interests (other than litigation or
proceedings with respect to the Properties) or Contributor's ability to
consummate the transactions contemplated hereby.
(b) Contributor knows of no outstanding order, writ,
injunction or decree of any court, government, governmental entity or authority
or arbitration against or affecting all or any portion of its Property Interests
which would impair such Contributor's ability to enter into and perform all of
its obligations under this Agreement.
3.4 No Other Agreements.
(a) Except as set forth in the Partnership Agreement and this
Agreement, Contributor has made no agreement with, and will not enter into any
agreement with, and has no obligation (absolute or contingent) to, any other
person or entity to sell, transfer, dispose of or in any way encumber any of
Contributor's Property Interests or restricting in any way Contributor's ability
to contribute Contributor's Property Interests to the capital of the Company or
the Operating Partnership or to enter into any agreement with respect to
Contributor's Property Interests.
(b) In making the representations set forth in this Section
3.4, Contributor may assume
(i) that all consents and waivers required under the
Partnership Agreement have been given by all other partners or members
of the Partnership, as the case may be;
(ii) that, for purposes of making such representations as
of the date hereof, any Permitted Pledge has been released; and
(iii) that MMLIC has given all necessary consents and
approvals.
3.5 No Brokers. Contributor has not entered into, and covenants
that it will not enter into, any agreement, arrangement or understanding with
any person or entity which will result in
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the obligation of the Operating Partnership to pay any finder's fee, brokerage
commission or similar payment in connection with the transactions contemplated
hereby.
3.6 Investment Representations and Warranties.
(a) Contributor understands that an investment in the Company
or the Operating Partnership involves substantial risks and is capable of
bearing the economic risk of its investment in Common Stock or OP Units
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<PAGE> 24
(b) Contributor is an Accredited Investor.
(c) Contributor has not retained a person that is not employed
by Contributor to represent or advise it with respect to its investment
hereunder.
(d) Contributor has been given the opportunity to make a
thorough investigation of the proposed activities of the Company and the
Operating Partnership.
(e) Contributor has been afforded the opportunity to obtain
any additional information requested by it.
(f) Contributor has had an opportunity to ask questions of and
receive answers from representatives of the Company and the Operating
Partnership concerning the Company and the Operating Partnership and their
respective proposed activities and the terms and conditions of an investment in
Common Stock or OP Units.
(g) The Common Stock and OP Units to be issued to Contributor
will be acquired by Contributor for its own account, for investment only and not
with a view to, or with any intention of, a distribution or resale thereof, in
whole or in part, or the grant of any participation therein.
(h) Contributor was not formed for the specific purpose of
acquiring an interest in the Company or the Operating Partnership.
(i) Contributor acknowledges that:
(i) the Common Stock or OP Units to be issued to such
Contributor at the Closing have not been registered under the
Securities Act or state securities laws by reason of a specific
exemption or exemptions from registration under the Securities Act and
applicable state securities laws, and any shares of Common Stock or OP
Units that are represented by certificates will bear the legend set
forth in Section 3.7,
(ii) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of such Contributor
contained herein,
(iii) the Common Stock or OP Units to be issued to
Contributor at the Closing may not be resold or otherwise distributed
unless registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is available,
(iv) there is no public market for the OP Units, and
(v) except as set forth in the Registration Rights
Agreement, the Company and the Operating Partnership has no obligation
or intention to register the shares of Common Stock
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or OP Units to be issued to Contributor pursuant to this Agreement
under the Securities Act or any state securities laws or to take any
action that would make available any exemption from the registration
requirements of such laws.
(j) Contributor hereby acknowledges that because of the
restrictions on transfer or assignment of the Common Stock and OP Units to be
issued hereunder, which will be set forth in the OP Agreement and in the lock-up
agreement referred to in Section 1.9, Contributor may have to bear the economic
risk of the investment commitment evidenced by this Agreement and any shares of
Common Stock or OP Units issued hereunder for an indefinite period of time.
(k) The address previously provided by Contributor to the
Operating Partnership is the address of Contributor's principal place of
business, and Contributor has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal place of business is situated.
3.7 Legends. (a) Contributor acknowledges that each certificate,
if any, representing the OP Units (and any shares of Common Stock that might be
exchanged therefor) and each certificate representing shares of Common Stock
shall bear the following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
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(b) Contributor also acknowledges that each certificate representing
shares of Common Stock (including shares for which the OP Units might be
exchanged) shall also bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.80% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING
<PAGE> 27
COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR
CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR
CONSTRUCTIVELY OWN COMMON STOCK IN EXCESS OF THE ABOVE LIMITATIONS MUST
IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE RESTRICTIONS ON
TRANSFER OR OWNERSHIP ARE VIOLATED, THE COMMON STOCK REPRESENTED HEREBY
WILL BE AUTOMATICALLY TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE
BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IN ADDITION, THE
CORPORATION MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED
BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF
DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY
VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE
OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE
RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS IN THIS
LEGEND THAT HAVE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS
THE SAME MAY BE AMENDED FROM TIME TO TIME, SHALL HAVE THE MEANINGS
THEREIN DEFINED. A COPY OF SUCH CHARTER, INCLUDING THE RESTRICTIONS ON
TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF COMMON
STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE
DIRECTED TO THE SECRETARY OF THE CORPORATION.
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3.8 Covenant to Remedy Breaches. So long as this Agreement is in
effect, but in no event subsequent to the Closing Date, Contributor covenants to
use all reasonable efforts within its control:
(a) to prevent the breach of any representation or warranty of
Contributor hereunder;
(b) to satisfy all covenants of Contributor hereunder; and
(c) to clear promptly any breach of a representation, warranty
or covenant of Contributor hereunder upon its learning of same.
3.9 Actions Prior to Closing. Between the date hereof and the
Closing Date, Contributor shall not:
(a) sell or transfer all or any portion of any Property
Interest; or
(b) mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of any Property Interest.
3.10 Certain ERISA Matters. Contributor is neither an "employee
benefit plan" within the meaning of Section 3(3) of ERISA (a "PLAN") nor an
entity whose assets include, or will include immediately following the
consummation of the transactions contemplated hereby, the assets of a Plan
pursuant to Section 2510.3-101 of the regulations of the United States
Department of Labor. The execution, delivery and performance of this Agreement,
each Closing Document to which Contributor is a party and each such agreement,
document and instrument by the Contributor will not constitute a non-exempt
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code.
3.11 Principal Purpose. Contributor's principal purpose is other
than to permit the Partnership to satisfy the 100 partner limitation under
Treasury Regulation 1.7704-1(h)(3).
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY AND THE OPERATING PARTNERSHIP
As a material inducement to Contributor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Company and the
Operating Partnership hereby make to Contributor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the Closing Date.
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4.1 Authority.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland, and the
Operating Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware.
(b) Each of the Company and the Operating Partnership has full
right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to issue shares of Common Stock and OP Units, as
applicable, to each Contributor pursuant to and in accordance with the
terms of this Agreement.
(c) This Agreement, each Closing Document to which the Company
or the Operating Partnership is a party and each agreement, document and
instrument executed and delivered by the Company or the Operating Partnership
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Company or the
Operating Partnership party thereto, each enforceable in accordance with its
respective terms, subject, however, as to enforceability to applicable
bankruptcy, insolvency, moratorium, fraudulent conveyance, and other similar
laws of general applicability and to general principles of equity (whether
interpreted in a proceeding at law or in equity).
(d) The execution, delivery and performance of this Agreement,
each Closing Document to which the Company or the Operating Partnership is a
party and each such agreement, document and instrument by the Company or the
Operating Partnership:
(i) in the case of the Operating Partnership, does not
and will not violate the OP Agreement;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Company or the Operating
Partnership, as the case may be, or require the Company or the
Operating Partnership to obtain any approval, consent or waiver of, or
make any filing with, any person or authority (governmental or
otherwise) that has not been obtained or made and which does not remain
in effect; and
(iii) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of, any
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<PAGE> 30
indenture, deed of trust, mortgage, loan or credit agreement, any other
material agreement, contract, instrument, lease, permit or
authorization, or any order, writ, judgment, injunction, decree,
determination or arbitration award to which the Company or the
Operating Partnership is a party or by which the property of either of
them is bound or affected.
4.2 No Brokers. The Company and the Operating Partnership have not
entered into, and covenant that they will not enter into, any agreement,
arrangement or understanding with any person or entity which will result in the
obligation of Contributor to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
4.3 Sale of Property. The Company and the Operating Partnership agree
that, in connection with any sale of any of the Properties within two years
after the Closing Date, the Company and the Operating Partnership will pay
Contributor an amount representing the federal and state income tax liability
associated with the recognition of gain by Contributor in connection with such
sale (the "MAKE-WHOLE AMOUNT"). No Make-Whole Amount would be due in the case of
a transaction that does not result in the recognition of gain for tax purposes
(such as Section 1031 "like-kind" exchanges under the Code). The provisions of
this Section 4.3 shall survive the Closing for a period of two years.
4.4 Allocation of Built-in Gain. Notwithstanding anything to the
contrary contained in the OP Agreement, the Operating Partnership agrees to use
the "traditional method" described in Treasury Regulation 1.704-3(b) in making
allocations to its partners with respect to the Properties under Section 704(c)
of the Internal Revenue Code of 1986, as amended.
4.5 REIT Sponsors. The Company and the Operating Partnership represent
and warrant that the REIT Sponsors constitute all of the employees of the
Company and the Operating Partnership who will receive, directly or indirectly,
OP Units or shares of Common Stock in connection with the IPO, provided,
however, that (a) Clifford L. Stein is expected to receive, directly or
indirectly, OP Units and is also expected to be employed by the Company or the
Operating Partnership, and (b) Robert M. Adams is expected to receive, directly
or indirectly, OP Units and is also expected to be a director of the Company.
ARTICLE V
MISCELLANEOUS
5.1 Amendment. This Agreement may only be amended by a written
agreement duly executed by both Contributor and the Operating Partnership. No
waiver of any provision of this Agreement shall be valid unless in writing and
signed by the party against whom enforcement is sought.
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5.2 Entire Agreement; Counterparts; Applicable Law. This
Agreement:
(a) notwithstanding any provisions of the OP Agreement to the
contrary, this Agreement constitutes the entire agreement and, to the extent
specifically set forth herein, supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and, specifically, supersedes Sections 13.1(a)-(d) and
(f), 13.2, 13.4, 13.5 and 13.6 (but not Section 13.1(e) or Section 13.3) of the
Partnership Agreement; however, no part of Article 13 of the Partnership
Agreement shall be deemed superseded with respect to any REIT Election (as
defined in the Partnership Agreement) subsequent to the one currently being
exercised in connection with the IPO;
(b) may be executed in several counterparts, each of which
shall be deemed an original, and all of which shall constitute one and the same
instrument; and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
5.3 Assignability. This Agreement shall be binding upon, and shall
be enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns, provided,
however, that this Agreement may not be assigned (i) by the Company and the
Operating Partnership without the prior written consent of Contributor, or (ii)
except as permitted herein, by Contributor without the prior written consent of
the Company and the Operating Partnership, and any attempted assignment without
such consent shall be void and of no effect, provided further, however, that the
Company and the Operating Partnership may assign all or any portion of this
Agreement, the Closing Documents and any agreement contemplated hereunder or
thereunder to the Company or to a Controlled Affiliate of the Operating
Partnership or the Company without Contributor's consent. The term "CONTROLLED
AFFILIATE" shall mean an entity the majority of the voting stock of which, or
the general partner or managing member of which, is or is under the control of
and is beneficially owned by the Company, the Operating Partnership or a public
or private real estate investment trust controlled by Lawrence H. Feldman.
5.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
5.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, except as expressly provided herein.
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<PAGE> 32
5.6 Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall be interpreted so as reasonably to
effect the intent of the parties hereto. The parties agree (i) to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision and (ii) to execute any
amendment, consent or agreement deemed necessary or desirable by the Operating
Partnership to effect such replacement.
5.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent any breach of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are respectively entitled under this Agreement or
otherwise at law or in equity.
5.8 Notices. Any notice or demand which must or may be given under
this Agreement or by law shall, except as otherwise provided, be in writing and
shall be deemed to have been given (i) when physically received by personal
delivery, (ii) three (3) business days after being deposited in the United
States certified or registered mail, return receipt requested, postage prepaid,
or (iii) one (1) business day after being deposited with a nationally known
commercial courier service utilizing its next day delivery service (such as
Federal Express); addressed and delivered in the case of a notice to the
Operating Partnership to the following address:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Bradley A. Kaufman, Esq.
and addressed and delivered, in the case of a notice to Contributor, to the
address set forth in EXHIBIT A hereto.
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5.9 Waiver of Rights; Consents with Respect to Partnership
Interests. From and after the Closing Date,
(a) Contributor acknowledges that the agreements contained
herein and the transactions contemplated hereby and any actions taken in
contemplation of the transactions contemplated hereby (including the declaration
of any dividend or distribution in the form of Property Interests) may conflict
with and may not have been contemplated by the Partnership Agreement or another
agreement among one or more of the partners of the Partnership.
(b) With respect to the Partnership, Contributor expressly
gives all Consents (and any consent necessary to authorize the proper parties in
interest to give such Consents) and Waivers necessary or desirable to facilitate
any Conveyance Action relating to such partnership (as such terms are defined
below).
(c) Contributor agrees that it will take no action to enjoin,
or seek damages resulting from, any Conveyance Action by any holder of a direct
or indirect interest in the Partnership.
(d) The Waivers and Consent contained in this Section 5.9
shall terminate upon the termination of this Agreement, except as to
transactions completed hereunder prior to termination.
(e) As used herein, the term "CONVEYANCE ACTION" means, with
respect to the Partnership,
(i) the conveyance or agreement to convey by a partner thereof
or by any holder of an indirect interest therein (whether or not such partner or
holder is a Contributor hereunder) of its direct or indirect interest in the
Partnership to the Operating Partnership or the Company or to another person in
connection with the formation of the Operating Partnership or the Company, or
(ii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company,
(B) the direct or indirect acquisition by the Operating
Partnership or the Company of any such direct or indirect interest, or
(C) the transactions described in or contemplated by the
Registration Statement or the prospectus included therein relating to
the IPO, or
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(iii) the taking by any such partner or holder of any
action necessary or desirable to facilitate any of the foregoing,
including, without limitation, the following (provided that the same
are taken in furtherance of the foregoing):
(A) any sale or distribution to any person of a
direct or indirect interest in the Partnership or an undivided
tenant-in-common interest in the Property represented by such
partnership interest;
(B) entering into any agreement with any person or
entity that grants to such person or entity the right to
purchase a direct or indirect interest in the Partnership; and
(C) giving the Consents and Waivers contained in this
Section 5.9 or consents or waivers similar thereto in form or
purpose.
(f) As used herein, the term "CONSENTS" means any consent
deemed by the Operating Partnership to be necessary or desirable under the
Partnership Agreement or any other agreement among all or any of the holders of
interests therein or any other agreement relating thereto or referred to
therein:
(i) to permit any and all Conveyance Actions relating to the
Partnership or to amend the Partnership Agreement and/or other
agreements so that no provision thereof prohibits, restricts, impairs
or interferes with any Conveyance Action (such amendment to include,
without limitation, the deletion of provisions which cause a default
under such agreement if interests therein are transferred for other
than cash);
(ii) to admit the Operating Partnership (or the Company or
any affiliate of the Operating Partnership or the Company in accordance
with Section 5.3 above) as a substitute limited partner or general
partner or member of the Partnership, as the case may be, upon the
Operating Partnership's acquisition of a limited or general partner or
membership interest therein, respectively, and to adopt such amendment
as is necessary or desirable to effect such admission;
(iii) to adopt any amendment as may be deemed desirable by the
Company or the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general
partnership or membership interest therein, as the case may be,
provided, however, that such amendment shall not result in any
increased liability on the part of any Contributor hereunder or under
the Partnership Agreement; and
(iv) to continue the Partnership following the transfer of
interests therein to the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in accordance
with Section 5.3 above).
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(g) As used herein, the term "WAIVERS" means, with respect
to the Partnership, the waiving of any and all rights that Contributor may have
with respect to, and (to the extent possible) that any other person may have
with respect to, or that may accrue to Contributor or other person upon the
occurrence of, a Conveyance Action relating to such partnership, including,
without limitation, the following rights:
(i) rights of notice;
(ii) rights to response periods;
(iii) rights to purchase the direct or indirect interest of
another partner in the Partnership (or the property interests
represented by such partnership interest) or to sell Contributor's or
other person's direct or indirect interest therein to another partner;
(iv) rights to sell Contributor's or other person's direct or
indirect interest therein at a price other than as provided herein; or
(v) rights to prohibit, limit, invalidate, or otherwise
restrict or impair any such Conveyance Action or to cause a termination
or dissolution of the Partnership because of such Conveyance Action.
5.10 Releases and Waivers. Each of the releases and waivers
enumerated in this Section 5.10 shall become effective at Closing.
(a) As of the Closing, Contributor and the Manager jointly and
severally irrevocably waive, release and forever discharge the Company and the
Operating Partnership and their respective affiliates, partners (including
Lawrence H. Feldman), agents, attorneys, successors and assigns of and from, any
and all charges, complaints, claims, liabilities, damages, actions, causes of
action, losses and costs of any nature whatsoever (collectively, "CONTRIBUTOR
CLAIMS"), known or unknown, suspected or unsuspected, arising out of or relating
to any of the Partnership agreements, this Agreement or any other matter which
exists at the Closing, except for Contributor Claims arising from the breach of
any representation, warranty, covenant or obligation under this Agreement.
Notwithstanding the foregoing, any indemnities, representations or warranties
made by any affiliate or partner of the Company or the Operating Partnership
(including Lawrence H. Feldman) in the Partnership Agreement shall survive as
provided in the Partnership Agreement.
(b) As of the Closing, the Company and the Operating
Partnership jointly and severally irrevocably waive, release and forever
discharge Contributor, the Manager and their respective agents, attorneys,
successors and assigns of and from, any and all charges, complaints, claims,
liabilities, damages, actions, causes of action losses and costs of any nature
whatsoever (collectively, "OPERATING PARTNERSHIP CLAIMS"), known or unknown,
suspected or unsuspected, arising out of or relating to any of the Partnership
Agreements, this Agreement or any other matter
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<PAGE> 36
which exists at the Closing, except for Operating Partnership Claims arising
from the breach of any representation, warranty, covenant or obligation under
this Agreement.
(c) Other than as provided in Section 5.10(a), as of the
Closing, Contributor and the Manager jointly and severally waive and relinquish
all rights and benefits otherwise afforded to Contributor under the Partnership
Agreement including, without limitation, any right to consent to or approve of
the sale or contribution by the other partners or members of the Partnership, as
the case may be, of their partnership interests to the Company or the Operating
Partnership.
5.11 Confidentiality. Contributor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
common stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission and shall not communicate at any
time the terms of this Agreement to any person other than counsel or advisors to
Contributor who agree to keep such terms confidential and any lender holding a
lien on any Property Interests. Each Contributor shall treat all information
received from the Operating Partnership or its counsel or advisors pertaining to
the Operating Partnership or the Company confidential and shall disseminate same
only to counsel to such Contributor who agree to keep such information
confidential.
5.12 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
5.13 Legal Fees and Expenses. The Company and the Operating
Partnership, on the one hand, and Contributor, on the other, agree that each
side will bear the fees and expenses of its own counsel and counsel to their or
its affiliates relating to or incurred in connection with the negotiation,
execution, delivery and performance of this Agreement and the transactions
contemplated hereby, including, without limitation, the IPO and any financing or
other transactions contemplated or effected by the Company or the Operating
Partnership prior to the Closing.
5.14 Termination. This Agreement shall terminate and the
obligations of the parties hereunder shall be of no further force and effect
upon
(a) the mutual consent thereto of the parties hereto;
(b) the failure of the Closing to occur on or prior to
December 13, 1997; or
(c) the delivery of a REIT Termination Notice.
5.15 Survival. It is the express intention and agreement of the
parties hereto that the representations, warranties and covenants of the Company
and the Operating Partnership and
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Contributor set forth in this Agreement shall
survive the consummation of the transactions contemplated hereby.
5.16 Time of the Essence. Time is of the essence with respect to
all obligations of Contributor under this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
COMPANY:
TOWER REALTY TRUST, INC.
By: /s/ Lawrence H. Feldman
-------------------------------------
Name: Lawrence H. Feldman
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc.,
its general partner
By: /s/ Lawrence H. Feldman
-------------------------------------
Name: Lawrence H. Feldman
Title:
CONTRIBUTOR:
DRA OPPORTUNITY FUND
By: /s/ Francis X. Tansey
-------------------------------------
Name: Francis X. Tansey
Title: President
-32-
<PAGE> 38
EXHIBIT A
TO
CONTRIBUTION AGREEMENT
PARTNERSHIPS AND INTERESTS
Partnership
Corporate Center Associates, Limited Partnership, a Delaware limited partnership
Corporate Center, L.L.C.
Properties Directly or
Indirectly Held by Partnership
(the following are the "Properties,"
as defined in the Contribution Agreement
to which this Exhibit A is attached)
Corporate Center
Type of Interest
On the date hereof and on the Closing Date, Contributor owns and will own (i) a
limited partnership interest in Corporate Center Associates, Limited
Partnership, and (ii) a membership interest in Corporate Center, L.L.C., the
owner of a 1% general partnership interest in Corporate Center Associates,
Limited Partnership; of which Contributor hereby contributes all of its limited
partnership and membership interests, together with all right, title and
interest in all income, distributions and other payments due or owing to
Contributor, pursuant to the Corporate Center Associates, Limited Partnership
Amended, Restated and Reconstituted Agreement of Limited Partnership dated as of
September 13, 1995. No affiliate of the original Contributor under the
Contribution Agreement to which this Exhibit A is attached owns any interest in
the Property or the Property Interests, other than the indirect beneficial
interests of the equity owners of such original Contributor.
A-1
<PAGE> 39
Address
c/o DRA Advisors, Inc.
1180 Avenue of the Americas
New York, New York 10036
Attention: Francis X. Tansey
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attention: Russel T. Hamilton, Esq.
A-2
<PAGE> 40
EXHIBIT B
TO
CONTRIBUTION AGREEMENT
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
is hereby acknowledged, the undersigned hereby assigns, transfers, contributes
and conveys to Tower Realty Operating Partnership, L.P. a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), its entire legal and beneficial
right, title and interest in and to the assets, interests and other rights set
forth on Exhibit A to this Agreement and described thereon as being assigned,
transferred, contributed and conveyed hereunder (the "PARTNERSHIP INTEREST"),
including, without limitation, all rights to receive distributions of money,
profits and other assets from or relating to the Partnership Interest, presently
existing or hereafter at any time arising or accruing TO HAVE AND TO HOLD the
same unto the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating Partnership assumes
all obligations in respect of the Partnership Interest.
Executed: March __, 1997
[DRA OPPORTUNITY FUND]
By: _________________________________
Name:
Title:
B-1
<PAGE> 41
EXHIBIT C
TO
CONTRIBUTION AGREEMENT
CUSTOMARY CLOSING COSTS SPLITS
Transfer Taxes - N/A
Escrow Fees - Customarily split evenly between seller and purchaser.
Recording Fees - Customarily paid by purchaser.
Title Insurance - Seller customarily pays for purchaser's basic owner's
policy.
Other closing costs which are normally paid or payable by Seller
C-1
<PAGE> 42
EXHIBIT D
TO
CONTRIBUTION AGREEMENT
MODEL FOR CONSIDERATION CALCULATION
To be attached.
D-1
<PAGE> 43
EXHIBIT E
TO
OPTION AGREEMENT
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
__________ __, 1997, is entered into by and among Tower Realty Trust, Inc., a
Maryland corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, together with certain other limited partners, has
formed the Operating Partnership pursuant to the Agreement of Limited
Partnership of the Operating Partnership dated __________ __, 1997 (as such
agreement may be amended or amended and restated from time to time, the
"PARTNERSHIP AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited Partners (as
defined below) directly or indirectly hold units of limited partnership interest
("OP UNITS") in the Operating Partnership.
(c) The Operating Partnership has agreed to provide the Limited
Partners with certain direct or indirect rights to exchange their OP Units for
cash or, at the election of the Company, for shares of the Company's common
stock, par value $0.01 per share (the "REIT STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
E-1
<PAGE> 44
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Stock in REIT
Stock or makes a distribution to all holders of its outstanding REIT Stock in
REIT Stock; (ii) subdivides its outstanding REIT Stock; or (iii) combines its
outstanding REIT Stock into a smaller number of shares of REIT Stock, the
Exchange Factor shall be adjusted by multiplying the Exchange Factor by a
fraction, the numerator of which shall be the number of shares of REIT Stock
issued and outstanding on the record date for such dividend, contribution,
subdivision or combination assuming for such purpose that such dividend,
distribution, subdivision or combination has occurred as of such time, and the
denominator of which shall be the actual number of shares of REIT Stock
(determined without the above assumption) issued and outstanding on the record
date for such dividend, distribution, subdivision or combination. Any adjustment
to the Exchange Factor shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of Merrill Lynch Pierce Fenner & Smith Incorporated and/or
the Company.
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
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<PAGE> 45
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to
the product of the number of OP Units offered for exchange by an Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company or the Operating Partnership issues to all holders
of REIT Stock rights, options, warrants or convertible or exchangeable
securities entitling the stockholders to subscribe for or purchase REIT Stock,
or any other securities or property (collectively, the "rights"), then the REIT
Stock Amount shall also include such rights that a holder of that number of
shares of REIT Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the
New York Stock Exchange (the "NYSE"), any other national securities
exchange or the Nasdaq Stock Market ("Nasdaq"), the closing price on
such day, or if no such sale takes place on such day, the average of
the closing bid and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading
on the NYSE, any national securities exchange or Nasdaq, the last
reported sale price on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
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<PAGE> 46
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5
hereof, and subject to any limitations under applicable law, the Operating
Partnership hereby grants to each Limited Partner and each Limited Partner
hereby accepts the right (the "EXCHANGE RIGHT"), exercisable on or after the
date that is one (1) year after the closing of the IPO, to exchange on a
Specified Exchange Date all or a portion of the OP Units held by such Limited
Partner at an exchange price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of
Exchange delivered to the Operating Partnership, with a copy delivered to the
Company, by the Limited Partner who is exercising the Exchange Right (the
"EXCHANGING PARTNER"); provided, however, that the Company, on behalf of the
Operating Partnership, may elect, after a Notice of Exchange is delivered, to
satisfy the Exchange Right which is the subject of such notice in accordance
with Section 2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding
the provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging
Partner within five (5) Business Days after the receipt by the Company
of such Notice of Exchange,
E-4
<PAGE> 47
(ii) each Exchanging Partner hereby agrees to execute such
documents and instruments as the Company may reasonably require in
connection with the issuance of REIT Stock upon exercise of the
Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of
the Company,
(b) would otherwise jeopardize the REIT status of the Company,
or
(c) would cause the acquisition of the REIT Stock by the
Limited Partner to be "integrated" with any other distribution of REIT
Stock by the Company for purposes of complying with the registration
provisions of the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article
2, any person to whom OP Units have been pledged, in compliance with the terms
of the Lock-up Agreement, may exercise its Exchange Right prior to the date that
is one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
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<PAGE> 48
(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of
the Exchange Right, the Company shall reserve for issuance such number of shares
of REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall
deliver to Limited Partners in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
stockholders and all other communications transmitted from time to time by the
Company to its stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable
upon exchange of OP Units (or the cash equivalent amount thereof if the Cash
Amount is paid) shall be computed on the basis of the aggregate amount of OP
Units so surrendered.
(c) Instead of any fractional shares of REIT Stock which would
otherwise be issuable upon exchange of any OP Units, the Operating Partnership
shall pay a cash adjustment in respect of such fraction in an amount equal to
the Cash Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
E-6
<PAGE> 49
(a) (i) Such Exchanging Partner has received and reviewed
(A) a copy of the prospectus contained in the
Registration Statement on Form S-11 filed by the Company in
connection with the IPO, any prospectus contained in any
Registration Statement subsequently filed by the Company, and
any supplement or amendment thereto (each, a "PROSPECTUS"),
and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, made by
the Company with the SEC pursuant to the Securities Exchange
Act of 1934, as amended, and the rules and regulations
thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial
experience of those persons, if any, retained by it to represent or
advise it with respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience
in financial and business matters and in making investment
decisions of this type that it is capable of evaluating the
merits and risks of and of making an informed investment
decision with respect to an investment in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited
investor" as defined in Rule 501 of the regulations
promulgated under the Securities Act.
(B) If such Exchanging Partner has retained or
retains a person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such
representation and
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<PAGE> 50
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
(b) (i) Such Exchanging Partner understands that an investment
in the Company involves substantial risks.
(ii) Such Exchanging Partner has been given the opportunity
to make a thorough investigation of the activities of the Company and
has been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of such Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
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<PAGE> 51
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action that would make
available any exemption from the registration requirements of
such laws, except as provided in the Registration Rights
Agreement entered into by the Company and the Exchanging
Partner (the "REGISTRATION RIGHTS AGREEMENT").
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
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<PAGE> 52
4.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
4.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with
the consent of the Company by a vote of the Limited Partners in the same manner
as the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein,
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<PAGE> 53
provided, however, that the Company shall vote its limited partnership interests
in proportion to the votes of the other Limited Partners.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By: ____________________________________________
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By: ______________________________________
Name:
Title:
LIMITED PARTNERS:
_______________________________
Signature
_______________________________
Name (Please Print or Type)
E-11
<PAGE> 54
Exhibit A
Name and Address of Limited Partners
[To be attached]
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<PAGE> 55
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated: __________________________
______________________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
____________________________________________
(Signature of Limited Partner)
_____________________________
____________________________________________
(Street Address)
____________________________________________
(City) (State) (Zip Code)
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<PAGE> 56
If REIT Stock is to be issued, issue to:
Name: _____________________________________
Limited Partner's social security or tax
identification number:______________________
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<PAGE> 57
EXHIBIT F
TO
OPTION AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, limited liability companies, corporations and
other entities which are Holders or in which the Holders own direct or indirect
interests (the "PROPERTY PARTNERSHIPS") pursuant to Option or Contribution
Agreements (the "OPTION AGREEMENTS") among the Operating Partnership and the
Grantors named therein, and in connection therewith the Holders will receive
units of limited partnership interest in the Operating Partnership (such units
of limited partnership interest being referred to hereinafter as the "OP
UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their OP
Units for cash and, at the option of the Company, the Company may satisfy that
redemption request on behalf of the Operating Partnership through the issuance
of the Company's Common Stock, par value $0.01 per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
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"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement
relating to the sale thereof shall have become effective under the
Securities Act and which have been disposed of under such Registration
Statement or
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
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"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company
and of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not delay,
suspend or withdraw a Registration Statement for such reason for more
than 60 days or more often than twice during any period of 12
consecutive months.
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(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration Statement
covering the Registrable Securities held by more than one Holder.
2.2 Expenses.
(i) The Company shall pay all Registration Expenses in
connection with any registration pursuant to Article II.
(ii) Each Holder shall pay all underwriting discounts, if
any, sales commissions, the fees and disbursements of counsel
representing such Holder and transfer taxes, if any, relating to the
sale or disposition of such Holder's Registrable Securities pursuant to
the Shelf Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that
does not, within 10 days after receipt of a reasonable request by the Company
for information in connection with the Shelf Registration Statement, provide
such information to the Company, shall not be entitled to have its Registrable
Securities included in the Shelf Registration Statement.
2.4 Effect of Material Breach. In the event that the Company shall
breach any of its material obligations hereunder in any material respect, any
Holder of Registrable Securities may demand that the Company file a registration
statement covering such Holder's Registrable Securities. The Company agrees to
file such registration statement within 60 days after receipt of such demand and
agrees to use its best efforts to procure the effectiveness of such registration
statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of the
Company with respect to the Registration Statement required to be filed pursuant
to Article 2 hereof, the Company shall, to the extent applicable:
(i) Prepare and file with the SEC, within the time period
set forth in Section 2 hereof, a Shelf Registration Statement, which
Shelf Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof, and
(B) shall comply as to form in all material respects
with the requirements of the applicable form of registration
statement and include all financial statements required by the
SEC to be filed therewith.
(ii) (A) Subject to Article III, Section (a)(ii)(B),
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(I) prepare and file with the SEC such amendments
and post-effective amendments to each such Registration
Statement as may be necessary to keep such Registration
Statement effective for the applicable period;
(II) cause each such Prospectus to be supplemented
by any required prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 or any similar rule that may
be adopted under the Securities Act;
(III) respond as promptly as practicable to any
comments received from the SEC with respect to the Shelf
Registration Statement, or any amendment, post-effective
amendment or supplement relating thereto; and
(IV) comply with the provisions of the Securities
Act with respect to the disposition of all securities covered
by each Registration Statement during the applicable period in
accordance with the intended method or methods of distribution
by the selling Holders thereof.
(B) (I) Each Holder shall promptly provide to the
Company such information as the Company reasonably requests in
order to identify such Holder and the method of distribution
in a post-effective amendment to the Registration Statement or
a supplement to the Prospectus.
(II) Such Holder also shall notify the Company in
writing upon completion of any offer or sale or at such time
as such Holder no longer intends to make offers or sales under
the Registration Statement.
(iii) Furnish to each Holder of Registrable Securities, without
charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other
documents as such Holder may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Securities; the
Company consents to the use of the Prospectus, including each preliminary
Prospectus, by each such Holder of Registrable Securities in connection
with the offering and sale of the Registrable Securities covered by the
Prospectus or the preliminary Prospectus.
(iv) Use its reasonable efforts to register or qualify the
Registrable Securities by the time the applicable Registration Statement
is declared effective by the SEC under all applicable state securities or
"blue sky" laws of such jurisdictions as any Holder of Registrable
Securities covered by a Registration Statement shall reasonably request in
writing, keep each such registration or qualification effective during the
period such Registration Statement is required to be kept effective, and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to
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consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that
the Company shall not be required to
(A) qualify generally to do business in any jurisdiction or to
register as a broker or dealer in such jurisdiction where it would not
otherwise be required to qualify but for this Article III, Section
(a)(iv),
(B) subject itself to taxation in any such jurisdiction, or
(C) submit to the general service of process in any such
jurisdiction.
(v) Notify each Holder of Registrable Securities promptly and, if
requested by such Holder, confirm such notification in writing
(A) when a Registration Statement has become effective and
when any post-effective amendments and supplements thereto become
effective,
(B) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose,
(C) if the Company receives any notification with respect to
the suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation of any proceeding for such
purpose, and
(D) of the happening of any event during the period a
Registration Statement is effective which is of a type specified in
Article II, Section 2.1(iii) hereof or as a result of which such
Registration Statement or the related Prospectus contains any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made (in
the case of the Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment.
(vii) Furnish to each Holder of Registrable Securities, without charge,
at least one conformed copy of each Registration Statement and any
post-effective amendment thereto (without documents incorporated therein by
reference or exhibits thereto, unless requested).
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(viii) (A) Cooperate with the selling Holders of Registrable Securities
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend; and
(B) enable certificates for such Registrable Securities to be
issued for such numbers of shares of Common Stock and registered in
such names as the selling Holders may reasonably request at least two
business days prior to any sale of Registrable Securities.
(ix) Subject to Article II, Section 2.1(iii) and Article III, Section
(a)(ii)(B) hereof, upon the occurrence of any event contemplated by Article III,
Section (a)(v)(D) hereof, use its reasonable efforts promptly to prepare and
file a supplement or prepare, file and obtain effectiveness of a post-effective
amendment to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(x) Make available for inspection by representatives of the Holders of
the Registrable Securities and any counsel or accountant retained by such
Holders, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the respective officers, directors and
employees of the Company to supply all information reasonably requested by any
such representative, counsel or accountant in connection with a Registration
Statement; provided, however, that such records, documents or information which
the Company determines, in good faith, to be confidential and notifies such
representatives, counsel or accountants in writing that such records, documents
or information are confidential shall not be disclosed by such representatives,
counsel or accountants unless
(A) the disclosure of such records, documents or information
is necessary to avoid or correct a material misstatement or omission in
a Registration Statement,
(B) the release of such records, documents or information is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, or
(C) such records, documents or information have been generally
made available to the public.
(xi) Within a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus, provide copies of such document (not
including any documents incorporated by reference therein unless requested) to
the Holders of Registrable Securities.
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(xii) Use its reasonable efforts to cause all Registrable Securities to
be listed on any securities exchange on which similar securities issued by the
Company are then listed.
(xiii) Provide a CUSIP number for all Registrable Securities, not later
than the effective date of a Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering at
least 12 months which shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder.
(xv) Use its reasonable efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable Holders to consummate the
disposition of such Registrable Securities.
(b) The Company may require each Holder of Registrable Securities to furnish to
the Company in writing such information regarding the proposed distribution by
such Holder of such Registrable Securities as the Company may from time to time
reasonably request in writing.
(c) In connection with and as a condition to the Company's obligations with
respect to the Registration Statement required to be filed pursuant to Section 2
hereof and this Section 3, each Holder agrees that
(i) it will not offer or sell its Registrable Securities under the
Registration Statement until it has received copies of the supplemental or
amended Prospectus contemplated by Article III, Section (a)(ii) hereof and
receives notice that any post-effective amendment has become effective, and
(ii) upon receipt of any notice from the Company of the happening of
any event of the kind described in Article III, Section (a)(v)(D) hereof, such
Holder will forthwith discontinue disposition of Registrable Securities pursuant
to a Registration Statement until such Holder receives copies of the
supplemented or amended Prospectus contemplated by Article III, Section (a)(ix)
hereof and receives notice that any post-effective amendment has become
effective, and, if so directed by the Company, such Holder will deliver to the
Company (at the expense of the Company) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
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IV Indemnification; Contribution.
4.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder (within the meaning of Section 15 of the Securities
Act) as follows:
(a) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act, including
all documents incorporated therein by reference, or
(B) the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein not misleading or
(C) arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including
all documents incorporated therein by reference, or
(D) the omission or alleged omission therefrom of a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading;
(b) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company, which consent shall
not be unreasonably withheld or delayed; and
(c) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably
incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency
or body, commenced or threatened, in each case whether or not a party,
or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (a) or (b)
above;
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provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly
for use in a Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of any such
amended or supplemental Prospectus by the Company, if such loss,
liability, claim, damage or expense would not have arisen had such
delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees to
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, under the same circumstances and to the same
extent as the indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the written
consent of such Holder, which consent shall not be unreasonably withheld or
delayed), but only insofar as such loss, liability, claim, damage or expense
arises out of or is based upon any untrue statement or omission, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability which it
may have under the indemnity agreement provided in Section
4.1(a) or 4.1(b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the
indemnified party results in the forfeiture by the
indemnifying party of substantial rights and defenses and
(B) shall not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than
the indemnification obligation provided under Section 4.1(a)
or 4.1(b) above.
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(ii) If the indemnifying party so elects within a reasonable
time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's
own expense with counsel chosen by the indemnifying party and approved
by the indemnified parties defendant in such action or proceeding,
which approval shall not be unreasonably withheld; provided, however,
that, if such indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such indemnified
party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which
are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled
to assume such defense and the indemnified party or parties shall be
entitled to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the
proviso to Section 4.1(c), such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's
defense, and counsel for the indemnified party or parties
shall be entitled to conduct the defense of such indemnified
party or parties, it being understood that both such counsel
will cooperate with each other to conduct the defense of such
action or proceeding as efficiently as possible.
(B) If an indemnifying party is not so entitled to
assume the defense of such action or does not assume such
defense, after having received the notice referred to in
Section 4.1(c), the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified
party or parties as incurred.
(C) In such event, however, no indemnifying party
will be liable for any settlement effected without the written
consent of such indemnifying party, which consent may not be
unreasonably withheld or delayed.
(iv) If an indemnifying party is entitled to assume, and assumes, the
defense of such action or proceeding in accordance with this Section 4(c), such
indemnifying party shall not be liable for any fees and expenses of counsel for
the indemnified parties incurred thereafter in connection with such action or
proceeding.
4.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement
provided for in this Section 4 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall contribute to
the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity
agreement incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the relative
fault of and benefits to the Company on the one
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hand and the selling Holders on the other (in such proportions
that the selling Holders are severally, not jointly,
responsible for the balance), in connection with the
statements or omissions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other
relevant equitable considerations.
(B) (I) The relative benefits to the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, the total proceeds
received by the indemnifying party and indemnified
parties in connection with the offering to which such
losses, claims, damages, liabilities or expenses
relate.
(II) The relative fault of the indemnifying
party and indemnified parties shall be determined by
reference to, among other things, whether the action
in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged
omission to state a material fact, has been made by,
or relates to information supplied by, such
indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent
such action.
(ii) (A) The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 4.4(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in Section 4.4(i).
(B) Notwithstanding the provisions of this Section
4.4, no selling Holder shall be required to contribute any
amount in excess of the amount by which the total price at
which the Registrable Securities of such selling Holder were
offered to the public exceeds the amount of any damages which
such selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
(iii) Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(iv) For purposes of this Section 4.4, each Person, if any,
who controls a Holder within the meaning of Section 15 of the Securities Act and
directors and officers of a Holder shall have the same rights to contribution as
such Holder, and each director of the Company, each officer of the Company who
signed the Registration Statement and each Person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act shall have the
same rights to contribution as the Company.
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V Filing of Exchange Act Reports; Rule 144 Sales
5.1 The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Exchange Act so as to
enable any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition by any
Holder of any Exchange Stock pursuant to Rule 144, the Company shall cooperate
with such Holder to facilitate the timely preparation and delivery of
certificates representing Exchange Stock to be sold and not bearing any
Securities Act legend, and enable certificates for such Exchange Stock to be for
such number of shares and registered in such names as the selling Holders may
reasonably request at least two business days prior to any sale of Exchange
Stock.
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this Agreement,
including the provisions of this Section 6.1(i), may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given without the written consent of
the Company and the Holders of a majority in amount of the outstanding
Registrable Securities; provided, however, that no amendment,
modification or supplement or waiver or consent to the departure with
respect to the provisions of Articles 2, 4 or 5 hereof shall be
effective as against any Holder unless consented to in writing by such
Holder.
(ii) Notice of any amendment, modification or supplement to
this Agreement adopted in accordance with this Section 6.1 shall be
provided by the Company to each Holder at least thirty (30) days prior
to the effective date of such amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery, to the parties at their respective addresses set forth opposite their
signatures below or at such other address as a party may indicate by written
notice to the other party or parties.
(ii) All such notices and communications shall be deemed to
have been duly given:
(A) at the time delivered by hand, if personally
delivered;
(B) three (3) business days after being deposited in
the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
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(D) when receipt is acknowledged, if telecopied; or
(E) at the time delivered, if delivered by an air
courier guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement shall inure
to the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders.
(ii) If any successor, assignee or transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such Person shall be entitled to
receive the benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of a Holder"
shall include any Person that acquires Registrable Securities by
operation of law, including upon the merger or consolidation,
liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
6.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
F-15
<PAGE> 72
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By: ________________________________________
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING PARTNERSHIP, L.P.
New York, New York 10036-4003
By: Tower Realty Trust, Inc., its general partner
By: ________________________________________
Name:
Title:
HOLDERS:
[Address:] ____________________________________________
Signature
____________________________________________
Name (Please Print or Type)
F-16
<PAGE> 73
EXHIBIT G
TO
CONTRIBUTION AGREEMENT
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner
& Smith, Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public. Capitalized terms used but not otherwise
defined in this letter agreement will have the meaning set forth in the
Company's Registration Statement on Form S-11 in connection with the
registration under the Securities Act of 1933, as amended, of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that without the prior written consent of Merrill
Lynch, the undersigned will not (and, except as may be disclosed in the
Prospectus, will not announce or disclose any intention to) directly or
indirectly sell, offer to sell, solicit an offer to buy, contract to sell, grant
any option to purchase, or otherwise transfer or dispose (or enter into any
transaction or device which is designed to, or could be expected to, result in
the disposition at any time in the future) of, any shares of Common Stock, or
any securities convertible into or exercisable or exchangeable for Common Stock,
including any units of limited partnership interest (the "OP Units") in Tower
Realty Operating Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership") beneficially owned by the undersigned as of the date of
the closing of the Company's initial public offering, for a period of twelve
(12) months after the date of the final Prospectus relating to the offering of
the Shares to the public by the Underwriters. Prior to the expiration of such
period, the undersigned will not publicly announce or disclose any intention
G-1
<PAGE> 74
to do anything after the expiration of such period which the undersigned is
prohibited, as provided in the preceding sentence, from doing during such
period.
This letter shall not prohibit the undersigned from (i) transferring OP
Units to any Affiliate (as defined below) of the undersigned, provided that such
transferee is an accredited investor (as such term is defined in Rule 501 under
the Securities Act of 1933, as amended) and agrees in writing with you to the
transfer restrictions described above, or (ii) pledging the OP Units and Common
Stock which are subject to this Agreement to the Operating Partnership or the
Company, or to any financial institution as collateral for any bona fide loan or
other obligation with respect to which the undersigned is personally liable. As
used herein, the term "AFFILIATE" shall mean any Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with a specified Person, and, with respect to an
individual, shall include such Person's immediate family or a trust for the
benefit thereof, with respect to a partnership, shall include a general or
limited partner thereof, with respect to a limited liability company, is a
member thereof, and with respect to a corporation, is a shareholder thereof.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and [___________________],
its Transfer Agent, are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
letter agreement.
It is understood that, if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
and delivery of the shares of Common Stock relating to such agreement, you will
release the undersigned from [his][its] obligations under this letter agreement.
Very truly yours,
[INVESTOR]
By:______________________________________
Name:
Title:
G-2
<PAGE> 75
EXHIBIT H
TO CONTRIBUTION AGREEMENT
EXISTING PROPERTIES
Tower 45
Maitland Forum
120 Mineola
The D/F Portfolio Properties
Century Plaza
Osborn Plaza
2800 N. Central
5750 Major Blvd.
Maitland West
Corporate Center
H-1
<PAGE> 1
Exhibit 10.56
CONTRIBUTION AGREEMENT
(OP Units)
BY AND AMONG
TOWER REALTY TRUST, INC.
TOWER REALTY OPERATING PARTNERSHIP, L.P.
AND
OFFICE INVEST SUB LLC
Dated as of May 1, 1997
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I
CONTRIBUTION OF PARTNERSHIP INTERESTS
1.1 Contribution Transaction....................................... 2
1.2 Consideration to be Paid to Contributor........................ 2
1.3 Adjustments Relating to the Allocation of the
Consideration.................................................. 7
1.4 Deferred Management Fee........................................ 9
1.5 Additional Consideration....................................... 10
1.6 Contribution of Certain Rights................................. 11
1.7 Payment of Debt................................................ 11
1.8 Treatment as Contribution...................................... 11
1.9 Additional Documents........................................... 11
1.11 Option to Purchase Property Interests for
Increased Price; Termination of Agreement...................... 11
ARTICLE II
CLOSING
2.1 Conditions Precedent........................................... 13
2.2 Time and Place................................................. 15
2.3 Closing Deliveries............................................. 15
2.4 Closing Costs.................................................. 17
2.5 Good Faith Efforts............................................. 17
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CONTRIBUTOR
3.1 Title to Interests............................................. 17
3.2 Organization; Authority; No Conflicts.......................... 18
3.3 Litigation..................................................... 19
3.4 No Other Agreements............................................ 20
3.5 No Brokers..................................................... 20
3.6 Investment Representations and Warranties...................... 20
3.7 Legends........................................................ 22
3.8 Covenant to Remedy Breaches.................................... 23
3.9 Actions Prior to Closing....................................... 23
3.10 Certain ERISA Matters.......................................... 24
3.11 Principal Purpose.............................................. 24
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY AND THE OPERATING PARTNERSHIP
4.1 Authority...................................................... 24
4.2 No Brokers..................................................... 25
4.3 Sale of Property............................................... 25
4.4 Allocation of Built-in Gain.................................... 26
4.5 REIT Sponsors.................................................. 26
4.6 Capital Expenditures........................................... 26
i
<PAGE> 3
PAGE
ARTICLE V
MISCELLANEOUS
5.1 Amendment...................................................... 26
5.2 Entire Agreement; Counterparts; Applicable Law................. 26
5.3 Assignability.................................................. 27
5.4 Titles......................................................... 27
5.5 Third Party Beneficiary........................................ 27
5.6 Severability................................................... 27
5.7 Equitable Remedies............................................. 27
5.8 Notices........................................................ 28
5.9 Waiver of Rights; Consents with Respect to
Partnership Interests.......................................... 28
5.10 Releases and Waivers........................................... 31
5.11 Confidentiality................................................ 31
5.12 Computation of Time............................................ 32
5.13 Legal Fees and Expenses........................................ 32
5.14 Termination.................................................... 32
5.15 Survival....................................................... 32
5.16 Time of the Essence............................................ 32
EXHIBITS
A. Partnership & Interests
B. Contribution and Assumption Agreement
C. Customary Closing Cost Splits
D. Model for Consideration Calculation
E. Exchange Rights Agreement
F. Registration Rights Agreement
G. Lock-Up Agreement
H. Existing Properties
I. Capital Expenditures
ii
<PAGE> 4
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "AGREEMENT") is dated as of the 1st
day of May, 1997 and is entered into by and among TOWER REALTY TRUST, INC., a
Maryland corporation (the "COMPANY"), TOWER REALTY OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and OFFICE INVEST
SUB LLC, a Delaware limited liability company ("CONTRIBUTOR").
R E C I T A L S:
A. Contributor owns a general partner and a limited partner interest in
the partnership (the "PARTNERSHIP") described on EXHIBIT A attached hereto and
made a part hereof, which Partnership owns direct or indirect interests in
certain properties (the "PROPERTIES") also set forth on EXHIBIT A.
B. The Company and the Operating Partnership desire to acquire through
a contribution to capital from Contributor, and Contributor desires, among other
things, to contribute to the Company and the Operating Partnership, on the terms
and conditions set forth herein, all of Contributor's right, title and interest
as a general partner and a limited partner of the Partnership (collectively, the
"PROPERTY INTERESTS") in exchange for one or more of the following: (a) cash,
(b) units of limited partnership interest ("OP UNITS") in the Operating
Partnership, and (c) shares of common stock, par value $0.01 per share (the
"COMMON STOCK") of the Company, as hereinafter provided.
C. The Company and the Operating Partnership desire to acquire the
Property Interests in connection with the intended initial public offering (the
"IPO") of shares of Common Stock by the Company.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company, the
Operating Partnership and Contributor agree as follows:
<PAGE> 5
ARTICLE I
CONTRIBUTION OF PARTNERSHIP INTERESTS
1.1 Contribution Transaction. (a) At the Closing (as hereinafter
defined) and subject to the terms and conditions contained in this
Agreement, Contributor shall transfer to the Company and the Operating
Partnership, absolutely and unconditionally and free and clear of all
Encumbrances (as defined in Section 3.1(a)), all of the Property
Interests. The contribution of Contributor's Property Interests shall
be evidenced by a Contribution and Assumption Agreement in
substantially the form of EXHIBIT B attached hereto and made a part
hereof. The portion of the Property Interests that will be contributed
to the Company, if any, will be determined as set forth in Section
1.2(d) hereof.
(b) The parties shall take such additional actions and execute
such additional documentation as may be required by either (i) the
Partnership Agreement (as hereinafter defined) or (ii) the Agreement of
Limited Partnership dated as of March 24, 1997 of the Operating
Partnership (the "OP AGREEMENT") in order to effect the transactions
contemplated hereby.
(c) Contributor hereby subscribes for and agrees to accept the
issuance of the Common Stock and the OP Units specified by it pursuant
to the terms of this Agreement, and, if Contributor receives OP Units,
accepts, subject to the provisions of this Contribution Agreement, the
terms and conditions of the OP Agreement, including, without
limitation, the power of attorney granted therein, and agrees to
execute and deliver at the Closing such other documents and agreements
as may be reasonably required by the Company under the OP Agreement to
effect the admission of Contributor as a limited partner in the
Operating Partnership.
(d) As used herein, the term "PARTNERSHIP AGREEMENT" shall
mean the Amended, Restated and Reconstituted Agreement of Limited
Partnership of D/F Portfolio Associates Limited Partnership dated as of
December 10, 1996 among Feldman MOT Portfolio Corp, Contributor and FSA
Associates, L.P.
1.2 Consideration to be Paid to Contributor. Subject to Sections 1.3
and 1.5 hereof, the Company and the Operating Partnership (as the case may be)
shall, in exchange for the Property Interests (and Contributor's obligations
hereunder), pay to Contributor the amount determined as follows:
(a) The amount (the "CONSIDERATION") that Contributor would
receive under the Partnership Agreement if:
(i) the Partnership were to sell all of the Properties, free
and clear of all Encumbrances, for an aggregate of $132,500,000 (or
$138,000,000 in the event the Closing occurs after September 13, 1997),
in each case minus the outstanding principal
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<PAGE> 6
amount of the GECC Loan (as defined in the Partnership Agreement) as of
the Closing Date and
(ii) the Partnership were to dissolve and distribute the
proceeds of the sale referred to in clause (i) above and any
undistributed cash (in accordance with the procedures and priorities
stated in Articles 8, 9 and 11 of of the Partnership Agreement) to be
calculated as of, and assuming such sale was effective as of, the
Closing Date, taking into account disposition costs and other similar
costs (excluding real estate brokerage commissions) associated with
such liquidation, as follows:
(A) the actual cost of any transfer taxes,
documentary stamps and other closing costs which are normally
payable by a seller in the relevant market, as more
particularly described on EXHIBIT C attached hereto and made a
part hereof,
(B) the actual cost, if any, of Funding Losses (as
defined under the GECC Documents (as such term is defined in
the Partnership Agreement)) due under Section 2.8 of the GECC
Documents as a result of the prepayment of the GECC Loan at
the time of the Closing, but only if such costs are actually
incurred in connection with the closing of the IPO (the "IPO
CLOSING"),
(C) the amount referred to in Section 1.12 hereof,
and
(D) if actually paid, the lesser of (x) the actual
amount of any prepayment penalty (other than Funding Losses)
under the GECC Documents, and (y) $437,500.
(b)(i) (A) The following shall be apportioned (ratably based
upon the number of days prior to and after the Closing Date to which
any of the following amounts relates) between the Partnership as it was
composed immediately prior to the Closing (the "PREVIOUS
PARTNERSHIP") and the Operating Partnership at the Closing, as of the
close of business of the day immediately preceding the Closing Date
(the "APPORTIONMENT DATE"), and amounts apportioned to the Previous
Partnership shall be allocated between the Operating Partnership and
Contributor in accordance with the applicable provisions of the
Partnership Agreement, assuming that Contributor directly or indirectly
holds the interests in the Partnership held by Contributor immediately
prior to the Closing Date and the Operating Partnership directly or
indirectly holds all other interests in the Partnership:
(I) water rates and charges, sewer taxes and
rents and electricity and other utility charges, except those
required to be paid directly by tenants to the entity imposing
same, based upon the per diem charges obtained by using the
most recent period for which readings of such utility services
shall then be available;
-3-
<PAGE> 7
(II) fuel oil and liquid propane gas, if any,
at the cost per gallon most recently charged to the Previous
Partnership or its relevant subsidiary entity which is the
direct owner of the applicable Property, based on the
supplier's measurements thereof taken within one (1) business
day (to the extent practicable) of the Apportionment Date;
(III) rents, if, as and when collected in
accordance with the provisions of Section 1.2(b)(ii);
(IV) business, occupancy and sales taxes, if
any;
(V) real and personal property taxes and
assessments (or installments thereof) for or relating to
periods commencing on or after December 13, 1996, on the basis
of the fiscal year for which payable, except those required to
be paid directly by tenants to the entity imposing same; if
the Apportionment Date shall be prior to the date on which the
real or personal property tax rate is fixed, the apportionment
of real or personal property taxes, as the case may be, shall
be made on the basis of the tax rate for the preceding year
applied to the latest assessed valuation and after the real or
personal property taxes, as the case may be, are finally
fixed, and Contributor and the Operating Partnership shall
make a recalculation of the apportionment of same and the
Operating Partnership and the Previous Partnership, as the
case may be, shall promptly make an appropriate payment to the
other based on such recalculation;
(VI) payments to the lender under the GECC
Documents, including, without limitation, tax and insurance
escrows (which shall be treated as Capital Event Proceeds
under the Partnership Agreement) and interest payments;
(VII) all other payables and receivables of the
Previous Partnership and its subsidiary entities and any
general partner thereof, if any, not otherwise apportioned
herein; and
(VIII) all other payments made by or on behalf of
the Previous Partnership, any general partner thereof or any
subsidiary entity for liabilities or obligations relating to a
period which extends in part prior to and in part beyond the
Closing Date.
(B) If, on the Closing Date, all or any portion of
any Properties shall be or shall have been affected by assessments that
are, or which may become, payable in annual installments, of which the
first installment is then a charge or lien or has been paid or if any
of the improvements to be paid for thereby are in place or commenced,
then for
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<PAGE> 8
purposes of this Agreement only the installment which shall then be due
and payable shall be apportioned between the Previous Partnership and
the Operating Partnership and all of the unpaid installments of any
such assessments, including those which are to become due and payable
after the date hereof, shall not be deemed to be due and payable and
shall continue to be liens upon such Properties, it being understood
and agreed that the Operating Partnership shall be responsible for the
period from and after the Apportionment Date and the Previous
Partnership shall be responsible for the period prior to the
Apportionment Date, regardless of when such installments are due and
payable.
(C) To the extent that any refund of real property
taxes, water rates and charges or sewer taxes and rents made after the
Closing Date is applicable to a period before the Closing Date, such
refund shall be payable to the Previous Partnership within 10 business
days from the date of receipt thereof, subject to the reasonable costs
incurred in obtaining same and to tenants having a right to any portion
of such refunds, and the Operating Partnership shall indemnify the
Previous Partnership from and against all claims, damages and expenses
incurred by the Previous Partnership if any claim by any tenant is made
that the Operating Partnership's pursuit of such refunds was inadequate
or insufficient.
(D) Contributor and the Operating Partnership agree
that
(I) in the event that there have been
underbillings of operating expenses, due to underestimating,
resulting in underpayments by tenants applicable to a period
before the Closing Date, the Operating Partnership shall
directly or indirectly bill such tenants for such
underpayments (or Contributor may so bill) and any amounts
directly or indirectly paid to the Operating Partnership (or
Contributor) in respect thereof shall be deemed paid to the
Previous Partnership (less any costs incurred in connection
with the collection of same), and
(II) in the event that there have been
overbillings of operating expenses or real estate tax
contributions resulting in overpayments by tenants applicable
to a period before the Closing Date, the Previous Partnership
shall indemnify the Operating Partnership and the Partnership
and hold the Operating Partnership and the Partnership
harmless from and against claims, damages and expenses
incurred, directly or indirectly, by the Operating Partnership
for Contributor's ratable share incurred as a result of such
overbillings.
(E) Within 10 business days following the Closing and
periodically thereafter, for a period of up to 120 days, if additional
adjustments are necessary, the Operating Partnership shall prepare a
schedule demonstrating the computation of the Closing Date
reimbursement adjustments, including detailed supporting schedules for
each of the line items appearing in such computation. If Contributor
disputes the amount of the adjustments, then the Operating Partnership
and Contributor shall make a good faith effort
-5-
<PAGE> 9
to resolve such dispute. If the Operating Partnership and Contributor
are unable to resolve such disagreement within a reasonable period of
time (not to exceed 20 days), either the Operating Partnership or
Contributor may pursue all remedies available pursuant to applicable
law.
(ii) (A) Subject to Section 1.2(b)(ii)(B) and (C), if
the Operating Partnership shall directly or indirectly receive rents
under any lease after the Closing Date from tenants which are
thirty-one (31) days or more in arrears in the payment of rent as of
the Closing Date, the same shall be allocated first, to the payment of
current rent then due for the month in which the rent is received,
second, to the payment of rent due for the month prior to the month in
which the rent is received and such allocation shall continue by month
in reverse chronological order until all arrearages have been paid. For
example, if the Operating Partnership shall directly or indirectly
receive two (2) months' rent on January 15 under a lease which is in
arrears for the months of October, November, December and January, the
two months' rent shall first be applied to rent due for the month of
January, second to rent due for the month of December, and the months
of October and November shall remain in arrears. With respect to rents
due for the month during which the Closing occurs, the Operating
Partnership shall render an accounting to Contributor, and the amount
of such rents shall be apportioned between the Previous Partnership and
the Operating Partnership based upon the Apportionment Date.
(B) Subject to the provisions of the last sentence of
this clause (B), at the end of the fiscal year with respect to which
any additional rent is payable under a lease, there shall be a
calculation of the amount of each of such additional rents to which
each of the Previous Partnership and the Partnership is entitled, based
upon the Apportionment Date, with the Previous Partnership being
entitled to an amount equal to the amount of additional rent multiplied
by a fraction, expressed as a percentage, the numerator of which is the
number of days in said fiscal year with respect to which additional
rent under such lease was payable prior to the Closing Date, and the
denominator of which is the total number of days in said fiscal year
during which additional rent under such lease was payable, and the
Operating Partnership shall be entitled to the remaining portion of
such additional rent. Anything to the contrary contained in this clause
(B) notwithstanding, with respect to tenants which are 31 days or more
in arrears in the payment of additional rent under leases as of the
Closing Date, the provisions of Section 1.2(b)(ii)(A) shall apply as if
such arrearage were for rents and not for additional rent.
(C) If there shall be any change in the assessed
value of any Property or in the base amounts utilized in the
calculation of any additional rents generated by any Property, or for
any other reason, so that any tenant shall be required to pay
additional rents with respect to any period prior to the Closing Date,
the Operating Partnership shall bill or cause to be billed such tenants
therefor and shall use commercially reasonable efforts to collect the
amount thereof, for a period of up to 120 days following the Closing
Date, and any such amounts directly or indirectly received by the
Operating Partnership,
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<PAGE> 10
less the reasonable third-party costs incurred in collecting such
additional rents, shall be paid by the Operating Partnership to the
Previous Partnership promptly after receipt.
(c) Attached hereto as EXHIBIT D, and made a part hereof, is a model of
the calculations described in Section 1.2(a) utilizing an assumed date for the
sale of the Properties of March 31, 1997. This model shall govern the
determination of the Consideration and shall be utilized by the parties as a
methodology for performing the calculation set forth in Section 1.2(a); any
ambiguity in the provisions set forth in Section 1.2(a) shall be resolved by
Ernst & Young LLP (or, if Ernst & Young LLP shall not be available, such other
accounting firm of nationally recognized standing as shall be chosen by the
Operating Partnership and Contributor within two business days after receipt of
notice of such unavailability) by reference to such model.
(d) The Consideration shall be paid to the Contributor in the form of a
combination of (i) cash, (ii) shares of Common Stock and (iii) OP Units in the
percentages set forth in a written notice from the Contributor to the Operating
Partnership and the Company that must be received on or before April 29, 1997.
In the event no timely election is made, Contributor will receive the
Consideration in the following proportion: 50% in cash and 50% through the
issuance of Common Stock. In the event Contributor elects to receive all or a
portion of the Consideration in respect of its contribution of Property
Interests in shares of Common Stock, Contributor shall transfer to the Company
an undivided percentage interest in the Property Interests that corresponds to
the percentage of the Consideration that will be paid in shares of Common Stock.
The balance of the Property Interests shall be contributed to the Operating
Partnership.
(e) For purposes of this Agreement, each share of Common Stock and each
OP Unit shall be valued based on the mid-point of the price range (the
"MID-POINT PURCHASE PRICE") per share of Common Stock set forth in the
Preliminary Prospectus (as defined below). For purposes of this Agreement, the
term "PRELIMINARY PROSPECTUS" means the last preliminary prospectus of the
Company circulated to investors in connection with the IPO, or any subsequent
preliminary prospectus which is included in a subsequent amendment to the
Company's Registration Statement on Form S-11 which is declared effective by the
Securities and Exchange Commission. It is the intention of the parties that the
definition shall mean that preliminary prospectus in which REIT Sponsor equity
is last determined. For purposes of this Agreement, the term "REIT SPONSORS"
shall mean Lawrence H. Feldman, Robert L. Cox, Joseph D. Kasman, Scott Jensen,
Eric Reimer and Reuben Friedberg, including their direct or indirect interests
in any affiliates controlled by any of them.
1.3 Adjustments Relating to the Allocation of the Consideration. (a) In
the event Contributor elects to receive more than fifty percent (50%) of the
Consideration in the form of OP Units and/or shares of Common Stock, then the
number of OP Units or shares of Common Stock to be received by Contributor (as
designated by Contributor) shall be increased based upon the following:
IP x C x 0.5 x 0.07 x 1
--
-7-
<PAGE> 11
MP
where: IP = the difference between (1) the aggregate percentage
of the Consideration that Contributor elects to
receive in the form of OP Units and shares of Common
Stock and (2) 50% (expressed as a decimal fraction);
C = the amount of the Consideration (without regard to
any adjustments made pursuant to this Section 1.3 or
Section 1.5); and
MP = the Mid-Point Purchase Price.
For example, if (i) Contributor elects to receive 70% of the Consideration in
the form of OP Units and shares of Common Stock, (ii) the amount of the
Consideration is $132,500,000, and (iii) the Mid-Point Purchase Price is $25,
then the aggregate number of OP Units or shares of Common Stock to be received
by Contributor shall be increased by 37,100.
(b) In the event Contributor elects to receive less than fifty percent
(50%) of the Consideration in the form of OP Units and/or shares of Common
Stock, then the cash portion of the Consideration shall be reduced by an amount
determined as follows:
IP x C x 0.5 x 0.07
where: IP = the difference between (1) the aggregate percentage
of the Consideration that Contributor elects to
receive in cash and (2) 50% (expressed as a decimal
fraction); and
C = the amount of the Consideration (without regard to
any adjustments made pursuant to this Section 1.3 or
Section 1.5).
For example, if (i) Contributor elects to receive 70% of the Consideration in
the form of cash, and (ii) the amount of the Consideration is $132,500,000, then
the cash portion of the Consideration shall be reduced by $927,500.
(c) The adjustments to the Consideration set forth in Section 1.3(a)
and (b) shall be made after the calculation of the Consideration pursuant to
Section 1.2(a), and without further recomputation pursuant to Section 1.2(a).
(d) Notwithstanding the foregoing provisions of this Section 1.3, in
the event that adjustments to the Consideration are required to be made as a
result of a violation or potential violation of the limitation on ownership
contained in clause (1) of the legend contained in Section 3.7(b) hereof, such
adjustment to the Consideration shall not be deemed to have been made at the
election of Contributor, and no further adjustment shall be made pursuant to
Section 1.3(b) hereof.
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<PAGE> 12
1.4 Deferred Management Fee and Amendments to Management Agreements. In
addition to Contributor's foregoing obligations, (a) Contributor shall pay to
the Feldman Partners (as defined in the Partnership Agreement) at Closing an
amount equal to any management fees deferred pursuant to certain restrictions
set forth in the GECC Documents (as defined in the Partnership Agreement), as
amended, for the period from and after December 13, 1996 and (b) Contributor
and/or its affiliates, as the case may be, shall at the Closing agree to amend
each of the Management Agreements (as defined below) to provide that the
Management Agreements shall not be terminated during the period commencing on
the Closing Date and ending on the second anniversary of the Closing Date unless
either (i) Contributor or its affiliates pays to Tower Equities Management,
Inc., a Delaware corporation and the management affiliate of the Company and the
Operating Partnership ("TEMI"), the applicable management company the
Cancellation Payment (as hereinafter defined) prior to such cancellation or (ii)
such cancellation is made either (1) pursuant to Sections 7(a)(i), (ii), (iv),
(v), (vi) or (vii) or 7(b) of the Mountainside Agreement or pursuant Section
7(a)(ii), (iii), (v), (vi), (vii) or (viii) or 7(b) of the Lakeside Agreement or
the Warner Agreement, as the case may be, or (2) upon an Uncured Default Event
(as defined below) or (3) because TEMI fails to be the exclusive property
manager of all of the McClintock Fountain, Union Crossing and Cobblestone Plaza
properties (collectively, the "MANAGEMENT AGREEMENT AMENDMENTS"). As used
herein, the phrase "CANCELLATION PAYMENT" shall mean a payment equal to the
number derived by multiplying (A) the average management fee paid during the
twelve consecutive (12) months immediately preceding the effective date of such
cancellation by (B) a fraction the a numerator of which equals the number of
months from the effective date of such cancellation through the second
anniversary of the date hereof and (y) a denominator equal to twelve (12). As
used herein, the term "MANAGEMENT AGREEMENTS" means, collectively, that certain
Property Management Agreement dated as of January __, 1995 between Mountainside
Plaza Associates, Limited Partnership and Tower Equities of Arizona, L.L.C.
("TEA") (the "MOUNTAINSIDE AGREEMENT"); that certain Property Management
Agreement dated as of May 12, 1995 between Lakeside Plaza Associates, Limited
Partnership and TEA (the "LAKESIDE AGREEMENT"); and that certain Property
Management Agreement dated as of May 12, 1995 between Warner Ranch Associates,
Limited Partnership and TEA (the "WARNER AGREEMENT"). As used herein, the term
"UNCURED DEFAULT EVENT" means the occurrence of two Uncured Defaults (as defined
below) which occur during any 60-day period provided that the corresponding
notices of default are not less than 30 days apart or the occurrence of three
Uncured Defaults which occur during any 12 consecutive month period. As used
herein, an "UNCURED DEFAULT" means one particular, specifically identified
obligation of the manager under the respective Management Agreement that is
breached and is not cured within ten days' written notice thereof, provided,
however, that such ten-day cure period shall be extended one day for each day of
delay attributable to the events described in Section 7(d) of that certain
Property Management Agreement dated as of December 10, 1996 between East
Broadway 5151 Limited Partnership and TEA. At the Closing, Contributor shall, or
shall cause its affiliates to, enter into amended and restated Management
Agreements with TEMI that reflect the current terms of such agreements as
modified as set forth above.
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<PAGE> 13
1.5 Additional Consideration. In the event (a) the Closing occurs on or
before September 13, 1997 and (b) the product of (i) the Mid-Point Purchase
Price and (ii) the aggregate number of shares of Common Stock and OP Units
issued or to be issued to the REIT Sponsors (but specifically excluding any
shares of Common Stock or OP Units issued or to be issued to Morgan Stanley
Asset Management Inc. or any entity advised thereby) as of the Closing of the
IPO, exceeds $20,000,000, then Contributor shall receive the following number of
additional shares of Common Stock or OP Units (determined as a percentage to be
designated by Contributor prior April 29, 1997, and as computed by Merrill
Lynch, Pierce, Fenner & Smith, Incorporated):
0.072207 x {REIT Sponsor Equity - [(FFO(n)/(FFO(t)) x
REIT Sponsor Equity] - $20,000,000},
-----------------------------------------------------
Mid-Point Purchase Price
where REIT Sponsor Equity = The aggregate number of shares
of Common Stock and OP Units
issued or to be issued to the
REIT Sponsors, times the
Mid-Point Purchase Price.
FFO(n) = Estimated 1997 funds from operations
relating to any properties (the "NEW
PROPERTIES") directly or indirectly
acquired or to be acquired as of the
Closing Date by the Company, other
than properties set forth on Exhibit
H hereto. Funds from operations for
the New Properties shall be equal to
NOI for the New Properties, minus
the debt service allocable to the
New Properties. The debt service
allocable to the New Properties
shall be equal to the amount of
principal and interest payments on
all indebtedness for money borrowed
of the Company on a consolidated
basis, times the NOI for the New
Properties, divided by the NOI for
all properties directly or
indirectly owned by the Company.
FFO(t) = Estimated 1997 funds from
operations relating to all
properties directly or
indirectly owned or to be
owned as of the Closing Date
by the Company. Funds from
operations shall be equal to
NOI for all such properties,
minus the Company's debt
service. The Company's debt
service shall be equal to the
amount of principal and
interest payments on all
indebtedness for money
borrowed of the Company on a
consolidated basis.
NOI = The net cash flow (determined
after giving effect to the
"straight lining" of rents
over applicable rental
periods) after operating
expenses for the applicable
properties.
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<PAGE> 14
1.6 Contribution of Certain Rights. Except as provided in Section
5.10(a), effective upon the Closing, Contributor hereby contributes to the
Operating Partnership all of its rights and interests, if any, including rights
to indemnification in favor of Contributor, if any, under the agreements
pursuant to which Contributor or its affiliates initially acquired the Property
Interests transferred pursuant to this Agreement.
1.7 Payment of Debt. Effective upon the Closing, the Operating
Partnership shall pay off any and all outstanding debt encumbering the
Properties, including, without limitation, the GECC Loan, in accordance with a
pay-off letter to be obtained from the lender prior to the Closing and certified
by an officer of such lender.
1.8 Treatment as Contribution. The transfer, assignment and exchange of
interests effectuated with respect to the Operating Partnership, pursuant to
this Agreement, shall constitute a "CAPITAL CONTRIBUTION" pursuant to Article 4
of the OP Agreement and is intended to be governed by Section 721(a) of the
Internal Revenue Code of 1986, as amended (the "CODE"). The transfer, assignment
and exchange of interests effectuated with respect to the Company pursuant to
this Agreement is intended to be governed by Section 351 of the Internal Revenue
Code of 1986, as amended (the "CODE").
1.9 Additional Documents. At the Closing of the IPO, Contributor shall
enter into with the Operating Partnership, the Company or the underwriters for
the IPO (as the case may be) an exchange rights agreement, a registration rights
agreement and a lock-up agreement, substantially in the same form as those
attached hereto as EXHIBITS E, F and G, respectively.
1.10 Appointment of Observer. Effective on and for each year after the
IPO, until the aggregate number of OP Units and shares of Common Stock held by
Contributor and DRA Opportunity Fund, is less than 50% of the number of OP Units
and shares of Common Stock held by Contributor and DRA Opportunity Fund
immediately following the IPO, the Company, on behalf of itself and the
Operating Partnership, will afford one person selected by DD Investment
Partners, L.P. ("DDI") and DRA Opportunity Fund full Board observation rights,
including (i) full and timely notice of all meetings of the Board of Directors
and each of its committees, (ii) copies of all written and other materials
disseminated to members of the Board or its committees, (iii) the right to
attend in person or by telephone all meetings of the Board or its committees,
(iv) the right to receive all reports concerning the business and financing of
the Company and the Operating Partnership that are prepared or otherwise
provided to the Company and the Operating Partnership, (v) the right to consult
at least once per calendar quarter, if requested by DDI, with the management
personnel of the Company concerning the finances and operations of the Company
and the Operating Partnership and (vi) the right to receive in advance written
notice from the Company of any acquisition or divestiture by the Company or the
Operating Partnership (subject to the requirements of applicable securities
laws).
1.11 Option to Purchase Property Interests for Increased Price;
Termination of Agreement. (a) At any time after the date hereof and on or prior
to December 13, 1997, in
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<PAGE> 15
connection with the formation of a private real estate investment trust by the
Company (a "PRIVATE REIT"), upon ten business days notice to Contributor, the
Company and the Operating Partnership shall have the right to purchase the
Property Interests and to pay to Contributor in cash the amount (the "PRIVATE
REIT CONSIDERATION") that Contributor would receive under the Partnership
Agreement if:
(i) the Partnership were to sell all of the Properties, free and
clear of all liens, mortgages and other encumbrances, for $138,000,000,
minus the outstanding principal amount of the GECC Loan as of the
Closing Date; and
(ii) the Partnership were to dissolve and distribute the proceeds
of the sale referred to in clause (i) above (in accordance with the
procedures and priorities stated in Articles 8, 9 and 11 of of the
Partnership Agreement) to be calculated as of, and assuming such sale
was effective as of, the the closing date for such Private REIT (the
"PRIVATE REIT CLOSING DATE"), taking into account disposition costs and
other similar costs (excluding real estate brokerage commissions)
associated with such liquidation, as follows:
(A) the actual cost of any transfer taxes, documentary stamps
and other closing costs which are normally payable by a seller in the
relevant market, as more particularly described on EXHIBIT C attached
hereto and made a part hereof,
(B) the actual cost, if any, of Funding Losses due under
Section 2.8 of the GECC Documents as a result of the prepayment of the
GECC Loan at the time of the Closing, but only if such costs are
actually incurred in connection with the formation of the Private REIT,
(C) the amount referred to in Section 1.12 hereof, as
increased to $1,060,000, and
(D) if actually paid, the lesser of (x) the actual amount of
any prepayment penalty (other than Funding Losses) under the GECC
Documents, and (y) $437,500.
(b) In the event the Company and the Operating Partnership exercise the
option set forth in Section 1.11(a), then (i) the obligation to make any payment
in respect of the Consideration or issue any shares of Common Stock or OP Units
pursuant to Section 1.2 hereof or any other provision of this Agreement and the
obligations under Sections 1.3 and 1.10 hereof shall terminate, and shall be of
no further force and effect and (ii) Contributor and the Operating Partnership
shall make or cause to be made the apportionments and allocations set forth in
Section 1.2(b) hereof.
1.12 Management Fee. On the Closing Date, the Operating Partnership
will cause the Partnership to pay to Contributor or its designee (the "MANAGER")
referred to in Section 5.2(b) of the Partnership Agreement, $560,000 in cash, in
complete satisfaction of all additional amounts (the "ASSET MANAGEMENT FEE")
payable to Contributor or the Manager pursuant to such Section
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<PAGE> 16
5.2(b), provided, however, that in the event the Company and the Operating
Partnership shall exercise the option set forth in Section 1.11 hereof, such
amount shall be increased to $1,060,000. Such payment shall be made to the party
that is actually receiving the Asset Management Fee immediately prior to the
Closing Date. At the Closing, Contributor and the Manager shall execute a
release, in form and substance reasonably satisfactory to the Operating
Partnership and the Company, that forever releases the Operating Partnership,
the Company, the Partnership, any future owner of the Properties or any of their
respective partners, members, officers, directors, stockholders and agents from
the obligation to pay the Asset Management Fee.
1.13 REIT Election. The Feldman Partners (as defined in the Partnership
Agreement) may not make another REIT Election (as defined in the Partnership
Agreement) prior to the third (3rd) anniversary of the earlier to occur of (a)
the December 13, 1997 and (b) the date upon which the Feldman Partners sent
written notice to the Contributor of the abandonment of the IPO.
ARTICLE II
CLOSING
2.1 Conditions Precedent. (a) The obligation of the parties to
consummate the transactions contemplated hereby, other than those set forth in
Section 1.11 hereof, are subject to the IPO Closing, including, without
limitation, the requirement that at or prior to Closing the Feldman Partners
shall have transferred their Partnership Interests in the Partnership to the
Company or Operating Partnership in connection with the IPO. If the Company and
the Operating Partnership are unable to consummate the IPO Closing on or before
December 13, 1997, this Agreement shall terminate and be of no force and effect,
the parties hereto shall be relieved of any obligations hereunder.
(b) The obligation of the Company and the Operating Partnership to
consummate the transactions contemplated hereby shall be subject to the
following additional conditions:
(i) the representations and warranties of Contributor contained in this
Agreement shall have been true and correct in all material respects on
the date such representations and warranties were made, and shall be
true and correct in all material respects on the Closing Date as if made
at and as of such date; provided, however, that in the event that the
Closing relates to the transactions set forth in Section 1.11 hereof,
the representations and warranties set forth in Sections 3.6 and 3.7
hereof need not be true and correct;
(ii) each of the obligations of Contributor to be performed by it shall
have been duly performed by it on or before the Closing Date;
(iii) the Company and the Operating Partnership shall have received a
certificate of a member of Contributor certifying as to clauses (i) and
(ii) above;
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<PAGE> 17
(iv) concurrently with the Closing, Contributor shall have executed and
delivered to the Operating Partnership the documents required to be
delivered pursuant to Section 2.3 hereof;
(v) Contributor shall have obtained all necessary consents or approvals
of governmental authorities or third parties to the consummation of the
transactions contemplated hereby;
(vi) no order, statute, rule, regulation, executive order, injunction,
stay, decree or restraining order shall have been enacted, entered,
promulgated or enforced by any court of competent jurisdiction or
governmental or regulatory authority or instrumentality that prohibits
the consummation of the transactions contemplated hereby, and no
litigation or governmental proceeding seeking such an order shall be
pending or threatened; and
(vii) there shall not have occurred between the date hereof
and the Closing Date any material adverse change in the Partnership's
businesses.
The foregoing conditions may be waived by the Company and the
Operating Partnership in their sole and absolute discretion.
(c) The obligation of Contributor to consummate the transactions
contemplated hereby shall be subject to the following additional conditions:
(i) the representations and warranties of the Company and the
Operating Partnership contained in this Agreement shall have been true
and correct in all material respects on the date such representations
and warranties were made, and shall be true and correct in all material
respects on the Closing Date as if made at and as of such date;
(ii) each of the obligations of the Company and the Operating
Partnership to be performed by either of them shall have been duly
performed by it on or before the Closing Date;
(iii) Contributor shall have received a certificate of an
executive officer of the Company certifying as to clauses (i) and (ii)
above;
(iv) concurrently with the Closing, the Company and the
Operating Partnership shall have executed and delivered to the
Operating Partnership the documents required to be delivered by them
pursuant to Section 2.3 hereof;
(v) the Company and the Operating Partnership shall have
obtained all necessary consents or approvals of governmental
authorities or third parties to the consummation of the transactions
contemplated hereby;
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<PAGE> 18
(vi) no order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted,
entered, promulgated or enforced by any court of competent jurisdiction
or governmental or regulatory authority or instrumentality that
prohibits the consummation of the transactions contemplated hereby, and
no litigation or governmental proceeding seeking such an order shall be
pending or threatened;
(vii) there shall not have occurred between the date hereof
and the Closing Date any material adverse change in the businesses
(other than the Partnership's business) proposed to be acquired and
operated by the Operating Partnership following the IPO or the
formation of the Private REIT, as applicable
(viii) Contributor shall have received the Consideration or
the Private REIT Consideration, as applicable;
(ix) the GECC Loan shall have been repaid from the proceeds of
the IPO or the formation of the Private REIT, or provision shall have
been made for such repayment promptly after the Closing; and
(x) the Closing shall have occurred under the Contribution
Agreement dated as of the date hereof among the Company, the Operating
Partnership and DRA Opportunity Fund.
The foregoing conditions may be waived by Contributor in its
sole and absolute discretion.
2.2 Time and Place. The date, time and place of the transactions
contemplated hereunder shall be the day of the IPO Closing or the formation of
the Private REIT, as the case may be, at 10:00 a.m. in the office of Battle
Fowler LLP, 75 East 55th Street, New York, New York 10022 (the "CLOSING" or
"CLOSING DATE"). The transfers described in Article I hereof and all closing
deliveries shall be deemed concurrent for all purposes and shall occur
immediately after the closing of the IPO.
2.3 Closing Deliveries. At the Closing, the parties shall make,
execute, acknowledge and deliver, or cause to be made, executed, acknowledged
and delivered, the legal documents and other items (collectively, the "CLOSING
DOCUMENTS") necessary to carry out the intention of this Agreement, which
Closing Documents and other items shall include, without limitation, the
following:
(a) a Contribution and Assumption Agreement in substantially
the form of EXHIBIT B attached hereto and made a part hereof;
(b) the Amendment evidencing the transfer of OP Units to
Contributor;
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<PAGE> 19
(c) the Management Agreement Amendments;
(d) an Exchange Rights Agreement in substantially the form of
EXHIBIT E attached hereto and made a part hereof;
(e) a Registration Rights Agreement in substantially the form
of EXHIBIT F attached hereto and made a part hereof;
(f) a Lock-Up Agreement in substantially the form of EXHIBIT G
attached hereto and made a part hereof;
(g) the Partnership's books and records and securities or
other evidences of ownership held by Contributor, provided, however, that
Contributor shall continue to have reasonable access to inspect the same from
time to time;
(h) an affidavit from Contributor, stating under penalty of
perjury Contributor's United States taxpayer identification number and that
Contributor is not a foreign person pursuant to section 1445(b)(2) of the Code
and a comparable affidavit satisfying any other withholding requirements;
(i) (i) a member's certificate from Contributor certifying as
to Contributor's organizational documents and resolutions or other
actions authorizing the consummation of the transactions contemplated
hereby; and
(ii) a secretary's certificate from the Company certifying
as to the organizational documents of the Company and the Operating
Partnership and resolutions or other actions authorizing the
consummation by them of the transactions contemplated hereby;
(j) resignations of Contributor's affiliates, designees and
employees who are officers and directors of the subsidiary entities of the
Partnership immediately prior to the Closing;
(k) the release referred to in Section 1.12; and
(l) customary opinions of counsel relating to the
organization and good standing of Contributor, on the one hand, and the Company
and the Operating Partnership, on the other, authorization of the transactions
contemplated hereby, due execution, delivery and enforceability of this
Agreement and such other matters as shall be reasonably requested by the party
or parties receiving such opinion.
Notwithstanding the foregoing, in the event of a Closing
resulting from the exercise of the option set forth in Section 1.11 hereof,
Contributor shall not be required to deliver the documents set forth in Section
2.3(d), (e) and (f) above.
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<PAGE> 20
2.4 Closing Costs. The Operating Partnership shall pay any documentary
transfer taxes, escrow charges, title charges and recording taxes or fees
incurred in connection with the transactions contemplated hereby
(notwithstanding the allocation of such expenses as provided in connection with
the calculation of the Consideration).
2.5 Good Faith Efforts. Each of the parties hereto agrees to proceed in
good faith to facilitate the IPO. The Company has and agrees to continue to
diligently pursue the IPO until the earlier to occur of (i) December 13, 1997,
and (ii) the date upon which the Company sends written notice to Contributor
that it reasonably believes that the IPO cannot be completed by December 13,
1997 (a "REIT TERMINATION NOTICE"). The Company shall provide Contributor with
monthly progress reports in writing with respect to the IPO.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CONTRIBUTOR
As a material inducement to the Company and the Operating Partnership
to enter into this Agreement and to consummate the transactions contemplated
hereby, Contributor hereby makes to the Company and the Operating Partnership,
with respect to the Property Interests, each of the representations and
warranties set forth in this Article III, which representations and warranties
(unless otherwise noted) are true as of the date hereof. As a condition to the
Operating Partnership's obligation to consummate the contribution of
Contributor's Property Interests to the capital of the Operating Partnership,
such representations and warranties must be true as of the Closing Date.
3.1 Title to Interests.
(a) Contributor owns beneficially and of record, free and
clear of any claim, lien, pledge, voting agreement, option, charge, security
interest, mortgage, deed of trust, encumbrance, right of assignment, purchase
right or other rights of any nature whatsoever (except for any of the foregoing
given in respect of the mortgage indebtedness encumbering the Properties or
arising under the Partnership Agreement (any of the foregoing, a "PERMITTED
PLEDGE")) (each, an "ENCUMBRANCE"), and has full power and authority to convey
free and clear of any Encumbrances, its Property Interests and, upon delivery of
a Contribution and Assumption Agreement by Contributor conveying its Property
Interests and delivery of the Consideration by the Company and the Operating
Partnership for such Property Interests as herein provided, the Company and the
Operating Partnership will acquire, as a contribution to its capital, good and
valid title to the Property Interests, free and clear of any Encumbrance, except
Encumbrances created in favor of the Company or the Operating Partnership by the
transactions contemplated hereby.
(b) Contributor will fund before the same is past due all
capital contributions and advances to the Partnership that are required to be
funded or advanced prior to the Closing.
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<PAGE> 21
(c) In making the representations in this Section 3.1
regarding the absence of Encumbrances, Contributor may assume that all consents
and waivers of rights required to be received under the Partnership Agreement
have been given by all other partners or members of the Partnership, as the case
may be.
3.2 Organization; Authority; No Conflicts.
(a) Contributor is a limited liability company duly organized,
validly existing and in good standing under the laws of the state of its
organization.
(b) Contributor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of Contributor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver the
Property Interests to the Company and the Operating Partnership in accordance
with this Agreement.
(c) (i) All applicable corporate, partnership, limited
liability company, trust or other action necessary for such Contributor
to execute and deliver this Agreement, the Closing Documents and each
other agreement, document and instrument executed by or on behalf of
Contributor pursuant to this Agreement, and to perform the transactions
contemplated hereby and thereby, has been taken, or will be taken prior
to the Closing Date.
(ii) Except for any that have been obtained, no approval,
authorization or consent of the shareholders, limited partners, members
(other than a managing member) or beneficiaries of Contributor is or
was required for the execution, delivery and performance described in
paragraph (c)(i) above.
(d) This Agreement, each Closing Document and each other
agreement, document and instrument executed and delivered by or on behalf of
Contributor pursuant to this Agreement constitute, or when executed and
delivered will constitute, the legal, valid and binding obligation of
Contributor, each enforceable in accordance with its respective terms, subject,
however, as to enforceability to applicable bankruptcy, insolvency, moratorium,
fraudulent conveyance, and other similar laws of general applicability and to
general principles of equity (whether interpreted in a proceeding at law or in
equity).
(e) Except for any breaches, violations or defaults which will
be waived or cured, or discharged or repaid prior to or contemporaneously with
the Closing, the execution,
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<PAGE> 22
delivery and performance of this Agreement, the Closing Documents and each other
agreement, document and instrument to be executed and delivered by or on behalf
of such Contributor:
(i) does not and will not violate Contributor's partnership
agreement or operating agreement, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to Contributor or require
Contributor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which
Contributor is a party or by which the property of Contributor is bound
or affected, or result in the creation of any Encumbrance on any of the
property or assets of the Partnership.
(f) In making the representations set forth in this Section
3.2, Contributor may assume
(i) that all consents and waivers of rights required to be
received under the Partnership Agreement have been given by all other
partners or members of the Partnership, as the case may be;
(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released; and
(iii) that GECC has given all necessary consents and
approvals.
3.3 Litigation.
(a) Contributor knows of no litigation or proceeding, whether
judicial, administrative or arbitral, pending or overtly threatened, affecting
all or any portion of Contributor's Property Interests (other than litigation or
proceedings with respect to the Properties) or Contributor's ability to
consummate the transactions contemplated hereby.
(b) Contributor knows of no outstanding order, writ,
injunction or decree of any court, government, governmental entity or authority
or arbitration against or affecting all or any portion of its Property Interests
which would impair such Contributor's ability to enter into and perform all of
its obligations under this Agreement.
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<PAGE> 23
3.4 No Other Agreements.
(a) Except as set forth in the Partnership Agreement and this
Agreement, Contributor has made no agreement with, and will not enter into any
agreement with, and has no obligation (absolute or contingent) to, any other
person or entity to sell, transfer, dispose of or in any way encumber any of
Contributor's Property Interests or restricting in any way Contributor's ability
to contribute Contributor's Property Interests to the capital of the Company or
the Operating Partnership or to enter into any agreement with respect to
Contributor's Property Interests.
(b) In making the representations set forth in this Section
3.4, Contributor may assume
(i) that all consents and waivers required under the
Partnership Agreement have been given by all other partners or members
of the Partnership, as the case may be;
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released; and
(iii) that GECC has given all necessary consents and
approvals.
3.5 No Brokers. Contributor has not entered into, and covenants
that it will not enter into, any agreement, arrangement or understanding with
any person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.6 Investment Representations and Warranties.
(a) Contributor understands that an investment in the Company
or the Operating Partnership involves substantial risks and is capable of
bearing the economic risk of its investment in Common Stock or OP Units
(b) Contributor is an Accredited Investor.
(c) Contributor has not retained a person that is not employed
by Contributor to represent or advise it with respect to its investment
hereunder.
(d) Contributor has been given the opportunity to make a
thorough investigation of the proposed activities of the Company and the
Operating Partnership.
(e) Contributor has been afforded the opportunity to obtain
any additional information requested by it.
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<PAGE> 24
(f) Contributor has had an opportunity to ask questions of and
receive answers from representatives of the Company and the Operating
Partnership concerning the Company and the Operating Partnership and their
respective proposed activities and the terms and conditions of an investment in
Common Stock or OP Units.
(g) The Common Stock and OP Units to be issued to Contributor
will be acquired by Contributor for its own account, for investment only and not
with a view to, or with any intention of, a distribution or resale thereof, in
whole or in part, or the grant of any participation therein.
(h) Contributor was not formed for the specific purpose of
acquiring an interest in the Company or the Operating Partnership.
(i) Contributor acknowledges that:
(i) the Common Stock or OP Units to be issued to such
Contributor at the Closing have not been registered under the
Securities Act or state securities laws by reason of a specific
exemption or exemptions from registration under the Securities Act and
applicable state securities laws, and any shares of Common Stock or OP
Units that are represented by certificates will bear the legend set
forth in Section 3.7,
(ii) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of such Contributor
contained herein,
(iii) the Common Stock or OP Units to be issued to
Contributor at the Closing may not be resold or otherwise distributed
unless registered under the Securities Act and applicable state
securities laws, or unless an exemption from registration is available,
(iv) there is no public market for the OP Units, and
(v) except as set forth in the Registration Rights
Agreement, the Company and the Operating Partnership has no obligation
or intention to register the shares of Common Stock or OP Units to be
issued to Contributor pursuant to this Agreement under the Securities
Act or any state securities laws or to take any action that would make
available any exemption from the registration requirements of such
laws.
(j) Contributor hereby acknowledges that because of the
restrictions on transfer or assignment of the Common Stock and OP Units to be
issued hereunder, which will be set forth in the OP Agreement and in the lock-up
agreement referred to in Section 1.9, Contributor may have to bear the economic
risk of the investment commitment evidenced by this Agreement and any shares of
Common Stock or OP Units issued hereunder for an indefinite period of time.
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<PAGE> 25
(k) The address previously provided by Contributor to the
Operating Partnership is the address of Contributor's principal place of
business, and Contributor has no present intention of becoming a resident of any
country, state or jurisdiction other than the country and state in which such
principal place of business is situated.
3.7 Legends. (a) Contributor acknowledges that each certificate, if
any, representing the OP Units (and any shares of Common Stock that might be
exchanged therefor) and each certificate representing shares of Common Stock
shall bear the following legend:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO
THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE
SECURITIES OR "BLUE SKY" LAWS.
(b) Contributor also acknowledges that each certificate
representing shares of Common Stock (including shares for which the OP Units
might be exchanged) shall also bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE
OF THE CORPORATION'S MAINTENANCE OF ITS STATUS AS A REAL ESTATE
INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS
EXPRESSLY PROVIDED IN THE CORPORATION'S CHARTER, (1) NO PERSON MAY
BENEFICIALLY OWN OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S
COMMON STOCK IN EXCESS OF 9.80% (BY VALUE OR BY NUMBER OF SHARES,
WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING COMMON STOCK OF THE
CORPORATION; (2) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK THAT WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD"
UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO
FAIL TO QUALIFY AS A REIT; AND (3) NO PERSON MAY TRANSFER COMMON STOCK
IF SUCH TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE CORPORATION
BEING OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR
CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON STOCK WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR
CONSTRUCTIVELY OWN COMMON STOCK
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<PAGE> 26
IN EXCESS OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE
CORPORATION. IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE
VIOLATED, THE COMMON STOCK REPRESENTED HEREBY WILL BE AUTOMATICALLY
TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE
CHARITABLE BENEFICIARIES. IN ADDITION, THE CORPORATION MAY REDEEM
SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE
RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF
CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS IN THIS LEGEND THAT
HAVE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS THE SAME
MAY BE AMENDED FROM TIME TO TIME, SHALL HAVE THE MEANINGS THEREIN
DEFINED. A COPY OF SUCH CHARTER, INCLUDING THE RESTRICTIONS ON TRANSFER
AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF COMMON STOCK ON
REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO
THE SECRETARY OF THE CORPORATION.
3.8 Covenant to Remedy Breaches. So long as this Agreement is in
effect, but in no event subsequent to the Closing Date, Contributor covenants to
use all reasonable efforts within its control:
(a) to prevent the breach of any representation or warranty of
Contributor hereunder;
(b) to satisfy all covenants of Contributor hereunder; and
(c) to clear promptly any breach of a representation, warranty
or covenant of Contributor hereunder upon its learning of same.
3.9 Actions Prior to Closing. Between the date hereof and the
Closing Date, Contributor shall not:
(a) sell or transfer all or any portion of any Property
Interest; or
(b) mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of any Property Interest.
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<PAGE> 27
3.10 Certain ERISA Matters. Contributor is neither an "employee
benefit plan" within the meaning of Section 3(3) of ERISA (a "PLAN") nor an
entity whose assets include, or will include immediately following the
consummation of the transactions contemplated hereby, the assets of a Plan
pursuant to Section 2510.3-101 of the regulations of the United States
Department of Labor. The execution, delivery and performance of this Agreement,
each Closing Document to which Contributor is a party and each such agreement,
document and instrument by the Contributor will not constitute a non-exempt
"prohibited transaction" within the meaning of Section 406 of ERISA or Section
4975 of the Code.
3.11 Principal Purpose. Contributor's principal purpose is other
than to permit the Partnership to satisfy the 100 partner limitation under
Treasury Regulation 1.7704-1(h)(3).
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY AND THE OPERATING PARTNERSHIP
As a material inducement to Contributor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Company and the
Operating Partnership hereby make to Contributor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the Closing Date.
4.1 Authority.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland, and the
Operating Partnership is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware.
(b) Each of the Company and the Operating Partnership has full
right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement;
(ii) to perform the transactions contemplated hereby
and thereby; and
(iii) to issue shares of Common Stock and OP Units, as
applicable, to each Contributor pursuant to and in accordance with the
terms of this Agreement.
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(c) This Agreement, each Closing Document to which the Company
or the Operating Partnership is a party and each agreement, document and
instrument executed and delivered by the Company or the Operating Partnership
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Company or the
Operating Partnership party thereto, each enforceable in accordance with its
respective terms, subject, however, as to enforceability to applicable
bankruptcy, insolvency, moratorium, fraudulent conveyance, and other similar
laws of general applicability and to general principles of equity (whether
interpreted in a proceeding at law or in equity).
(d) The execution, delivery and performance of this Agreement,
each Closing Document to which the Company or the Operating Partnership is a
party and each such agreement, document and instrument by the Company or the
Operating Partnership:
(i) in the case of the Operating Partnership, does not
and will not violate the OP Agreement;
(ii) does not and will not violate any foreign,
federal, state, local or other laws applicable to the Company or the
Operating Partnership, as the case may be, or require the Company or
the Operating Partnership to obtain any approval, consent or waiver of,
or make any filing with, any person or authority (governmental or
otherwise) that has not been obtained or made and which does not remain
in effect; and
(iii) does not and will not result in a breach or a
violation of, constitute a default under, accelerate any obligation
under or give rise to a right of termination of, any indenture, deed of
trust, mortgage, loan or credit agreement, any other material
agreement, contract, instrument, lease, permit or authorization, or any
order, writ, judgment, injunction, decree, determination or arbitration
award to which the Company or the Operating Partnership is a party or
by which the property of either of them is bound or affected.
4.2 No Brokers. The Company and the Operating Partnership have not
entered into, and covenant that they will not enter into, any agreement,
arrangement or understanding with any person or entity which will result in the
obligation of Contributor to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
4.3 Sale of Property. The Company and the Operating Partnership
agree that, in connection with any sale of any of the Properties within two
years after the Closing Date, the Company and the Operating Partnership will pay
Contributor an amount representing the federal and state income tax liability
associated with the recognition of gain by Contributor in connection with such
sale (the "MAKE-WHOLE AMOUNT"). No Make-Whole Amount would be due in the case of
a transaction that does not result in the recognition of gain for tax purposes
(such as Section
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<PAGE> 29
1031 "like-kind" exchanges under the Code). The provisions of this Section 4.3
shall survive the Closing for a period of two years.
4.4 Allocation of Built-in Gain. Notwithstanding anything to the
contrary contained in the OP Agreement, the Operating Partnership agrees to use
the "traditional method" described in Treasury Regulation 1.704-3(b) in making
allocations to its partners with respect to the Properties under Section 704(c)
of the Internal Revenue Code of 1986, as amended.
4.5 REIT Sponsors. The Company and the Operating Partnership
represent and warrant that the REIT Sponsors constitute all of the employees of
the Company and the Operating Partnership who will receive, directly or
indirectly, OP Units or shares of Common Stock in connection with the IPO,
provided, however, that (a) Clifford L. Stein is expected to receive, directly
or indirectly, OP Units and is also expected to be employed by the Company or
the Operating Partnership, and (b) Robert M. Adams is expected to receive,
directly or indirectly, OP Units and is also expected to be a director of the
Company.
4.6 Capital Expenditures. Exhibit I attached hereto sets forth the
Partnership's budget of the monthly amount of capital expenditures (excluding
tenant improvements and brokerage fees) and borrowings expected to be made under
the GECC Loan. Between the date hereof and the Closing Date, the Partnership
will have caused to be made aggregate amounts of capital expenditures and
borrowings under the GECC Loan that are less than or equal to the aggregate
amounts of capital expenditures and borrowings, respectively, shown on Exhibit I
for such period.
ARTICLE V
MISCELLANEOUS
5.1 Amendment. This Agreement may only be amended by a written
agreement duly executed by both Contributor and the Operating Partnership. No
waiver of any provision of this Agreement shall be valid unless in writing and
signed by the party against whom enforcement is sought.
5.2 Entire Agreement; Counterparts; Applicable Law. This
Agreement:
(a) notwithstanding any provisions of the OP Agreement to the
contrary, this Agreement constitutes the entire agreement and, to the extent
specifically set forth herein, supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and, specifically, supersedes Sections 13.1(a)-(d) and
(f), 13.2, 13.4, 13.5 and 13.6 (but not Section 13.1(e) or Section 13.3) of the
Partnership Agreement; however, no part of Article 13 of the Partnership
Agreement shall be deemed superseded with respect to any REIT Election (as
defined in the Partnership Agreement) subsequent to the one currently being
exercised in connection with the IPO;
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<PAGE> 30
(b) may be executed in several counterparts, each of which
shall be deemed an original, and all of which shall constitute one and the same
instrument; and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York without giving
effect to the conflicts of law provisions thereof.
5.3 Assignability. This Agreement shall be binding upon, and shall
be enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns, provided,
however, that this Agreement may not be assigned (i) by the Company and the
Operating Partnership without the prior written consent of Contributor, or (ii)
except as permitted herein, by Contributor without the prior written consent of
the Company and the Operating Partnership, and any attempted assignment without
such consent shall be void and of no effect, provided further, however, that the
Company and the Operating Partnership may assign all or any portion of this
Agreement, the Closing Documents and any agreement contemplated hereunder or
thereunder to the Company or to a Controlled Affiliate of the Operating
Partnership or the Company without Contributor's consent. The term "CONTROLLED
AFFILIATE" shall mean an entity the majority of the voting stock of which, or
the general partner or managing member of which, is or is under the control of
and is beneficially owned by the Company, the Operating Partnership or a public
or private real estate investment trust controlled by Lawrence H. Feldman.
5.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
5.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, except as expressly provided herein.
5.6 Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall be interpreted so as reasonably to
effect the intent of the parties hereto. The parties agree (i) to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision and (ii) to execute any
amendment, consent or agreement deemed necessary or desirable by the Operating
Partnership to effect such replacement.
5.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
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<PAGE> 31
entitled to an injunction or injunctions to prevent any breach of this Agreement
and to enforce specifically the terms and provisions hereof in any federal or
state court located in the State of New York (as to which the parties agree to
submit to jurisdiction for the purposes of such action), this being in addition
to any other remedy to which they are respectively entitled under this Agreement
or otherwise at law or in equity.
5.8 Notices. Any notice or demand which must or may be given under
this Agreement or by law shall, except as otherwise provided, be in writing and
shall be deemed to have been given (i) when physically received by personal
delivery, (ii) three (3) business days after being deposited in the United
States certified or registered mail, return receipt requested, postage prepaid,
or (iii) one (1) business day after being deposited with a nationally known
commercial courier service utilizing its next day delivery service (such as
Federal Express); addressed and delivered in the case of a notice to the
Operating Partnership to the following address:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Bradley A. Kaufman, Esq.
and addressed and delivered, in the case of a notice to Contributor, to the
address set forth in EXHIBIT A hereto.
5.9 Waiver of Rights; Consents with Respect to Partnership
Interests. From and after the Closing Date,
(a) Contributor acknowledges that the agreements contained
herein and the transactions contemplated hereby and any actions taken in
contemplation of the transactions contemplated hereby (including the declaration
of any dividend or distribution in the form of Property Interests) may conflict
with and may not have been contemplated by the Partnership Agreement or another
agreement among one or more of the partners of the Partnership.
(b) With respect to the Partnership, Contributor expressly
gives all Consents (and any consent necessary to authorize the proper parties in
interest to give such Consents) and Waivers necessary or desirable to facilitate
any Conveyance Action relating to such partnership (as such terms are defined
below).
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<PAGE> 32
(c) Contributor agrees that it will take no action to enjoin,
or seek damages resulting from, any Conveyance Action by any holder of a direct
or indirect interest in the Partnership.
(d) The Waivers and Consent contained in this Section 5.9
shall terminate upon the termination of this Agreement, except as to
transactions completed hereunder prior to termination.
(e) As used herein, the term "CONVEYANCE ACTION" means, with
respect to the Partnership,
(i) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein (whether or
not such partner or holder is a Contributor hereunder) of its direct or
indirect interest in the Partnership to the Operating Partnership or
the Company or to another person in connection with the formation of
the Operating Partnership or the Company, or
(ii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company,
(B) the direct or indirect acquisition by the Operating
Partnership or the Company of any such direct or indirect
interest, or
(C) the transactions described in or contemplated by the
Registration Statement or the prospectus included therein
relating to the IPO, or
(iii) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
(A) any sale or distribution to any person of a direct
or indirect interest in the Partnership or an undivided
tenant-in-common interest in the Property represented by such
partnership interest;
(B) entering into any agreement with any person or
entity that grants to such person or entity the right to
purchase a direct or indirect interest in the Partnership; and
(C) giving the Consents and Waivers contained in this
Section 5.9 or consents or waivers similar thereto in form or
purpose.
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<PAGE> 33
(f) As used herein, the term "CONSENTS" means any consent
deemed by the Operating Partnership to be necessary or desirable under the
Partnership Agreement or any other agreement among all or any of the holders of
interests therein or any other agreement relating thereto or referred to
therein:
(i) to permit any and all Conveyance Actions relating to the
Partnership or to amend the Partnership Agreement and/or other
agreements so that no provision thereof prohibits, restricts, impairs
or interferes with any Conveyance Action (such amendment to include,
without limitation, the deletion of provisions which cause a default
under such agreement if interests therein are transferred for other
than cash);
(ii) to admit the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in accordance
with Section 5.3 above) as a substitute limited partner or general
partner or member of the Partnership, as the case may be, upon the
Operating Partnership's acquisition of a limited or general partner or
membership interest therein, respectively, and to adopt such amendment
as is necessary or desirable to effect such admission;
(iii) to adopt any amendment as may be deemed desirable by the
Company or the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general
partnership or membership interest therein, as the case may be,
provided, however, that such amendment shall not result in any
increased liability on the part of any Contributor hereunder or under
the Partnership Agreement; and
(iv) to continue the Partnership following the transfer of
interests therein to the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in accordance
with Section 5.3 above).
(g) As used herein, the term "WAIVERS" means, with respect to
the Partnership, the waiving of any and all rights that Contributor may have
with respect to, and (to the extent possible) that any other person may have
with respect to, or that may accrue to Contributor or other person upon the
occurrence of, a Conveyance Action relating to such partnership, including,
without limitation, the following rights:
(i) rights of notice;
(ii) rights to response periods;
(iii) rights to purchase the direct or indirect interest of
another partner in the Partnership (or the property interests
represented by such partnership interest) or to sell Contributor's or
other person's direct or indirect interest therein to another partner;
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<PAGE> 34
(iv) rights to sell Contributor's or other person's direct or
indirect interest therein at a price other than as provided herein; or
(v) rights to prohibit, limit, invalidate, or otherwise
restrict or impair any such Conveyance Action or to cause a termination
or dissolution of the Partnership because of such Conveyance Action.
5.10 Releases and Waivers. Each of the releases and waivers enumerated
in this Section 5.10 shall become effective at Closing.
(a) As of the Closing, Contributor and the Manager jointly and
severally irrevocably waive, release and forever discharge the Company and the
Operating Partnership and their respective affiliates, partners (including
Lawrence H. Feldman), agents, attorneys, successors and assigns of and from, any
and all charges, complaints, claims, liabilities, damages, actions, causes of
action, losses and costs of any nature whatsoever (collectively, "CONTRIBUTOR
CLAIMS"), known or unknown, suspected or unsuspected, arising out of or relating
to any of the Partnership agreements, this Agreement or any other matter which
exists at the Closing, except for Contributor Claims arising from the breach of
any representation, warranty, covenant or obligation under this Agreement.
Notwithstanding the foregoing, any indemnities, representations or warranties
made by any affiliate or partner of the Company or the Operating Partnership
(including Lawrence H. Feldman) in the Partnership Agreement or the Contribution
Agreement dated as of December 10, 1996 relating to the Partnership shall
survive as provided in the Partnership Agreement.
(b) As of the Closing, the Company and the Operating
Partnership jointly and severally irrevocably waive, release and forever
discharge Contributor, the Manager and their respective agents, attorneys,
successors and assigns of and from, any and all charges, complaints, claims,
liabilities, damages, actions, causes of action losses and costs of any nature
whatsoever (collectively, "OPERATING PARTNERSHIP CLAIMS"), known or unknown,
suspected or unsuspected, arising out of or relating to any of the Partnership
Agreements, this Agreement or any other matter which exists at the Closing,
except for Operating Partnership Claims arising from the breach of any
representation, warranty, covenant or obligation under this Agreement.
(c) Other than as provided in Section 5.10(a), as of the
Closing, Contributor and the Manager jointly and severally waive and relinquish
all rights and benefits otherwise afforded to Contributor under the Partnership
Agreement including, without limitation, any right to consent to or approve of
the sale or contribution by the other partners or members of the Partnership, as
the case may be, of their partnership interests to the Company or the Operating
Partnership.
5.11 Confidentiality. Contributor shall treat as strictly confidential
the fact that the Company is contemplating an offering of its common stock until
such time as the Company has filed the Registration Statement with the
Securities and Exchange Commission and shall not
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<PAGE> 35
communicate at any time the terms of this Agreement to any person other than
counsel or advisors to Contributor who agree to keep such terms confidential and
any lender holding a lien on any Property Interests. Each Contributor shall
treat all information received from the Operating Partnership or its counsel or
advisors pertaining to the Operating Partnership or the Company confidential and
shall disseminate same only to counsel to such Contributor who agree to keep
such information confidential.
5.12 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
5.13 Legal Fees and Expenses. The Company and the Operating
Partnership, on the one hand, and Contributor, on the other, agree that each
side will bear the fees and expenses of its own counsel and counsel to their or
its affiliates relating to or incurred in connection with the negotiation,
execution, delivery and performance of this Agreement and the transactions
contemplated hereby, including, without limitation, the IPO and any financing or
other transactions contemplated or effected by the Company or the Operating
Partnership prior to the Closing.
5.14 Termination. This Agreement shall terminate and the obligations of
the parties hereunder shall be of no further force and effect upon
(a) the mutual consent thereto of the parties hereto;
(b) the failure of the Closing to occur on or prior to December
13, 1997; or
(c) the delivery of a REIT Termination Notice.
5.15 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Company and the
Operating Partnership and Contributor set forth in this Agreement shall survive
the consummation of the transactions contemplated hereby.
5.16 Time of the Essence. Time is of the essence with respect to all
obligations of Contributor under this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
COMPANY:
TOWER REALTY TRUST, INC.
By: /s/ Lawrence H. Feldman
-------------------------
Name: Lawrence H. Feldman
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP,
L.P.
By: Tower Realty Trust, Inc.,
its general partner
By: /s/ Lawrence H. Feldman
-------------------------
Name: Lawrence H. Feldman
Title:
CONTRIBUTOR:
OFFICE INVEST SUB LLC
By: DD Investment Partners, L.P., a member
By: General Realty, LLC, its general
partner
By: Manageco, Inc., its managing
member
By: /s/ Francis X. Tansey
---------------------
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<PAGE> 37
Name: Francis X. Tansey
Title: President
By: Office Invest Sub Inc., a member
By: Francis X. Tansey
-----------------------
Name: Francis X. Tansey
Title: President
WITH RESPECT TO SECTION 1.10 ONLY:
DD INVESTMENT PARTNERS, L.P.,
By: General Realty, LLC, its general partner
By: Manageco, Inc., its managing member
By: /s/ Francis X. Tansey
-----------------------
Name: Francis X. Tansey
Title: President
THE FELDMAN PARTNERS, WITH RESPECT
TO SECTION 1.13 ONLY:
FELDMAN MOT PORTFOLIO CORP.
By: /s/ Lawrence H. Feldman
-------------------------
Name: Lawrence H. Feldman
Title:
FSA ASSOCIATES, L.P.
By: Feldman FSA Corp, its general partner
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<PAGE> 38
By: /s/ Lawrence H. Feldman
--------------------------
Name: Lawrence H. Feldman
Title:
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<PAGE> 39
EXHIBIT A
TO
CONTRIBUTION AGREEMENT
PARTNERSHIP AND INTERESTS
Partnership
D/F Portfolio Associates Limited Partnership, a Delaware limited partnership
Properties Directly or
Indirectly Held by Partnership
(the following are the "Properties,"
as defined in the Contribution Agreement
to which this Exhibit A is attached)
286 Madison Avenue
290 Madison Avenue
292 Madison Avenue
5151 East Broadway
One Orlando Center
All surplus land associated therewith in Tucson, Arizona and Orlando, Florida
Type of Interest
On the date hereof and on the Closing Date, Contributor owns and will own a
general partnership interest and a limited partnership interest in D/F Portfolio
Associates Limited Partnership, of which Contributor hereby contributes all of
its general and limited partnership interest, together with all right, title and
interest in all income, distributions and other payments due or owing to
Contributor, pursuant to the D/F Portfolio Associates Limited Partnership
Amended, Restated and Reconstituted Agreement of Limited Partnership dated as of
December 10, 1996. No affiliate of the original Contributor under the
Contribution Agreement to which this Exhibit A is attached owns any interest in
the Property or the Property Interests, other than the indirect beneficial
interests of the equity owners of such original Contributor.
A-1
<PAGE> 40
Address
c/o DRA Advisors, Inc.
1180 Avenue of the Americas
New York, New York 10036
Attention: Francis X. Tansey
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attention: Russel T. Hamilton, Esq.
A-2
<PAGE> 41
EXHIBIT B
TO
CONTRIBUTION AGREEMENT
CONTRIBUTION AND ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
is hereby acknowledged, the undersigned hereby assigns, transfers, contributes
and conveys to Tower Realty Operating Partnership, L.P. a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), its entire legal and beneficial
right, title and interest in and to the assets, interests and other rights set
forth on Exhibit A to this Agreement and described thereon as being assigned,
transferred, contributed and conveyed hereunder (the "PARTNERSHIP INTEREST"),
including, without limitation, all rights to receive distributions of money,
profits and other assets from or relating to the Partnership Interest, presently
existing or hereafter at any time arising or accruing TO HAVE AND TO HOLD the
same unto the Operating Partnership, its successors and assigns, forever.
Upon the execution and delivery hereof, the Operating Partnership assumes
all obligations in respect of the Partnership Interest.
Executed: March __, 1997
OFFICE INVEST SUB LLC
By: DD Investment Partners, L.P., a member
By: General Realty, LLC, its general partner
By: Manageco, Inc., its managing
member
By: ____________________ Name:
Title:
By: Office Invest Sub Inc., a member
A-1
<PAGE> 42
By: _______________________
Name:
Title:
A-2
<PAGE> 43
EXHIBIT C
TO
CONTRIBUTION AGREEMENT
CUSTOMARY CLOSING COSTS SPLITS
Florida:
Documentary
Stamps - Customarily paid by Seller.
Intangible Stamps - N/A
Recording Fees - Customarily paid by purchaser.
Title Insurance - Seller and purchaser split equally
Other closing costs which are normally paid or payable by Seller
New York:
Transfer Taxes - Customarily paid by seller.
Recording Fees - Customarily paid by purchaser (except for
Satisfaction of Mortgage).
Title Insurance - Customarily paid by purchaser.
Other closing costs which are normally paid or payable by Seller
C-1
<PAGE> 44
Arizona:
Transfer Taxes - N/A
Escrow Fees - Customarily split evenly between seller and
purchaser.
Recording Fees - Customarily paid by purchaser.
Title Insurance - Seller customarily pays for purchaser's basic
owner's policy.
Other closing costs which are normally paid or payable by Seller
The amounts set forth in Section 1.12 of the Contribution Agreement to which
this Exhibit C is attached.
C-2
<PAGE> 45
EXHIBIT D
TO
CONTRIBUTION AGREEMENT
MODEL FOR CONSIDERATION CALCULATION
To be attached.
D-1
<PAGE> 46
EXHIBIT E
TO
CONTRIBUTION AGREEMENT
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of __________
__, 1997, is entered into by and among Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P., a
Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, acting on its own behalf and through FEC LP, Inc., a
Delaware corporation ("FEC LP"), a wholly-owned subsidiary of the Company, has
formed the Operating Partnership pursuant to the Agreement of Limited
Partnership of the Operating Partnership dated __________ __, 1997 (as such
agreement may be amended or amended and restated from time to time, the
"PARTNERSHIP AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited Partners (as
defined below) directly or indirectly hold units of limited partnership interest
("OP UNITS") in the Operating Partnership.
(c) The Operating Partnership has agreed to provide the Limited Partners
with certain direct or indirect rights to exchange their OP Units for cash or,
at the election of the Company, for shares of the Company's common stock, par
value $0.01 per share (the "REIT STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
E-1
<PAGE> 47
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the Company
(i) declares or pays a dividend on its outstanding REIT Stock in REIT Stock or
makes a distribution to all holders of its outstanding REIT Stock in REIT Stock;
(ii) subdivides its outstanding REIT Stock; or (iii) combines its outstanding
REIT Stock into a smaller number of shares of REIT Stock, the Exchange Factor
shall be adjusted by multiplying the Exchange Factor by a fraction, the
numerator of which shall be the number of shares of REIT Stock issued and
outstanding on the record date for such dividend, contribution, subdivision or
combination assuming for such purpose that such dividend, distribution,
subdivision or combination has occurred as of such time, and the denominator of
which shall be the actual number of shares of REIT Stock (determined without the
above assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Exchange Factor
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust, charge,
claim, encumbrance, pledge, option, right of first offer or first refusal and
any other right or interest of others of any kind or nature, actual or
contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than FEC LP, named as a Limited
Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than FEC LP, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of the Company and Merrill Lynch & Co.
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
E-2
<PAGE> 48
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to the
product of the number of OP Units offered for exchange by an Exchanging Partner,
multiplied by the Exchange Factor as of the Valuation Date, provided, that in
the event the Company or the Operating Partnership issues to all holders of REIT
Stock rights, options, warrants or convertible or exchangeable securities
entitling the stockholders to subscribe for or purchase REIT Stock, or any other
securities or property (collectively, the "rights"), then the REIT Stock Amount
shall also include such rights that a holder of that number of shares of REIT
Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the New
York Stock Exchange (the "NYSE"), any other national securities exchange
or the Nasdaq Stock Market ("Nasdaq"), the closing price on such day, or
if no such sale takes place on such day, the average of the closing bid
and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading on the
NYSE, any national securities exchange or Nasdaq, the last reported sale
price on such day or, if no sale takes place on such day, the average of
the closing bid and asked prices on such day, as reported by a reliable
quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
E-3
<PAGE> 49
ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5 hereof,
and subject to any limitations under applicable law, the Operating Partnership
hereby grants to each Limited Partner and each Limited Partner hereby accepts
the right (the "EXCHANGE RIGHT"), exercisable on or after the date that is one
(1) year after the closing of the IPO, to exchange on a Specified Exchange Date
all or a portion of the OP Units held by such Limited Partner at an exchange
price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of Exchange
delivered to the Operating Partnership, with a copy delivered to the Company, by
the Limited Partner who is exercising the Exchange Right (the "EXCHANGING
PARTNER"); provided, however, that the Company, on behalf of the Operating
Partnership, may elect, after a Notice of Exchange is delivered, to satisfy the
Exchange Right which is the subject of such notice in accordance with Section
2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding the
provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner, provided, however, that at the time of such
exchange the Company qualifies as a real estate investment trust within the
meaning of Section 856 of the Internal Revenue Code of 1986, as amended.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
E-4
<PAGE> 50
(i) the Company hereby agrees so to notify the Exchanging Partner
within five (5) Business Days after the receipt by the Company of such
Notice of Exchange,
(ii) each Exchanging Partner hereby agrees to execute such documents
and instruments as the Company may reasonably require in connection with
the issuance of REIT Stock upon exercise of the Exchange Right and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(A)(B)(i)(a) would be prohibited under the Articles of Incorporation
of the Company,
(b) would otherwise jeopardize the REIT status of the Company, or
(c) would cause the acquisition of the REIT Stock by the Limited
Partner to be "integrated" with any other distribution of REIT Stock by
the Company for purposes of complying with the registration provisions of
the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 105 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article 2,
any person to whom OP Units have been pledged, in compliance with the terms of
the Lock-up Agreement, may exercise its Exchange Right prior to the date that is
one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
E-5
<PAGE> 51
(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company or FEC LP as directed by the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of the
Exchange Right, the Company shall reserve for issuance such number of shares of
REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall deliver
to Limited Partners in a timely manner all reports filed by the Company with the
SEC to the extent the Company also transmits such reports to its stockholders
and all other communications transmitted from time to time by the Company to its
stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable upon
exchange of OP Units (or the cash equivalent amount thereof if the Cash Amount
is paid) shall be computed on the basis of the aggregate amount of OP Units so
surrendered.
(c) Instead of any fractional shares of REIT Stock which would otherwise
be issuable upon exchange of any OP Units, the Operating Partnership shall pay a
cash adjustment in respect of such fraction in an amount equal to the Cash
Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
E-6
<PAGE> 52
(a) (i) Such Exchanging Partner has received and reviewed
(A) a copy of the prospectus contained in the Registration
Statement on Form S-11 filed by the Company in connection with the
IPO, any prospectus contained in any Registration Statement
subsequently filed by the Company, and any supplement or amendment
thereto (each, a "PROSPECTUS"), and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, made by the Company
with the SEC pursuant to the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial experience
of those persons, if any, retained by it to represent or advise it with
respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions of
this type that it is capable of evaluating the merits and risks of and
of making an informed investment decision with respect to an investment
in REIT Stock,
(B) is capable of protecting its own interest or has
engaged representatives or advisors to assist it in protecting
its interests and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited investor"
as defined in Rule 501 of the regulations promulgated under
the Securities Act.
(B) If such Exchanging Partner has retained or retains a
person to represent or advise it with respect to its
investment in REIT Stock, such Exchanging Partner will advise
the Company of such retention and, at the Company's request,
such Exchanging Partner shall, prior to or at delivery of the
REIT Stock hereunder,
(I) acknowledge in writing such representation and
(II) cause such representative or advisor to
deliver a certificate to the Company containing such
representations as may be reasonably requested by the
Company.
E-7
<PAGE> 53
(b) (i) Such Exchanging Partner understands that an investment in
the Company involves substantial risks.
(ii) Such Exchanging Partner has been given the opportunity to
make a thorough investigation of the activities of the Company and has
been furnished with materials relating to the Company and its
activities, including, without limitation, each Prospectus and the SEC
Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and
any subsequent Prospectus, the SEC Reports and other written
information provided to the Exchanging Partner by or on behalf of the
Company and, as applicable, such Exchanging Partner's position as a
director or executive officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner
hereunder will be acquired by such Exchanging Partner for its own
account, for investment only and not with a view to, or with any
intention of, a distribution or resale thereof, in whole or in part, or
the grant of any participation therein.
(ii) Such Exchanging Partner was not formed for the specific
purpose of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such
Exchanging Partner hereunder have not been registered under
the Securities Act or state securities laws by reason of a
specific exemption or exemptions from registration under the
Securities Act and applicable state securities laws and, the
certificates representing such shares of REIT Stock will bear
a legend to such effect,
(B) the Company's and the Operating Partnership's
reliance on such exemptions is predicated in part on the
accuracy and completeness of the representations and
warranties of such Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging
Partner hereunder may not be resold or otherwise distributed
unless registered under the Securities Act and applicable
state securities laws, or unless an exemption from
registration is available,
(D) there may be no market for unregistered shares of
REIT Stock, and
(E) the Company has no obligation or intention to
register such REIT Stock under the Securities Act or any state
securities laws or to take any action
E-8
<PAGE> 54
that would make available any exemption from the registration
requirements of such laws, except as provided in the
Registration Rights Agreement entered into by the Company and
the Exchanging Partner (the "REGISTRATION RIGHTS AGREEMENT").
(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk
of its investment in REIT Stock issued hereunder for an indefinite
period of time, although the holder of any such REIT Stock will be
afforded certain rights to have such REIT Stock registered under the
Securities Act and applicable state securities laws pursuant to the
Registration Rights Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report
required or permitted to be given or made to the Operating Partnership, the
Company, a Limited Partner or Assignee, as the case may be, under this Agreement
shall be in writing and shall be deemed given or made when delivered in person
or when sent by first class United States mail or by other similarly reliable
means of written communication to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, (i) at the address listed on
the records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at 120 West 45th Street, New York, New York 10036-4003, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in
this Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
E-9
<PAGE> 55
4.4 Further Action and Additional Restrictions. The parties shall
execute and deliver all documents, provide all information and take or refrain
from taking action as may be necessary or appropriate to achieve the purposes of
this Agreement.
4.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with
the consent of the Company by a vote of the Limited Partners in the same manner
as the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein,
E-10
<PAGE> 56
provided, however, that the FEC LP shall vote its interest in proportion to the
votes of the Limited Partners.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By:
------------------------------------
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By:
--------------------------------
Name:
Title:
LIMITED PARTNERS:
---------------------------
Signature
---------------------------
Name (Please Print or Type)
E-11
<PAGE> 57
Exhibit A
Name and Address of Limited Partners
[To be attached]
E-12
<PAGE> 58
Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties
contained in Section 3.3 of the Exchange Rights Agreement as if such
representations and warranties had been set forth in full in this Notice of
Exchange.
Dated: ____________________
__________________________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
_______________________
__________________________________________
(Signature of Limited Partner)
__________________________________________
(Street Address)
__________________________________________
(City) (State) (Zip Code)
If REIT Stock is to be issued, issue to:
Name: ____________________________________
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<PAGE> 59
Limited Partner's social security or tax
identification number:
E-14
<PAGE> 60
EXHIBIT F
TO
CONTRIBUTION AGREEMENT
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of _______ __, 1997 by and among Tower Realty Trust, Inc., a
Maryland corporation, which operates as a real estate investment trust (the
"COMPANY"), Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "OPERATING PARTNERSHIP"), and the other parties which are
signatories hereto (together with their respective successors, transferees and
assigns, each a "HOLDER" and collectively the "HOLDERS").
WHEREAS, on the date hereof, the Operating Partnership is acquiring,
among other things, certain partnership interests or assets of various
partnerships, joint ventures, corporations and other entities which are Holders
or in which the Holders own direct or indirect interests (the "PROPERTY
PARTNERSHIPS") pursuant to Omnibus Option Agreements of even date herewith (the
"OPTION AGREEMENTS") among the Operating Partnership and the Grantors named
therein, and in connection therewith the Holders will receive units of limited
partnership interest in the Operating Partnership (such units of limited
partnership interest being referred to hereinafter as the "OP UNITS");
WHEREAS, the Company, the Operating Partnership and the Holders are
parties to an Exchange Rights Agreement which provides the Holders, among other
things, with the right to demand that the Operating Partnership redeem their
limited partnership units for cash and, at the option of the Company, the
Company may satisfy that redemption request on behalf of the Operating
Partnership through the issuance of the Company's Common Stock, par value $0.01
per share; and
WHEREAS, in order to induce the Property Partnerships and the Holders
to consummate the closings contemplated under the Option Agreements, the Company
has agreed to grant to the Holders the registration rights set forth in Section
2 hereof.
NOW, THEREFORE, the parties hereto, in consideration of the foregoing,
the mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, hereby agree as follows:
I Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
<PAGE> 61
"COMMON STOCK" shall mean shares of common stock, par value $0.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the Preamble and also
shall include the Company's successors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"EXCHANGE RIGHTS AGREEMENT" shall mean the Exchange Rights Agreement,
dated the date hereof, among the Company, the Operating Partnership and the
other parties thereto.
"EXCHANGE STOCK" shall mean any Common Stock issued or to be issued to
the Holders upon the exchange of their OP Units pursuant to the Exchange Rights
Agreement.
"HOLDER" or "HOLDERS" shall have the meaning set forth in the Preamble.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OP UNITS" shall have the meaning set forth in the Preamble.
"OPERATING PARTNERSHIP" shall have the meaning set forth in the
Preamble and also shall include the Operating Partnership's successors.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to such
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Exchange Stock, excluding
(i) Exchange Stock for which a Registration Statement relating
to the sale thereof shall have become effective under the Securities
Act and which have been disposed of under such Registration Statement
or
(ii) Exchange Stock sold or eligible for sale pursuant to Rule
144(k).
<PAGE> 62
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing
fees;
(ii) all fees and expenses incurred in connection with
compliance with state securities or "blue sky" laws (including
reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Securities and the
preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD;
(iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to
the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Securities on any securities
exchange or exchanges pursuant to Article III, Section (xii) hereof;
and
(v) the fees and disbursements of counsel for the Company and
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a selling Holder, all of which shall be borne by such
Holder in all cases.
"REGISTRATION STATEMENT" or "SHELF REGISTRATION STATEMENT" shall mean a
"shelf" registration statement of the Company and any other Person required to
be a registrant with respect to such shelf registration statement pursuant to
the requirements of the Securities Act which covers the issuance or resale of
the Registrable Securities on Form S-3 or otherwise under Rule 415 promulgated
under the Securities Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
amended from time to time, and any successor rule or regulation under the
Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
<PAGE> 63
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and any successor Act.
"SHELF REGISTRATION" shall mean a registration required to be effected
pursuant to Section 2 hereof.
II Shelf Registration Under the Securities Act.
2.1 Filing of Shelf Registration Statement.
(i) Within 15 days after the first anniversary date of the
date hereof, the Company shall cause to be filed a Shelf Registration
Statement providing for the sale by the Holders of the Registrable
Securities and will use its reasonable efforts to cause such Shelf
Registration Statement to be declared effective by the SEC as soon as
practicable.
(ii) The Company agrees to use its reasonable best efforts to
keep the Shelf Registration Statement continuously effective for a
period expiring on the date on which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement or have become eligible for sale
pursuant to Rule 144(k) and, subject to Article III hereof, further
agrees to supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration
Statement or by the Securities Act or by any other rules and
regulations thereunder for shelf registration; provided, however, that
the Company shall not be deemed to have used its reasonable efforts to
keep a Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders
covered thereby not being able to sell such Registrable Securities
during that period, unless such action is required under applicable law
or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective.
(iii) Notwithstanding the foregoing, the Company shall not be
required to file a Registration Statement or to keep a Registration
Statement effective if the negotiation or consummation of a transaction
is pending or an event has occurred, which negotiation, consummation or
event would require additional disclosure by the Company in the
Registration Statement of material information which the Company has a
bona fide business purpose for keeping confidential and the
nondisclosure of which in the Registration Statement might cause the
Registration Statement to fail to comply with applicable disclosure
requirements; provided, however, that the Company may not delay,
suspend or withdraw a Registration Statement for such reason for more
than 60 days or more often than twice during any period of 12
consecutive months.
<PAGE> 64
(iv) The Company is not required to file a separate
Registration Statement, but may file one Registration
Statement covering the Registrable Securities held by more
than one Holder.
2.2 Expenses. (i) The Company shall pay all Registration
Expenses in connection with any registration pursuant to
Article II.
(ii) Each Holder shall pay all underwriting
discounts, if any, sales commissions, the fees and
disbursements of counsel representing such Holder and transfer
taxes, if any, relating to the sale or disposition of such
Holder's Registrable Securities pursuant to the Shelf
Registration Statement or Rule 144.
2.3 Inclusion in Shelf Registration Statement. Any Holder that
does not, within 10 days after receipt of a reasonable request by the
Company for information in connection with the Shelf Registration
Statement, provide such information to the Company, shall not be
entitled to have its Registrable Securities included in the Shelf
Registration Statement.
2.4 Effect of Material Breach. In the event that the Company
shall breach any of its material obligations hereunder in any material
respect, any Holder of Registrable Securities may demand that the
Company file a registration statement covering such Holder's
Registrable Securities. The Company agrees to file such registration
statement within 60 days after receipt of such demand and agrees to use
its best efforts to procure the effectiveness of such registration
statement within 60 days after filing.
III Registration Procedures. (a) In connection with the obligations of
the Company with respect to the Registration Statement required to be
filed pursuant to Article 2 hereof, the Company shall, to the extent
applicable:
(i) Prepare and file with the SEC, within the time
period set forth in Section 2 hereof, a Shelf Registration
Statement, which Shelf Registration Statement
(A) shall be available for the sale of the
Registrable Securities in accordance with the
intended method or methods of distribution by the
selling Holders thereof, and
(B) shall comply as to form in all material
respects with the requirements of the applicable form
of registration statement and include all financial
statements required by the SEC to be filed therewith.
(ii) (A) Subject to Article III, Section (a)(ii)
(B),
<PAGE> 65
(I) prepare and file with the SEC
such amendments and post-effective
amendments to each such Registration
Statement as may be necessary to keep such
Registration Statement effective for the
applicable period;
(II) cause each such Prospectus to
be supplemented by any required prospectus
supplement, and as so supplemented to be
filed pursuant to Rule 424 or any similar
rule that may be adopted under the
Securities Act;
(III) respond as promptly as
practicable to any comments received from
the SEC with respect to the Shelf
Registration Statement, or any amendment,
post-effective amendment or supplement
relating thereto; and
(IV) comply with the provisions of
the Securities Act with respect to the
disposition of all securities covered by
each Registration Statement during the
applicable period in accordance with the
intended method or methods of distribution
by the selling Holders thereof.
(B) (I) Each Holder shall promptly
provide to the Company such information as
the Company reasonably requests in order to
identify such Holder and the method of
distribution in a post-effective amendment
to the Registration Statement or a
supplement to the Prospectus.
(II) Such Holder also shall notify
the Company in writing upon completion of
any offer or sale or at such time as such
Holder no longer intends to make offers or
sales under the Registration Statement.
(iii) Furnish to each Holder of Registrable
Securities, without charge, as many copies of each Prospectus,
including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder may
reasonably request, in order to facilitate the public sale or
other disposition of the Registrable Securities; the Company
consents to the use of the Prospectus, including each
preliminary Prospectus, by each such Holder of Registrable
Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the
preliminary Prospectus.
(iv) Use its reasonable efforts to register or
qualify the Registrable Securities by the time the applicable
Registration Statement is declared effective by the SEC under
all applicable state securities or "blue sky" laws of such
<PAGE> 66
jurisdictions as any Holder of Registrable Securities covered
by a Registration Statement shall reasonably request in
writing, keep each such registration or qualification
effective during the period such Registration Statement is
required to be kept effective, and do any and all other acts
and things which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such
Holder; provided, however, that the Company shall not be
required to
(A) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in
such jurisdiction where it would not otherwise be
required to qualify but for this Article III, Section
(a)(iv),
(B) subject itself to taxation in any such
jurisdiction, or
(C) submit to the general service of process
in any such jurisdiction.
(v) Notify each Holder of Registrable Securities
promptly and, if requested by such Holder, confirm such
notification in writing
(A) when a Registration Statement has become
effective and when any post-effective amendments and
supplements thereto become effective,
(B) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose,
(C) if the Company receives any notification
with respect to the suspension of the qualification
of the Registrable Securities for sale in any
jurisdiction or the initiation of any proceeding for
such purpose, and
(D) of the happening of any event during the
period a Registration Statement is effective which is
of a type specified in Article II, Section 2.1(iii)
hereof or as a result of which such Registration
Statement or the related Prospectus contains any
untrue statement of a material fact or omits to state
any material fact required to be stated therein or
necessary to make the statements therein, in light of
the circumstances under which they were made (in the
case of the Prospectus), not misleading.
(vi) Make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of a
Registration Statement at the earliest possible moment.
<PAGE> 67
(vii) Furnish to each Holder of Registrable
Securities, without charge, at least one conformed copy of
each Registration Statement and any post-effective amendment
thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested).
(viii)(A) Cooperate with the selling Holders of
Registrable Securities to facilitate the timely
preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any
Securities Act legend; and
(B) enable certificates for such Registrable
Securities to be issued for such numbers of shares of
Common Stock and registered in such names as the
selling Holders may reasonably request at least two
business days prior to any sale of Registrable
Securities.
(ix) Subject to Article II, Section 2.1(iii) and
Article III, Section (a)(ii)(B) hereof, upon the occurrence of
any event contemplated by Article III, Section (a)(v)(D)
hereof, use its reasonable efforts promptly to prepare and
file a supplement or prepare, file and obtain effectiveness of
a post-effective amendment to a Registration Statement or the
related Prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading.
(x) Make available for inspection by representatives
of the Holders of the Registrable Securities and any counsel
or accountant retained by such Holders, all financial and
other records, pertinent corporate documents and properties of
the Company, and cause the respective officers, directors and
employees of the Company to supply all information reasonably
requested by any such representative, counsel or accountant in
connection with a Registration Statement; provided, however,
that such records, documents or information which the Company
determines, in good faith, to be confidential and notifies
such representatives, counsel or accountants in writing that
such records, documents or information are confidential shall
not be disclosed by such representatives, counsel or
accountants unless
(A) the disclosure of such records,
documents or information is necessary to avoid or
correct a material misstatement or omission in a
Registration Statement,
<PAGE> 68
(B) the release of such records, documents
or information is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction,
or
(C) such records, documents or information
have been generally made available to the public.
(xi) Within a reasonable time prior to the filing of
any Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a
Prospectus, provide copies of such document (not including any
documents incorporated by reference therein unless requested)
to the Holders of Registrable Securities.
(xii) Use its reasonable efforts to cause all
Registrable Securities to be listed on any securities exchange
on which similar securities issued by the Company are then
listed.
(xiii) Provide a CUSIP number for all Registrable
Securities, not later than the effective date of a
Registration Statement.
(xiv) Otherwise use its reasonable efforts to comply
with all applicable rules and regulations of the SEC and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering at least 12 months
which shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder.
(xv) Use its reasonable efforts to cause the
Registrable Securities covered by a Registration Statement to
be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable Holders to
consummate the disposition of such Registrable Securities.
(b) The Company may require each Holder of Registrable
Securities to furnish to the Company in writing such information
regarding the proposed distribution by such Holder of such Registrable
Securities as the Company may from time to time reasonably request in
writing.
(c) In connection with and as a condition to the Company's
obligations with respect to the Registration Statement required to be
filed pursuant to Section 2 hereof and this Section 3, each Holder
agrees that
(i) it will not offer or sell its Registrable
Securities under the Registration Statement until it has
received copies of the supplemental or amended
<PAGE> 69
Prospectus contemplated by Article III, Section (a)(ii) hereof
and receives notice that any post-effective amendment has
become effective, and
(ii) upon receipt of any notice from the Company of
the happening of any event of the kind described in Article
III, Section (a)(v)(D) hereof, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to
a Registration Statement until such Holder receives copies of
the supplemented or amended Prospectus contemplated by Article
III, Section (a)(ix) hereof and receives notice that any
post-effective amendment has become effective, and, if so
directed by the Company, such Holder will deliver to the
Company (at the expense of the Company) all copies in its
possession, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
IV Indemnification; Contribution.
4.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder and its officers and directors
and each Person, if any, who controls any Holder (within the meaning of
Section 15 of the Securities Act) as follows:
(a) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of
(A) any untrue statement or alleged untrue
statement of a material fact contained in any
Registration Statement (or any amendment thereto)
pursuant to which Registrable Securities were
registered under the Securities Act, including all
documents incorporated therein by reference, or
(B) the omission or alleged omission
therefrom of a material fact required to be stated
therein or necessary to make the statements therein
not misleading or
(C) arising out of any untrue statement or
alleged untrue statement of a material fact contained
in any Prospectus (or any amendment or supplement
thereto), including all documents incorporated
therein by reference, or
(D) the omission or alleged omission
therefrom of a material fact necessary in order to
make the statements therein, in the light of the
circumstances under which they were made, not
misleading;
(b) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of
the aggregate amount paid in settlement
<PAGE> 70
of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of
any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if
such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld or
delayed; and
(c) against any and all expense whatsoever, as
incurred (including reasonable fees and disbursements of
counsel), reasonably incurred in investigating, preparing or
defending against any litigation, or investigation or
proceeding by any governmental agency or body, commenced or
threatened, in each case whether or not a party, or any claim
whatsoever based upon any such untrue statement or omission,
or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph
(a) or (b) above;
provided, however, that the indemnity provided pursuant to this Article
IV, Section 4.1(c) does not apply to any Holder with respect to any
loss, liability, claim, damage or expense to the extent arising out of
(x) any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company
by such Holder expressly for use in a Registration Statement
(or any amendment thereto) or any Prospectus (or any amendment
or supplement thereto) or
(y) such Holder's failure to deliver an amended or
supplemental Prospectus, after having been provided copies of
any such amended or supplemental Prospectus by the Company, if
such loss, liability, claim, damage or expense would not have
arisen had such delivery occurred.
4.2 Indemnification by Holders. Each Holder severally agrees
to indemnify and hold harmless the Company and the other selling
Holders, and each of their respective directors and officers (including
each director and officer of the Company who signed the Registration
Statement), and each Person, if any, who controls the Company or any
other selling Holder within the meaning of Section 15 of the Securities
Act, under the same circumstances and to the same extent as the
indemnity contained in Section 4.1(a) hereof (except that any
settlement described in Section 4.1(a)(B) shall be effected with the
written consent of such Holder, which consent shall not be unreasonably
withheld or delayed), but only insofar as such loss, liability, claim,
damage or expense arises out of or is based upon any untrue statement
or omission, or alleged untrue statements or omissions, made in a
Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto) in reliance upon and in conformity
with written information furnished to the Company by
<PAGE> 71
such selling Holder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or
supplement thereto).
4.3 Conduct of Indemnification Proceedings. (i) Each
indemnified party shall give reasonably prompt notice to each
indemnifying party of any action or proceeding commenced
against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party
(A) shall not relieve it from any liability
which it may have under the indemnity agreement
provided in Section 4.1(a) or 4.1(b) above, unless
and to the extent it did not otherwise learn of such
action and the lack of notice by the indemnified
party results in the forfeiture by the indemnifying
party of substantial rights and defenses and
(B) shall not, in any event, relieve the
indemnifying party from any obligations to any
indemnified party other than the indemnification
obligation provided under Section 4.1(a) or 4.1(b)
above.
(ii) If the indemnifying party so elects within a
reasonable time after receipt of such notice, the indemnifying
party may assume the defense of such action or proceeding at
such indemnifying party's own expense with counsel chosen by
the indemnifying party and approved by the indemnified parties
defendant in such action or proceeding, which approval shall
not be unreasonably withheld; provided, however, that, if such
indemnified party or parties reasonably determine that a
conflict of interest exists where it is advisable for such
indemnified party or parties to be represented by separate
counsel or that, upon advice of counsel, there may be legal
defenses available to them which are different from or in
addition to those available to the indemnifying party, then
the indemnifying party shall not be entitled to assume such
defense and the indemnified party or parties shall be entitled
to one separate counsel at the indemnifying party's or
parties' expense.
(iii)(A) If an indemnifying party is not entitled to
assume the defense of such action or proceeding as a
result of the proviso to Section 4.1(c), such
indemnifying party's counsel shall be entitled to
conduct such indemnifying party's defense, and
counsel for the indemnified party or parties shall be
entitled to conduct the defense of such indemnified
party or parties, it being understood that both such
counsel will cooperate with each other to conduct the
defense of such action or proceeding as efficiently
as possible.
(B) If an indemnifying party is not so
entitled to assume the defense of such action or does
not assume such defense, after having received the
notice referred to in Section 4.1(c), the
indemnifying party
<PAGE> 72
or parties will pay the reasonable fees and expenses
of counsel for the indemnified party or parties as
incurred.
(C) In such event, however, no indemnifying
party will be liable for any settlement effected
without the written consent of such indemnifying
party, which consent may not be unreasonably withheld
or delayed.
(iv) If an indemnifying party is entitled to assume,
and assumes, the defense of such action or proceeding in
accordance with this Section 4(c), such indemnifying party
shall not be liable for any fees and expenses of counsel for
the indemnified parties incurred thereafter in connection with
such action or proceeding.
4.4 Contribution.
(i) (A) In order to provide for just and equitable
contribution in circumstances in which the indemnity
agreement provided for in this Section 4 is for any
reason held to be unenforceable although applicable
in accordance with its terms, the Company and the
selling Holders shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity agreement
incurred by the Company and the selling Holders, in
such proportion as is appropriate to reflect the
relative fault of and benefits to the Company on the
one hand and the selling Holders on the other (in
such proportions that the selling Holders are
severally, not jointly, responsible for the balance),
in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable
considerations.
(B) (I) The relative benefits to the
indemnifying party and indemnified parties
shall be determined by reference to, among
other things, the total proceeds received by
the indemnified party and indemnified
parties in connection with the offering to
which such losses, claims, damages,
liabilities or expenses relate.
(II) The relative fault of the
indemnifying party and indemnified parties
shall be determined by reference to, among
other things, whether the action in
question, including any untrue or alleged
untrue statement of a material fact or
omission or alleged omission to state a
material fact, has been made by, or relates
to information supplied by, such
indemnifying party or the indemnified
parties, and the parties' relative intent,
knowledge,
<PAGE> 73
access to information and opportunity to
correct or prevent such action.
(ii) (A) The parties hereto agree that it would not
be just or equitable if contribution pursuant to this
Section 4.4(d) were determined by pro rata allocation
or by any other method of allocation which does not
take account of the equitable considerations referred
to in Section 4.4(i).
(B) Notwithstanding the provisions of this
Section 4.4, no selling Holder shall be required to
contribute any amount in excess of the amount by
which the total price at which the Registrable
Securities of such selling Holder were offered to the
public exceeds the amount of any damages which such
selling Holder would otherwise have been required to
pay by reason of such untrue statement or omission.
(iii) Notwithstanding the foregoing, no Person guilty
of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent
misrepresentation.
(iv) For purposes of this Section 4.4, each Person,
if any, who controls a Holder within the meaning of Section 15
of the Securities Act and directors and officers of a Holder
shall have the same rights to contribution as such Holder, and
each director of the Company, each officer of the Company who
signed the Registration Statement and each Person, if any, who
controls the Company within the meaning of Section 15 of the
Securities Act shall have the same rights to contribution as
the Company.
V Filing of Exchange Act Reports; Rule 144 Sales. 5.1The Company
covenants that it will file the reports required to be filed by the
Company under the Securities Act and the Exchange Act so as to enable
any Holder to sell Exchange Stock pursuant to Rule 144.
5.2 In connection with any sale, transfer or other disposition
by any Holder of any Exchange Stock pursuant to Rule 144, the Company
shall cooperate with such Holder to facilitate the timely preparation
and delivery of certificates representing Exchange Stock to be sold and
not bearing any Securities Act legend, and enable certificates for such
Exchange Stock to be for such number of shares and registered in such
names as the selling Holders may reasonably request at least two
business days prior to any sale of Exchange Stock.
<PAGE> 74
VI Miscellaneous.
6.1 Amendments and Waivers. (i) The provisions of this
Agreement, including the provisions of this Section 6(a)(i),
may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be
given without the written consent of the Company and the
Holders of a majority in amount of the outstanding Registrable
Securities; provided, however, that no amendment, modification
or supplement or waiver or consent to the departure with
respect to the provisions of Articles 2, 4 or 5 hereof shall
be effective as against any Holder unless consented to in
writing by such Holder.
(ii) Notice of any amendment, modification or
supplement to this Agreement adopted in accordance with this
Section 6.1 shall be provided by the Company to each Holder at
least thirty (30) days prior to the effective date of such
amendment, modification or supplement.
6.2 Notices. (i) All notices and other communications provided
for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier,
or any courier guaranteeing overnight delivery, to the parties
at their respective addresses set forth opposite their
signatures below or at such other address as a party may
indicate by written notice to the other party or parties.
(ii) All such notices and communications shall be
deemed to have been duly given:
(A) at the time delivered by hand, if
personally delivered;
(B) three (3) business days after being
deposited in the mail, postage prepaid, if mailed;
(C) when answered back, if telexed;
(D) when receipt is acknowledged, if
telecopied; or
(E) at the time delivered, if delivered by
an air courier guaranteeing overnight delivery.
6.3 Successors, Assigns and Transferees. (i) This Agreement
shall inure to the benefit of and be binding upon the
successors, assigns and transferees of each of the parties,
including, without limitation and without the need for an
express assignment, subsequent Holders.
<PAGE> 75
(ii) If any successor, assignee or transferee of any
Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable
Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable
Securities such Person shall be entitled to receive the
benefits hereof and shall be conclusively deemed to have
agreed to be bound by all of the terms and provisions hereof.
(iii) The term "successor, assignee or transferee of
a Holder" shall include any Person that acquires Registrable
Securities by operation of law, including upon the merger or
consolidation, liquidation or dissolution of a Holder.
6.4 Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
6.5 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
6.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
6.7 Specific Performance. The parties hereto acknowledge that
there would be no adequate remedy at law if any party fails to perform
any of its obligations hereunder, and accordingly agree that each
party, in addition to any other remedy to which it may be entitled at
law or in equity, shall be entitled to compel specific performance of
the obligations of any other party under this Agreement in accordance
with the terms and conditions of this Agreement in any court of the
United States or any State thereof having jurisdiction.
6.8 Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained herein.
This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
<PAGE> 76
Address:
120 West 45th Street TOWER REALTY TRUST, INC.
New York, New York 10036-4003
By:
-------------------------------------
Name:
Title:
120 West 45th Street TOWER REALTY OPERATING
New York, New York 10036-4003 PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By:
-------------------------------------
Name:
Title:
HOLDERS:
[Address:]
-----------------------------------------
Signature
-----------------------------------------
Name (Please Print or Type)
<PAGE> 77
EXHIBIT G
TO
CONTRIBUTION AGREEMENT
FORM OF
LOCK-UP AGREEMENT
_____________, 1997
Merrill Lynch, Pierce, Fenner
& Smith, Incorporated
World Financial Center
North Tower, 26th Floor
New York, New York 10281-1326
Dear Sirs,
The undersigned understands that Merrill Lynch, Pierce, Fenner & Smith,
Incorporated ("Merrill Lynch") and certain other firms propose to enter into an
Underwriting Agreement (the "Underwriting Agreement") providing for the purchase
by Merrill Lynch and such other firms (the Underwriters") of shares (the
"Shares") of Common Stock, par value $0.01 per share (the "Common Stock"), of
Tower Realty Trust, Inc. (the "Company") and that the Underwriters propose to
reoffer the Shares to the public. Capitalized terms used but not otherwise
defined in this letter agreement will have the meaning set forth in the
Company's Registration Statement on Form S-11 in connection with the
registration under the Securities Act of 1933, as amended, of Shares.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that without the prior written consent of Merrill
Lynch, the undersigned will not (and, except as may be disclosed in the
Prospectus, will not announce or disclose any intention to), directly or
indirectly, sell, offer to sell, solicit an offer to buy, contract to sell,
grant any option to purchase, or otherwise transfer or dispose (or enter into
any transaction or device which is designed to, or could be expected to, result
in the disposition at any time in the future) of, any shares of Common Stock, or
any securities convertible into or exercisable or exchangeable for Common Stock,
including any units of limited partnership interest (the "OP Units") in Tower
Realty Operating Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership") beneficially owned by the undersigned as of the date of
the closing of the Company's initial public offering, for a period of twelve
(12) months after the date of the final Prospectus relating to the offering of
the Shares to the public by the Underwriters. Prior to the expiration of such
period, the undersigned will not publicly announce or disclose any intention
<PAGE> 78
to do anything after the expiration of such period which the undersigned is
prohibited, as provided in the preceding sentence, from doing during such
period.
This letter shall not prohibit the undersigned from (i)
transferring OP Units to any Affiliate (as defined below) of the undersigned,
provided that such transferee is an accredited investor (as such term is defined
in Rule 501 under the Securities Act of 1933, as amended) and agrees in writing
with you to the transfer restrictions described above, or (ii) pledging the OP
Units and Common Stock which are subject to this Agreement to the Operating
Partnership or the Company, or to any financial institution as collateral bona
fide for any loan or other obligation with respect to which the undersigned is
personally liable. As used herein, the term "AFFILIATE" shall mean any Person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with a specified Person, and, with
respect to an individual, shall include such Person's immediate family or a
trust for the benefit thereof, with respect to a partnership, shall include a
general or limited partner thereof, with respect to a limited liability company,
is a member thereof, and with respect to a corporation, is a shareholder
thereof.
The undersigned agrees that the provisions of this agreement shall also
be binding upon the successors, assigns, heirs and personal representatives of
the undersigned.
In furtherance of the foregoing, the Company and [___________________],
its Transfer Agent, are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
letter agreement.
It is understood that, if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
and delivery of the shares of Common Stock relating to such agreement, you will
release the undersigned from [his][its] obligations under this letter agreement.
Very truly yours,
[INVESTOR]
By: _____________________________________
Name:
Title:
<PAGE> 79
EXHIBIT H
TO CONTRIBUTION AGREEMENT
EXISTING PROPERTIES
Tower 45
Maitland Forum
120 Mineola
The D/F Portfolio Properties
Century Plaza
Osborn Plaza
2800 N. Central
5750 Major Blvd.
Maitland West
Corporate Center
<PAGE> 80
EXHIBIT I
TO CONTRIBUTION AGREEMENT
BUDGET OF CAPITAL EXPENDITURES AND BORROWINGS
<PAGE> 1
Exhibit 10.57
SUPPLEMENT AND AMENDMENT TO CONTRIBUTION AGREEMENT
This Supplement and Amendment (the "SUPPLEMENT") dated as of September
11, 1997 to the Contribution Agreement (the "AGREEMENT") dated as of May 1, 1997
is entered into by and among TOWER REALTY TRUST, INC., a Maryland corporation
(the "COMPANY"), TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership (the "OP"), and OFFICE INVEST SUB LLC, a Delaware limited liability
company ("CONTRIBUTOR"), which are the parties to the Agreement, and FELDMAN MOT
PORTFOLIO CORP., a Delaware corporation ("FELDMAN MOT"), FELDMAN FSA CORP., a
Delaware corporation ("FELDMAN FSA"), FSA ASSOCIATES, L.P., a Delaware limited
partnership ("FSA ASSOCIATES"), and LAWRENCE H. FELDMAN.
R E C I T A L S:
A. The parties hereto have entered into the Agreement.
B. The Property Interests to be acquired by the OP from Contributor
pursuant to the Agreement include all of Contributor's general and limited
partnership interests in D/F Portfolio Associates Limited Partnership ("D/F
ASSOCIATES"). D/F Associates holds 100% of the issued and outstanding capital
stock of D/F 286 Madison Corp. ("D/F 286"), D/F 290 Madison Corp. ("D/F 290"),
D/F 292 Madison Corp. ("D/F 292"), D/F Tucson Corp. ("D/F TUCSON") and D/F
Orlando Corp. ("D/F ORLANDO") (each, a "CORPORATION"), each of which is
incorporated under the laws of the State of Delaware. D/F 286 is the general
partner of 286 Madison, L.P., D/F 290 is the general partner of 290 Madison,
L.P., D/F 292 is the general partner of 292 Madison, L.P., D/F Tucson Corp. is
the general partner of East Broadway 5151 Limited Partnership and D/F Orlando is
the general partner of Magnolia Associates Limited Partnership. D/F Associates
is the sole limited partner of each such limited partnership. Each such general
partnership interest of the Corporations is referred to herein as a "GENERAL
PARTNERSHIP INTEREST."
C. The parties hereto desire to cause the stock of the Corporations to
be distributed to the partners of D/F Associates, and the partners of FSA
Associates desire to cause FSA Associates to distribute its interest in such
stock to its partners (other than the OP, which desires to waive its right to
receive such stock). Each such recipient of the stock desires that the
Corporations in turn distribute an undivided interest in the General Partnership
Interests to
<PAGE> 2
such recipients, which will then be the shareholders of the Corporations. Such
recipients further desire to contribute their undivided interests in the General
Partnership Interests to the OP.
D. The principal acts required to effect the foregoing distributions of
the stock of the Corporations will be effected within five business days after
the date hereof. The subsequent transactions contemplated hereby will be
effected after the execution and delivery of the underwriting agreement relating
to the IPO (the "UNDERWRITING AGREEMENT") but prior to or simultaneously with
the consummation of the IPO (the "IPO CLOSING") and the transactions
contemplated by the Agreement.
E. The parties recognize that the economic effect for Contributor of
the transactions contemplated by this Supplement is identical to the economic
effect of the Agreement without giving effect to this Supplement, and
consequently Contributor will receive no additional cash or Company Common Stock
in connection herewith. The parties are entering into this Supplement because
the consummation of the transactions contemplated by this Supplement is a
prerequisite to the consummation of the IPO and the transactions contemplated by
the Agreement. In connection with the contribution by Contributor of its
undivided interest in the General Partnership Interests, Contributor shall
receive $10,000 in cash (the "GP CONTRIBUTION PRICE"), and the amount of cash
otherwise to be received by Contributor pursuant to the Agreement shall be
reduced by the amount of the GP Contribution Price and, to provide for such
identical economic effect on Contributor, the OP has agreed to provide the tax
indemnity provided in Section 4 below. Similarly, the consideration to be
received by the other contributors of the General Partnership Interests
hereunder shall be deemed to be a portion of the consideration received by them
pursuant to the other option or contribution agreements executed and delivered
by such contributors, and they shall not receive consideration hereunder in
addition to the consideration to be so received.
F. The parties hereto further desire to amend the Agreement as set
forth herein.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company, the OP and
Contributor agree as follows:
1. Distributions of Stock of the Corporations. Within five business
days after the date hereof, Contributor, in its capacity as a general partner of
D/F Associates, shall cause D/F Associates to distribute to each of the partners
in D/F Associates an undivided interest in the stock of each Corporation held by
D/F Associates, in accordance with the partnership agreement of D/F Associates.
Immediately thereafter, Feldman FSA shall cause FSA Associates to distribute an
undivided interest in the stock of each Corporation so received to its partners
(other than the OP, which hereby waives its right to receive such stock), in
accordance with the partnership agreement of FSA Associates.
-2-
<PAGE> 3
2. Distribution of General Partnership Interests. Immediately after the
execution and delivery of the Underwriting Agreement, Contributor, in its
capacity as the controlling shareholder of the Corporations, shall cause the
Corporations to distribute undivided tenant-in-common interests in the General
Partnership Interests to the Corporations' shareholders. Feldman MOT, Feldman
FSA, Lawrence Feldman and Contributor, which collectively will hold all of the
shares of capital stock of the Corporations, hereby consent to such distribution
of the General Partnership Interests.
3. Contribution of General Partnership Interests to the OP.
Simultaneously with the consummation of the transactions contemplated by the
Agreement, (a) Contributor shall contribute its undivided interest in the
General Partnership Interests to the OP, in exchange for the GP Contribution
Price, and the amount of cash to be otherwise received by Contributor pursuant
to the Agreement shall be reduced by the GP Contribution Price, and (b) Feldman
MOT, Feldman FSA and Lawrence Feldman shall contribute their respective
undivided interests in the General Partnership Interests to the OP.
4. Tax Indemnity. Lawrence H. Feldman hereby agrees to timely pay to
each of the Corporations an amount equal to the sum of the federal, state and
local income taxes (including any interest or penalties relating thereto)
payable by each such Corporation resulting from the recognition of income and/or
gain as a result of the distribution of the General Partnership Interests to
each such Corporation's shareholders pursuant to Section 2 hereof.
5. Deletion of Section 4.3 of the Agreement. Section 4.3 of the
Agreement is hereby deleted in its entirety.
6. Definitions. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
COMPANY:
TOWER REALTY TRUST, INC.
By: /s/ Lawrence H. Feldman
------------------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board,
Chief Executive Officer
and President
-3-
<PAGE> 4
OP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc.,
its general partner
By: /s/ Lawrence H. Feldman
--------------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board,
Chief Executive Officer
and President
CONTRIBUTOR:
OFFICE INVEST SUB LLC
By: DD Investment Partners, L.P., a member
By: General Realty, LLC, its general
partner
By: Manageco, Inc., its managing
member
By: /s/ Francis X. Tansey
----------------------------
Name: Francis X. Tansey
Title: President
By: Office Invest Sub Inc., a member
By: /s/ Francis X. Tansey
-------------------------------------
Name: Francis X. Tansey
Title: President
-4-
<PAGE> 5
FELDMAN MOT:
FELDMAN MOT PORTFOLIO CORP.
By: /s/ Lawrence H. Feldman
-------------------------------------------
Lawrence H. Feldman
President
FELDMAN FSA:
FELDMAN FSA CORP.
By: /s/ Lawrence H. Feldman
-------------------------------------------
Lawrence H. Feldman
President
FSA ASSOCIATES:
FSA ASSOCIATES, L.P.
By: FELDMAN FSA CORP., its general partner
By: /s/ Lawrence H. Feldman
-------------------------------------
Lawrence H. Feldman
President
LAWRENCE H. FELDMAN:
/s/ Lawrence H. Feldman
----------------------------------------------
Lawrence H. Feldman
-5-
<PAGE> 1
Exhibit 10.58
- --------------------------------------------------------------------------------
TOWER EQUITIES AND REALTY CORP.
and
TOWER REALTY OPERATING PARTNERSHIP, L.P.,
- --------------------------------------------------------------------------------
PURCHASE AND SALE AGREEMENT
- --------------------------------------------------------------------------------
Dated: March 31, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is entered into as of the 31 day of March, 1997 by TOWER
EQUITIES AND REALTY CORP., a New York corporation ("SELLER") and TOWER REALTY
OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the "OP").
R E C I T A L S:
A. Seller has previously entered into that certain Real Estate
Sale Agreement dated February 12, 1997 (the "CONTRACT") with Executive Villas
Limited Partnership, an Arizona limited partnership ("OWNER"), as seller, and
Seller, as purchaser, for the purchase of the property described below and more
particularly described in the Contract. A true and complete copy of the
Contract is attached hereto as EXHIBIT A.
B. The subject property is located in the City of Phoenix, County
of Maricopa and State of Arizona and is known as 3225 North Central Avenue, as
more particularly described on EXHIBIT B attached hereto. The term "PROPERTY"
as used herein is and shall be one in the same as and identical to the
"Property" and the "Premises" as such terms are defined in the Contract.
C. SELLER AND THE OP DESIRE (i) THAT SELLER ACQUIRE FEE TITLE TO
THE PROPERTY FROM OWNER PURSUANT TO THE CONTRACT AND (ii) THAT SELLER,
IMMEDIATELY THEREAFTER, CONVEY TO PURCHASER (AS HEREINAFTER DEFINED) SUCH FEE
TITLE OR OTHERWISE DISPOSE OF THE PROPERTY AS HEREINAFTER PROVIDED.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties do hereby agree as
follows:
1. Any capitalized term used herein and not defined shall have the
meanings ascribed to it in the Purchase Agreement (the "PURCHASE AGREEMENT")
entered into on or about the date hereof by and among Tower Realty Trust, Inc.,
the OP and each of the investors who are signatories thereto (collectively,
the "INVESTORS").
2. Upon the earlier to occur of a Termination Event or September
1, 1997, the OP shall have the right upon notice to Seller to require Seller to
enter into an agreement with such person(s), entity or entities as the OP may
designate or agree to, including itself (such person(s), entity or entities
being hereinafter referred to as "PURCHASER"), pursuant to which Seller shall
agree to convey the Property to Purchaser for a price equal to the purchase
price payable under the Contract (the "PURCHASE PRICE"). Any amounts, whether
in the form of cash, securities or otherwise, that Purchaser may agree to pay
in excess of the Purchase Price shall be retained by the OP and applied to the
payment of, or held as Collateral for, the Obligations. In the event that
Seller receives any amounts, whether in the form of cash, securities or
otherwise, in excess of the Purchase Price, it shall hold the same in trust for
the benefit of the OP, separate and apart from Seller's other assets, and
immediately transfer such amounts to the OP for application to the payment of,
or to be held as Collateral for, the Obligations.
3. If the OP has not exercised its rights under the preceding
paragraph by September 1, 1997, Seller, in its discretion, may elect either:
<PAGE> 3
(i) to locate a purchaser, in which event any amounts, whether in the
form of cash, securities or otherwise, received by Seller in excess of the
Purchase Price shall be held in trust for the benefit of the OP separate and
apart from Seller's other assets, and immediately transferred to the Company to
be held as additional Collateral for the Obligations; or
(ii) to purchase or otherwise acquire, with or without any partner or
co-venturer, the Property or a direct or indirect interest therein, in which
event Seller shall: (A) if Seller has purchased or otherwise acquired the
Property or a direct or indirect interest therein without any partners or
co-venturers, convey to the OP cash or an equity interest in the Property equal
to the difference between the fair market value of the Property and the Purchase
Price therefor, which cash or interest shall be held as additional Collateral,
or (B) if Seller has purchased or otherwise acquired the Property or a direct or
indirect interest therein, along with one or more partners or co-venturers,
transfer to the Company all cash received by Seller in excess of the Purchase
Price plus an equity interest in the Property equal to the difference between
the fair market value of the Property less the sum of the amount of cash
transferred to the OP as provided above plus the Purchase Price, which cash and
equity interest shall be held as additional Collateral for the Obligations. Any
equity interest transferred to the OP pursuant to this clause (ii) shall be
freely transferable (subject to any restrictions imposed under applicable law).
In the event that Seller exercise its rights pursuant to this paragraph, it
shall deliver to the OP and the Investors a certificate setting forth the terms
of the transaction and attaching copies of all of the transaction documents,
certified to be true, correct and complete and in full force and effect.
4. Seller acknowledges and agrees that the rights of the
Company under this Agreement will be assigned to the Collateral Agent as
security for the Obligations.
5. Seller shall use reasonable efforts to negotiate in good
faith the terms of any agreement with Purchaser required to be entered into
hereunder.
6. Seller shall use reasonable efforts, at Purchaser's
expense, to provide Purchaser with the benefit of any representation or
warranty by Owner in favor of Seller under the Contract, and, in connection
therewith, Purchaser shall have the right to compel Seller to sue Owner, at
Purchaser's expense, for any damages resulting from a breach by Owner of any
such representation or warranty, and Seller shall assign to Purchaser's
Seller's rights to any award from such suit.
7. Notwithstanding anything contained herein to the contrary,
the only representation or warranty Seller shall be obligated to give Purchaser
in connection with Seller's conveyance of the Property to Purchaser is that
Seller has not encumbered the Property in any way.
8. All notices, demands or other communications shall be in
writing and shall be sent to the party to whom the notice, demand or other
communication is directed at the following addresses.
If to Seller, as follows:
Tower Equities and Realty Corp.
c/o Feldman Equities
120 West 45th Street, 24th Floor
New York, New York 10036
Attention: Lawrence H. Feldman
-2-
<PAGE> 4
and an additional copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Bradley A. Kaufman, Esq.
If to the OP, as follows:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street, 24th Floor
New York, New York 10036
Attention: Lawrence H. Feldman
and additional copies to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Bradley A. Kaufman, Esq.; and
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Russell Platt; and
Rogers & Wells
Two Hundred Park Avenue
New York, New York 10166
Attention: A. Curtis Greer, Esq.
All notices, demands or other communications shall be sent either by (i)
personal delivery with receipt acknowledged in writing, (ii) United States
Mail, postage prepaid, as a registered or certified item, return receipt
requested, (iii) national prepaid overnight delivery service. Each notice,
demand or other communication sent by hand delivery or by national prepaid
overnight delivery service shall be effective when received or refused by the
party to whom the same is directed. Each notice, demand or other communication
sent by certified or registered mail shall be deemed given on the date of
receipt or refusal as indicated on the return receipt. Either party hereto may
change the address for notice, demand or other communication specified above by
giving the other party five (5) business days' advance written notice of such
change of address. Any notice, demand or other communication may be given
either by a party hereto or by such party's attorney.
9. OP acknowledges that Seller is not currently the owner of the
Property and that Seller is a contract-vendee under the Contract and that
certain of Seller's obligations under this Agreement are conditioned upon
Seller's acquisition of the Property from Owner. If Seller does not acquire the
Property on or before December 31, 1997, this Agreement shall automatically
terminate.
10. This Agreement may not be modified or amended except by an
agreement in writing signed by both parties and consented to by the Collateral
Agent. The parties may waive any of the conditions contained herein or any of
the obligations of the other party hereunder, but any such waiver shall be
effective only if in writing and signed by both parties to this Agreement and
consented to by the Collateral Agent. The Seller shall not agree to any
amendment, modification or termination of the Contract, or waive any right
-3-
<PAGE> 5
thereunder, or release Owner form any obligation thereunder unless consented to
by the OP and the Collateral Agent.
11. Each person executing this Agreement warrants and represents that
he or she is fully authorized to do so.
12. This Agreement, including the exhibits hereto, constitute the
entire agreement among the parties pertaining to the subject matter hereof and
supersede all prior and contemporaneous agreements and understanding of the
parties in connection therewith.
13. Numerous copies of this Agreement may be executed by the parties
hereto. Each such executed original copy shall have the full force and effect of
an original executed instrument.
14. This Agreement shall be controlled by and construed in accordance
with the laws of the State of New York.
15. PURCHASER AND THE OP HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
THE RIGHT TO A JURY TRIAL IN ANY ACTION, SUIT OR PROCEEDING ARISING FROM OR
RELATED TO THIS AGREEMENT.
16. At any time and from time to time after the Closing, Seller and
Purchaser shall, at the reasonable request of the other, execute and deliver any
further documents or agreements and take such further actions as may be
reasonably required for carrying out the intentions or facilitating the
consummation of this Agreement. The provisions of this Section shall survive the
Closing Date.
17. Neither this Agreement nor any memorandum hereof may be recorded
without first obtaining Seller's consent thereto. The recording of this
Agreement without Seller's consent shall be a default by Purchaser hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SELLER
TOWER EQUITIES AND REALTY CORP.
By: /s/ Lawrence Feldman
-------------------------------
Name: Lawrence Feldman
Title: President & CEO
Name: Robert Cox
Title: Executive Vice President
OP
TOWER REALTY OPERATING PARTNERSHIP. L.P.
By: /s/ Tower Realty Trust, Inc. general partner
------------------------
By: /s/ Lawrence Feldman
-------------------------
Name: Lawrence Feldman
Title: President and CEO
-4-
<PAGE> 6
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
On the 13th day of March, 1997, before me personally came Robert Cox to
me known, who, being by me duly sworn, did depose and say that he resides at 27
Anchor St., Freeport, NY, that he is a (vice) president of TOWER EQUITIES AND
REALTY CORP., the corporation described in and which executed the foregoing
instrument and that he executed said instrument as authorized by the board of
directors of said corporation.
/s/ Madeline Algarin MADELINE ALGARIN
- ------------------------------------- NOTARY PUBLIC, State of New York
Notary Public No. 01AL5046686
Qualified in Queens County
My commission expires: July 17, 1997 Commission Expires July 17, 1997
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
On the 31st day of March, 1997, before me personally came Lawrence
Feldman to me known, who, being by me duly sworn, did depose and say that he
resides at 351 Mill River Road, Upper Brodeville, NY, that he is a president of
Tower Realty Trust, Inc., the general partner of TOWER REALTY OPERATING
PARTNERSHIP, L.P., the corporation described in and which executed the
foregoing instrument on behalf of said partnership and that he executed said
instrument as authorized by the board of directors of said corporation and by
said partnership.
/s/ Madeline Algarin MADELINE ALGARIN
- ------------------------------------- NOTARY PUBLIC, State of New York
Notary Public No. 01AL5046686
Qualified in Queens County
My commission expires: July 17, 1997 Commission Expires July 17, 1997
5
<PAGE> 1
Exhibit 10.59
PURCHASE AND SALE AGREEMENT
Between
100 WALL LLC
SELLER,
and
TOWER REALTY
OPERATING PARTNERSHIP, L.P.
PURCHASER.
Premises:
100 Wall Street
New York, New York
September 11, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
----
l. DEFINITIONS...............................................................1
2. PURCHASE AND SALE.........................................................4
3. DUE DILIGENCE PERIOD......................................................4
4. PURCHASE PRICE AND DEPOSIT................................................6
5. STATUS OF THE TITLE.......................................................7
6. TITLE INSURANCE; LIENS....................................................8
7. APPORTIONMENTS............................................................10
8. PROPERTY NOT INCLUDED IN SALE.............................................15
9. COVENANTS OF SELLER.......................................................15
10. ASSIGNMENTS BY SELLER AND ASSUMPTIONS BY PURCHASER; SECURITY DEPOSITS;
EMPLOYEES................................................................16
11. CONDITION OF THE PROPERTY; REPRESENTATIONS...............................18
12. DAMAGE AND DESTRUCTION...................................................21
13. CONDEMNATION.............................................................23
14. BROKERS AND ADVISORS.....................................................24
15. TAX REDUCTION PROCEEDINGS................................................25
16. TRANSFER TAXES AND RECORDING CHARGES.....................................26
17. DELIVERIES TO BE MADE ON THE CLOSING DATE................................26
18. CLOSING DATE.............................................................29
19. NOTICES..................................................................31
20. DEFAULT BY PURCHASER OR SELLER...........................................32
21. FIRPTA COMPLIANCE........................................................34
22. ENTIRE AGREEMENT.........................................................35
-i-
<PAGE> 3
Page
----
23. AMENDMENTS...............................................................35
24. WAIVER...................................................................35
25. PARTIAL INVALIDITY.......................................................35
26. SECTION HEADINGS.........................................................35
27. GOVERNING LAW............................................................36
28. PARTIES; ASSIGNMENT AND RECORDING........................................36
29. CONFIDENTIALITY AND PRESS RELEASES.......................................37
30. FURTHER ASSURANCES.......................................................37
31. THIRD PARTY BENEFICIARY..................................................38
32. JURISDICTION AND SERVICE OF PROCESS......................................38
33. WAIVER OF TRIAL BY JURY..................................................38
34. MISCELLANEOUS............................................................38
34. REIT COOPERATION.........................................................39
-ii-
<PAGE> 4
Schedules
A. Description of the Land
B. Easements, Conditions, Restrictions and Encumbrances
C. List of Employees
D. List of Leases
E. List of Contracts
F. List of Security Deposits
G. Arrearage Schedule
H. Litigation
I. Violations
J. Employment Agreements
K. Existing Insurance
Exhibits
1. Form of Due Diligence Acceptance Notice
2. Escrow Agent's Wire Instructions
3. Form of Deed
4. Form of Bill of Sale
5. Form of Notice to Tenants
6. Form of FIRPTA Affidavit
7. Form of Assignment and Assumption of Leases and Contracts
8. Form of General Assignment and Assumption Agreement
9. Form of Tenant Estoppel Certificate
-iii-
<PAGE> 5
PURCHASE AND SALE AGREEMENT (this "Agreement") made as of the __ day
of September, 1997 between 100 WALL LLC, a New York limited liability company,
having an address at c/o The Witkoff Group, LLC 156 William Street, New York,
N.Y. 10038 ("Seller") and TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware
limited partnership, having an address at c/o Tower Realty Trust, Inc., 120 West
45th Street, New York, New York 10036 ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller is the owner and holder of the fee simple estate in
and to that certain plot, piece and parcel of land (the "Land") known as 100
Wall Street, New York, New York and more particularly described in Schedule A
annexed hereto, together with the building and all other improvements
(collectively, the "Building") located on the Land (the Building and the Land
are hereinafter sometimes collectively referred to as the "Premises");
WHEREAS, Seller desires to cause the sale, assignment and transfer
of its interests in and to the Premises to Purchaser in accordance with the
terms and provisions of this Agreement, and Purchaser desires to purchase such
interests from Seller upon the terms more particularly set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties hereto covenant and agree
as follows:
l. DEFINITIONS.
Adjourned Closing Date Section 6
Agreement Preamble
Apportionment Date Section 7(a)
Broker Section 14(a)
Building Recitals
business day Section 4(d)
Closing Section 18
Closing Date Section 18
Commitment Section 6(a)
Commitment Objection Date Section 6(a)
Company Section 6
Contracts Section 10(a)(ii)
Controlled Affiliate Section 28
controlled by Section 28(b)
Damages Section 11(c)
Deposit Section 4(a)
<PAGE> 6
Disclosed Survey Items Section 5(a)
Due Diligence Period Section 3(a)
Due Diligence Acceptance Notice Section 3(d)
Escrow Agent Section 4(a)
Excluded Personalty Section 8
Exculpated Parties Section 11(a)
Feldman Reit Section 28(b)
FFHS&J Escrow Agreement Section 4(b)
Final Closing Statement Section 7(i)
FIRPTA Section 21
First Adjournment Deposit Section 18
Land Recitals
Lease Additional Rent Section 7(b)(ii)
Leases Section 10(a)(i)
New Closing Notice Section 6(d)
96/97 Tax Year Section 15
97/98 Tax Year Section 15
Notices Section 19
Non-Objectionable Encumbrances Section 6(a)
Permitted Encumbrances Section 5
Personalty Section 2(a)
Preliminary Closing Statement Section 7(i)
Premises Recitals
Proceeding Section 11(c)
Proceeds Section 11(c)
Property Section 2(a)
Property Taxes Section 7(a)(ii)
Purchaser Preamble
Purchaser's Representatives Section 3(a)
RET Section 16(a)
RPT Section 16(a)
Rents Section 7(a)(i)
Representation Section 11(c)
Required Tenants Section 17(a)
Scheduled Closing Date Section 18
Second Adjournment Deposit Section 18
Seller Preamble
Seller Related Parties Section 3(c)
Taking Section 13(a)
Tenant Inducement Costs Section 7(h)
Title Cure Notice Section 6(a)
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Title Cure Period Section 6(a)
Title Objections Section 6(a)
Transferred Security Deposits Section 17(a)
Undisclosed Survey Items Section 5(a)
Update Exceptions Section 6(a)
Update Objection Date Section 6(a)
Utilities Section 7(e)
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2. PURCHASE AND SALE.
(a) Seller shall sell, assign and convey to Purchaser, and
Purchaser shall purchase and assume from Seller, subject to the terms and
conditions of this Agreement, all of Seller's right, title and interest in and
to and under (i) the Premises, (ii) the fixtures, furnishings, furniture,
equipment, machinery, inventory, appliances and other tangible and intangible
personal property owned by Seller and located at the Premises and used in
connection with the operation thereof (collectively, the "Personalty"); and
(iii) the Leases and Contracts in effect on the Closing Date (as such terms are
hereinafter defined) (subject to Section 9 hereof). The items described in
clauses (i), (ii) and (iii) above shall be referred to herein collectively as
the "Property."
(b) The parties hereto acknowledge and agree that the value of
the Personalty is de minimis and no part of the Purchase Price (as hereinafter
defined) is allocable thereto.
3. DUE DILIGENCE PERIOD.
(a) Purchaser shall have the period commencing on the date
hereof and continuing until 5:00 p.m. on Monday, September 15, 1997, time being
of the essence (the "Due Diligence Period"), during which to complete its review
and due diligence and to physically inspect the Premises, in accordance with
this Section 3. Subject to the provisions of this Section 3(b), during the Due
Diligence Period, Purchaser and its agents, employees, consultants, inspectors,
appraisers, engineers and contractors (collectively "Purchaser's
Representatives") shall have the right, from time to time, upon the advanced
notice required pursuant to Section 3(b), to enter upon and pass through the
Premises during normal business hours to examine and inspect the same.
(b) In conducting the inspection of the Premises and its due
diligence review, neither Purchaser nor any of Purchaser's Representatives shall
(a) contact or have any discussions with any of Seller's employees, agents or
representatives, or with any tenants at, or contractors providing services to,
the Premises, unless in each case Purchaser obtains the prior consent of Seller,
it being agreed that all such contacts or discussions shall, pending any such
approval, be directed to Jeffrey A. Goldberger, (b) interfere with the business
of Seller conducted at the Premises or (c) damage the Premises or any portion
thereof. In conducting the foregoing inspection, Purchaser and Purchaser's
Representatives shall at all times comply with, and shall be subject to, all
other terms, covenants and conditions of this Agreement. Seller may from time to
time establish reasonable rules of conduct for Purchaser and Purchaser's
Representatives in furtherance of the foregoing. Purchaser shall schedule and
coordinate all inspections, including, without limitation, any environmental
tests, with Seller and shall give Seller at least one (1) business day prior
notice thereof. Seller shall be entitled to have a representative present at all
times during each such inspection. Purchaser agrees to pay to
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<PAGE> 9
Seller on demand the actual cost of repairing and restoring any damage or
disturbance which Purchaser or Purchaser's Representatives shall cause to the
Premises or any portion thereof. All inspection fees, appraisal fees,
engineering fees and other costs and expenses of any kind incurred by Purchaser
or Purchaser's Representatives relating to such inspection of the Premises and
its other due diligence shall be at the sole expense of Purchaser. Purchaser and
Purchaser's Representatives shall not be permitted to conduct borings of the
Premises or drilling in or on the Premises in connection with the preparation of
an environmental audit or in connection with any other inspection of the
Premises without the consent of Seller (and, if such consent is given, Purchaser
shall be obligated to pay to Seller on demand the cost of repairing and
restoring any damage as aforesaid). The provisions of this Section 3(b) shall
survive the Closing or any termination of this Agreement.
(c) Purchaser agrees to indemnify and hold Seller and its
direct and indirect shareholders, officers, directors, partners, principals,
members, employees, agents, contractors, and any successors or assigns of the
foregoing (collectively with Seller, "Seller Related Parties") harmless from and
against any and all losses, costs, damages, liens, claims, liabilities or
expenses (including, but not limited to, reasonable attorneys' fees, court costs
and disbursements) incurred by any of Seller's Related Parties arising from or
by reason of Purchaser's and/or Purchaser's Representatives' access to, or
inspection of, the Premises, or any tests, inspections or other due diligence
conducted pursuant to this Agreement (whether or not the same shall occur during
the Due Diligence Period). The provisions of this Section 3(c) shall survive the
Closing or any termination of this Agreement.
(d) In the event Purchaser elects to proceed with the
transaction contemplated by this Agreement following the expiration of the Due
Diligence Period, then, Purchaser shall deliver notice (a "Due Diligence
Acceptance Notice") thereof to Seller, which Due Diligence Acceptance Notice
shall be in the form attached hereto as Exhibit 1 and must be delivered to
Seller no later than 5:00 p.m. on Monday, September 15, 1997, time being of the
essence, in order to be effective. If Purchaser shall fail to timely deliver a
Due Diligence Acceptance Notice as aforesaid, then this Agreement shall
automatically be deemed null and void and of no further force or effect. In the
event of the termination of this Agreement pursuant to this Section 3(d),
Purchaser shall be entitled to the return of the Deposit (as defined below),
together with all interest accrued thereon, and neither Seller nor Purchaser
shall have any further rights or obligations hereunder, except those arising
under provisions of this Agreement that expressly survive the termination
hereof.
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<PAGE> 10
4. PURCHASE PRICE AND DEPOSIT.
The purchase price to be paid by Purchaser to Seller for the
Property (the "Purchase Price") is Fifty Eight Million Dollars ($58,000,000),
subject to apportionment as provided in Section 7 below, payable as follows:
(a) Simultaneously with the execution of this Agreement by
Purchaser, Purchaser is delivering to Fried, Frank, Harris, Shriver & Jacobson,
as escrow agent (the "Escrow Agent") the amount of One Hundred Thousand Dollars
($100,000) either by (i) check payable directly to the order of "Fried, Frank,
Harris, Shriver & Jacobson, as Escrow Agent" or (ii) wire transfer of
immediately available federal funds to the escrow account of Escrow Agent, in
accordance with the wire instructions set forth on Exhibit 2 annexed hereto
(such deposit which is made pursuant to this subsection (a) being hereinafter
referred to as the "Deposit");
(b) Upon receipt by Escrow Agent of the Deposit, Escrow Agent
shall cause the same to be deposited into an interest bearing account selected
by Escrow Agent (it being agreed that Escrow Agent shall not be liable for the
amount of interest which accrues thereon) in accordance with the terms of that
certain Escrow Agreement of even date herewith between Seller, Purchaser and
Escrow Agent. If the Closing (as defined in Section 18 hereof) shall occur, the
interest on the Deposit, if any, shall be paid 50% to Seller (without credit
against the Purchase Price) and 50% to Purchaser, and, if the Closing shall not
occur and this Agreement shall be terminated, then the interest earned on the
Deposit shall be paid to the party entitled to receive the Deposit as provided
in this Agreement. The party receiving such interest shall pay any income taxes
thereon.
(c) At the Closing, the Deposit shall be paid to Seller
(together with 50% of all interest accrued thereon as aforesaid) and Purchaser
shall deliver the balance of the Purchase Price (i.e., the Purchase Price less
the Deposit (but without deduction of the portion of the interest accrued
thereon which is paid to Seller)) to Seller, as adjusted pursuant to Section 7
hereof.
(d) All monies payable by Purchaser under this Agreement,
unless otherwise specified in this Agreement, shall be paid, at Purchaser's
election, by (i) unendorsed bank check(s) issued by a bank which is a member of
the New York Clearinghouse Association and payable directly to the order of
Seller, or to such person or entity or persons or entities as Seller may
designate in writing at least one (1) business day prior to the Closing Date (as
defined in Section 18 hereof), or (ii) by Purchaser causing said amount to be
transferred (by wire or a series of wire transfers) in immediately available
federal funds for credit to such bank account or accounts as shall be specified
by Seller, or (iii) any combination of items (i) and (ii) above.
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<PAGE> 11
As used in this Agreement, the term "business day" shall mean every
day other than Saturdays, Sundays, all days observed by the federal or New York
State government as legal holidays and all days on which commercial banks in New
York State are required by law to be closed.
5. STATUS OF THE TITLE.
Subject to the terms and provisions of this Agreement, Seller's
interest in the Premises shall be sold, assigned and conveyed by Seller to
Purchaser, and Purchaser shall accept same, subject only to the following
(collectively, the "Permitted Encumbrances"):
(a) the state of facts disclosed on the survey prepared by
Earl B. Lovell - S.P. Belcher, Inc. dated May 24, 1984, last redated by visual
examination by Earl B. Lovell - S.P. Belcher, Inc. dated March 18, 1997 (the
"Disclosed Survey Items") and any further state of facts which are not Disclosed
Survey Items (the "Undisclosed Survey Items") as a current survey of the
Premises or a personal inspection would disclose and which would not materially
and adversely affect the use of the Premises as an office building;
(b) the standard printed exclusions from coverage contained in
the ALTA form of owners title policy currently in use in New York, with the
standard New York endorsement, and the easements, conditions, restrictions,
agreements and encumbrances as set forth on Schedule B annexed hereto;
(c) [INTENTIONALLY DELETED]
(d) Property Taxes (as hereinafter defined) which are a lien
but not yet due and payable, subject to proration in accordance with Section 7
hereof;
(e) any laws, rules, regulations, statutes, ordinances, orders
or other legal requirements affecting the Premises, including, without
limitation, those relating to zoning and land use;
(f) any utility company rights, easements and franchises for
electricity, water, steam, gas, telephone or other service or the right to use
and maintain poles, lines, wires, cables, pipes, boxes and other fixtures and
facilities in, over, under and upon the Premises, which are not of record,
provided that, the same do not materially and adversely affect the present use
of the Premises;
(g) any installment not yet due and payable of assessments
imposed after the date hereof and affecting the Premises or any portion thereof;
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<PAGE> 12
(h) all violations of laws, rules, regulations, statutes,
ordinances, orders or requirements, now or hereafter issued or noted (including,
without limitation, those attached hereto as Schedule I); and
(i) the rights and interests held by tenants, as tenants only,
under the Leases in effect at Closing.
6. TITLE INSURANCE; LIENS.
(a) (i) The parties acknowledge that Purchaser has ordered, at
Purchaser's expense, a title commitment (the "Commitment") for an owner's policy
of title insurance with respect to Purchaser's acquisition of the Premises from
Commonwealth Land Title Insurance Company, Chicago Title Insurance Company and
Lawyers Title Insurance Company, as co-insurers (collectively, the "Company").
Purchaser acknowledges that it has instructed the Company to deliver copies of
the Commitment and any updates thereto to Seller's counsel contemporaneously
with the delivery thereof to Purchaser. Purchaser shall have until the last day
of the Due Diligence Period, time being of the essence (the "Commitment
Objection Date") in which to give Seller notice of Purchaser's objections (the
"Title Objections") to any liens, encumbrances or other title exceptions (other
than Permitted Encumbrances) revealed by the Commitment, a copy of which
Commitment shall be delivered to Seller with such objection notice; it being
agreed that Purchaser shall have no right to object to the Permitted
Encumbrances. If Purchaser does not deliver such objection notice by the
Commitment Objection Date, Purchaser shall be deemed to have waived its right to
object to any liens, encumbrances or other title exceptions appearing on such
Commitment (and the same shall not constitute Title Objections and shall be
deemed Permitted Encumbrances). If Purchaser delivers such objection notice by
the Commitment Objection Date, any liens, encumbrances and other title
exceptions appearing on such Commitment which are not expressly objected to in
such notice shall not constitute Title Objections and shall be deemed Permitted
Encumbrances.
(ii) If, prior to the Closing Date, the Title
Company shall deliver any update to the Commitment which discloses additional
liens, encumbrances or other title exceptions which were not disclosed by the
Commitment ) (each, an "Update Exception"), then Purchaser shall have until the
earlier of (x) five (5) business days after delivery of such update or (y) the
business day immediately preceding the Closing Date, time being of the essence
(the "Update Objection Date") to deliver notice to Seller objecting to any of
the Update Exceptions. If Purchaser fails to deliver such objection notice by
the Update Objection Date, Purchaser shall be deemed to have waived its right to
object to any Update Exceptions (and the same shall not be deemed Title
Objections and shall be deemed Permitted Encumbrances). If Purchaser shall
deliver such objection notice by the Update Objection Date, any Update
Exceptions which are not objected to in
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<PAGE> 13
such notice shall not constitute Title Objections and shall be deemed Permitted
Encumbrances.
(iii) Purchaser shall not be entitled to object to,
and shall be deemed to have approved, any liens, encumbrances or other title
exceptions (and the same shall not constitute Title Objections but shall be
deemed Permitted Encumbrances) (1) over which the Company is willing to insure
(without additional cost to Purchaser), (2) against which the Company is willing
to provide affirmative insurance (without additional cost to Purchaser), or (3)
which will be extinguished upon the transfer of the Property (collectively, the
"Non-Objectionable Encumbrances"). Notwithstanding anything to the contrary
contained herein, if Seller is unable to eliminate the Title Objections set
forth in the Commitment or any update thereto by the Scheduled Closing Date (as
hereinafter defined), unless the same are waived by Purchaser without any
abatement in the Purchase Price, Seller may, upon at least two (2) business
days' prior notice ("Title Cure Notice") to Purchaser (except with respect to
matters first disclosed during such two (2) business day period, as to which
matters notice may be given at any time through and including the Scheduled
Closing Date) adjourn the Scheduled Closing Date (such date to which Seller
adjourns the Scheduled Closing Date is herein referred to as the "Adjourned
Closing Date"), for a period not to exceed thirty (30) days after the original
Scheduled Closing Date set forth in Article 18 ("Title Cure Period"), in order
to attempt to eliminate such exceptions.
(iv) Without limiting the provisions of Section
3(c), in no event shall any lien, encumbrance or other title exception arising
as a result of any act or omission of Purchaser or anyone acting on behalf of
Purchaser be deemed a Title Objection.
(b) Subject to Seller's obligations set forth in Section 6(c)
hereof, if Seller is unable to eliminate any Title Objection within the Title
Cure Period, unless the same is waived by Purchaser, then, Purchaser may (i)
accept the Property subject to such Title Objection without abatement of the
Purchase Price, in which event (x) such Title Objection shall be deemed to be,
for all purposes, a Permitted Encumbrance, (y) Purchaser shall close hereunder
notwithstanding the existence of same, and (z) Seller shall have no obligations
whatsoever after the Closing Date with respect to Seller's failure to cause such
Title Objection to be eliminated, or (ii) terminate this Agreement by notice
given to Seller within ten (10) business days following expiration of the Title
Cure Period, time being of the essence, in which event Purchaser shall be
entitled to a return of the Deposit (together with any interest accrued
thereon). If Purchaser shall fail to deliver the termination notice described in
clause (ii) within the 10 business day period described therein, time being of
the essence, Purchaser shall be deemed to have made the election under clause
(ii). Upon the timely giving of any termination notice under clause (ii), or
deemed termination in accordance with the immediately preceding sentence, this
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<PAGE> 14
Agreement shall terminate and neither party hereto shall have any further rights
or obligations hereunder other than those which are expressly provided to
survive the termination hereof.
(c) It is expressly understood that in no event shall Seller
be required to bring any action or institute any proceeding, or to otherwise
incur any costs or expenses in order to attempt to eliminate any Title
Objections or to otherwise cause title in the Premises to be in accordance with
the terms of this Agreement on the Closing Date; provided that Seller shall,
upon consummation of the Closing, cause the existing mortgage held by Lehman
Brothers Holdings Inc. encumbering the Premises to be discharged of record or at
Purchaser's option, assigned to Purchaser's designee or lender, if any.
Notwithstanding anything contained in this Article 6 to the contrary, Seller
shall be required to remove, by payment, bonding or otherwise, any Title
Objections which can be removed by the payment of a liquidated sum of money,
provided that in no event shall Seller be obligated to expend amounts in excess
of One Hundred Thousand Dollars ($100,000) in the aggregate pursuant to the
provisions of this sentence.
(d) If Seller shall have adjourned the Scheduled Closing Date
in order to cure Title Objections in accordance with the provisions of this
Section 6, Seller shall, upon the satisfactory cure thereof, promptly reschedule
the Scheduled Closing Date, upon at least five (5) business days' prior notice
to Purchaser (the "New Closing Notice"); it being agreed, however, that if any
matters which are Title Objections arise between the date the New Closing Notice
is given and the rescheduled Scheduled Closing Date, Seller may again adjourn
the Closing for a reasonable period or periods, in order to attempt to cause
such exceptions to be eliminated by sending Purchaser a Title Cure Notice, it
being agreed, however, that Seller shall not be entitled to adjourn the
Scheduled Closing Date pursuant to this Section 6 for a period or periods in
excess of thirty (30) days, in the aggregate, after the original Scheduled
Closing Date set forth in Article 18.
(e) If the Commitment discloses judgments, bankruptcies or
other returns against other persons having names the same as, or similar to,
that of Seller, Seller, on request, shall deliver to the Company affidavits
showing that such judgments, bankruptcies or other returns are not against
Seller in order to induce the Company to omit exceptions with respect to such
judgments, bankruptcies or other returns.
7. APPORTIONMENTS.
(a) The following shall be apportioned between Seller and
Purchaser as of 11:59 p.m. on the day immediately preceding the Closing Date
(the "Apportionment Date"):
(i) prepaid rents, fixed rents and additional rents
payable pursuant to the Leases (including, without limitation, operating expense
escalation
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payments, real estate tax escalation payments and percentage rent, if any,
payable under the Leases) (collectively, "Rents") to be apportioned in
accordance with Section 7(b) hereof;
(ii) real estate taxes, sewer rents and taxes, water
rates and charges (to the extent not accounted for pursuant to clause (i)
above), vault charges and taxes, business improvement district taxes and
assessments and any other governmental taxes, charges or assessments levied or
assessed against the Premises (collectively, "Property Taxes"), on the basis of
the respective periods for which each is assessed or imposed, to be apportioned
in accordance with Section 7(c) hereof;
(iii) administrative charges both permitted under the
respective Leases and under applicable law, on security deposits held
pursuant to the Leases;
(iv) fuel, if any, based on a reading Seller will
endeavor to have completed within five (5) days prior to closing or if not so
completed, as estimated by Seller's supplier, at current cost, together with any
sales taxes payable in connection therewith, if any (a letter from Seller's fuel
supplier shall be conclusive evidence as to the quantity of fuel on hand and the
current cost therefor);
(v) prepaid or payable fees for licenses and other
permits assigned to Purchaser at the Closing;
(vi) any amounts prepaid or payable by the owner of the
Property under the Contracts (as defined in Section 10);
(vii) wages and fringe benefits (including, without
limitation, vacation pay, sick days, health, welfare, pension and disability
benefits) and other compensation payable to all personnel employed at the
Building;
(viii) all other operating expenses with respect to the
Premises; and
(ix) such other items as are customarily apportioned in
accordance with real estate closings of commercial properties in the Borough of
Manhattan.
(b) (i) If, on the Apportionment Date, there are any past due
Rents owing by any tenant for any period through the Apportionment Date, the
Purchaser shall use its commercially reasonable efforts to collect the same
after the Closing Date (provided Purchaser shall not be obligated to institute
legal proceedings against any tenant with regard to the same, but Seller shall
retain its right to institute legal proceedings against such tenant).
Notwithstanding the preceding sentence, Seller agrees
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<PAGE> 16
(1) not to institute legal proceedings following the Closing Date against any of
the tenants at the Premises to collect any past due Rents from such tenants so
long as the aggregate amount of such past due Rents with respect to all tenants
at the Premises shall not equal or exceed Fifty Thousand Dollars ($50,000) and
(2) prior to commencing any such legal proceedings permitted hereunder against
any such tenant at the Premises, Seller shall provide Purchaser with ten (10)
days prior written notice of Seller's intention to commence such legal
proceedings and the amount of such past due Rent owed by such tenant. If
Purchaser shall fail to pay to Seller the amount of such past due Rents owed by
such tenant within ten (10) days following receipt of such notice, then Seller
shall be entitled to commence and prosecute such legal proceedings. Any Rent
received from any such tenant after the Closing Date shall be applied in the
following order of priority: (i) first, to Rent arrearages with respect to the
month in which the Closing Date shall occur (subject to apportionment pursuant
to Section 7(a) above), (ii) second, to Rent arrearages with respect to the
period following the month in which the Closing Date shall occur and (iii)
third, to Rent arrearages with respect to the period preceding the month in
which the Closing Date shall occur.
(ii) If, as of the Closing Date, any Rents other
than fixed rents (including, without limitation, operating expense escalations,
real estate tax escalations and percentage rent) (collectively, "Lease
Additional Rent") has not been billed or has not been determined in accordance
with the provisions of the Leases or, if billed, has not been collected by
Seller, Purchaser shall (A) bill the same when billable, (B) cooperate with
Seller to determine the correct amount of Lease Additional Rent and (C)
diligently pursue and use all commercially reasonable efforts to achieve the
collection of the same (provided Purchaser shall not be obligated to institute
legal proceedings against any tenant with regard to the same, but Seller shall
retain its right to institute legal proceedings against such tenant in
accordance with the terms of Section 7(b)(i) above. If the final determination
of Lease Additional Rent in accordance with the Leases shows that a net amount
is owed by Seller to Purchaser, the portion of Lease Additional Rent
attributable to the period following the Apportionment Date shall be paid by
Seller to Purchaser within ten (10) business days of such final determination
under the Leases. If the final determination of Lease Additional Rent in
accordance with the Leases shows that a net amount is owed by Purchaser to
Seller, the portion of Lease Additional Rent attributable to the period up to
and including the Apportionment Date, shall be paid by Purchaser to Seller
within ten (10) business days of such final determination.
(iii) Any Rents received by Seller or Purchaser
following the Closing Date which are the property of the other, shall be paid to
the other within five (5) business days following receipt thereof.
(c) Property Taxes shall be apportioned on the basis of the
fiscal period for which assessed. If the Closing Date shall occur either before
an assessment is
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<PAGE> 17
made or a tax rate is fixed for the tax period in which the Closing Date occurs,
the apportionment of such Property Taxes based thereon shall be made at the
Closing Date by applying the tax rate for the preceding year to the latest
assessed valuation, but, promptly after the assessment and/or tax rate for the
current year are fixed, the apportionment thereof shall be recalculated and
Seller or Purchaser, as the case may be, shall promptly make an appropriate
payment to the other based on such recalculation. If as of the Closing Date the
Premises or any portion thereof shall be affected by any special or general
assessments which are or may become payable in installments of which the first
installment is then a lien and has become payable, Seller shall pay the unpaid
installments of such assessments which are due prior to the Closing Date and
Purchaser shall pay the installments which are due on or after the Closing Date.
(d) If there are water meters at the Premises, the unfixed
water rates and charges and sewer rents and taxes covered by meters, if any,
shall be apportioned (i) on the basis of an actual reading Seller shall endeavor
to have completed within five (5) days prior to Closing, or (ii) if such reading
has not been so completed, on the basis of the last available reading. If the
apportionment is not based on an actual current reading, then upon the taking of
a subsequent actual reading, the parties shall, within ten (10) business days
following notice of the determination of such actual reading, readjust such
apportionment and Seller shall deliver to Purchaser or Purchaser shall deliver
to Seller, as the case may be, the amount determined to be due upon such
readjustment.
(e) Charges for all electricity, steam, gas and other utility
services (collectively, "Utilities") shall be billed to Seller's account up to
the Apportionment Date and, from and after the Apportionment Date, all utilities
shall be billed to Purchaser's account. If for any reason such changeover in
billing is not practicable as of the Closing Date, as to any Utility, such
Utility shall be apportioned on the basis of actual current readings or, if such
readings have not been made, on the basis of the most recent bills that are
available. If any apportionment is not based on an actual current reading, then
upon the taking of a subsequent actual reading, the parties shall, within ten
(10) business days following notice of the determination of such actual reading,
readjust such apportionment and Seller shall promptly deliver to Purchaser, or
Purchaser shall promptly deliver to Seller, as the case may be, the amount
determined to be due upon such adjustment.
(f) [INTENTIONALLY DELETED]
(g) Purchaser shall have no right to receive any rental
insurance proceeds which relate to the period prior to the Closing Date and, if
any such proceeds are delivered to Purchaser, Purchaser shall, within five (5)
business days following receipt thereof, pay the same to Seller.
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(h) Except as set forth below, Seller agrees that it shall be
responsible for the payment of all Tenant Inducement Costs (as hereinafter
defined) and leasing commissions which become due and payable (whether before or
after the Closing Date) arising from, relating to or in connection with the
existing term of the Leases in effect as of the date hereof, provided, that,
Purchaser agrees that, (A) with respect to any existing Lease granting to the
tenant thereunder a cancellation right which has not yet lapsed, Purchaser shall
be responsible for any such payments which would become due and payable (whether
before or after the Closing Date) upon the lapse of, or as a result of the lapse
of, such cancellation right and (B) Purchaser shall be responsible for any such
Tenant Inducement Cost or leasing commissions which become due and payable
(whether before or after the Closing Date) with respect to the existing Leases
with the following tenants: (i) Kinko's, (ii) Cellco/Nynex and (iii) Waterhouse
Securities, but only with respect to that certain Letter Agreement dated June
26, 1997 and that certain 7th Amendment dated August 1, 1997. Subject to the
preceding sentence, Purchaser agrees that it shall be responsible for the
payment of (i) all Tenant Inducement Costs and leasing commissions which become
due and payable (whether before or after the Closing Date) arising from,
relating to or in connection with any new Leases or any renewal agreements,
modifications, amendments, expansion agreements or other agreements relating, to
the existing Leases or any such new Leases entered into between the date hereof
and the Closing Date, in each case which have been approved (or deemed approved)
by Purchaser to the extent required pursuant to the terms hereof; and (ii) all
Tenant Inducement Costs and leasing commissions which become due and payable
(whether before or after the Closing Date) arising from, relating to or in
connection with any renewal, expansion or other options contained in the
existing Leases (or in any such new Leases or any other agreements described in
clause (i) above) which are exercised on or after the date hereof. If as of the
Closing Date Seller shall have paid any Tenant Inducement Costs or leasing
commissions for which Purchaser is responsible pursuant to the foregoing
provisions, Purchaser shall reimburse Seller therefor at Closing provided that
Seller shall supply invoices and statements for all such Tenant Inducement Costs
and leasing commissions to Purchaser on or prior to the Closing Date. For
purposes hereof, the term "Tenant Inducement Costs" shall mean any out-of-pocket
payments required under a Lease to be paid by the landlord thereunder to or for
the benefit of the tenant thereunder which is in the nature of a tenant
inducement or concession, including, without limitation, tenant improvement
costs, design, refurbishment and other work allowances, lease buyout costs, and
moving allowances; provided that "Tenant Inducement Costs" shall not include
loss of income resulting from any free rental period (it being agreed that
Seller shall bear such loss resulting from any free rental period with respect
to the period prior to the Closing Date and that Purchaser shall bear such loss
with respect to the period from and after the Closing Date).
(i) At or prior to the Closing, Seller and Purchaser and/or
their respective agents or designees will jointly prepare a preliminary closing
statement (the
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"Preliminary Closing Statement") which will show the net amount due either to
Seller or to Purchaser as the result of the adjustments and prorations provided
for herein, and such net due amount will be added to or subtracted from the cash
balance of the Purchase Price to be paid to Seller at the Closing pursuant to
Section 4 hereof, as applicable. Within one hundred twenty (120) days following
the Closing Date, Seller and Purchaser will jointly prepare a final closing
statement reasonably satisfactory to Seller and Purchaser in form and substance
(the "Final Closing Statement") setting forth the final determination of the
adjustments and prorations provided for herein and setting forth any items which
are not capable of being determined at such time (and the manner in which such
items shall be determined and paid). The net amount due Seller or Purchaser, if
any, by reason of adjustments to the Preliminary Closing Statement as shown in
the Final Closing Statement, shall be paid in cash by the party obligated
therefor within ten (10) business days following that party's receipt of the
approved Final Closing Statement. The adjustments, prorations and determinations
agreed to by Seller and Purchaser in the Final Closing Statement shall be
conclusive and binding on the parties hereto except for any items which are not
capable of being determined at the time the Final Closing Statement is agreed to
by Seller and Purchaser, which items shall be determined and paid in the manner
set forth in the Final Closing Statement and except for other amounts payable
hereunder pursuant to provisions which survive the Closing. Prior to and
following the Closing Date, each party shall provide the other with such
information as the other shall reasonably request (including, without
limitation, access to the books, records, files, ledgers, information and data
with respect to the Property during normal business hours upon reasonable
advance notice) in order to make the preliminary and final adjustments and
prorations provided for herein.
(j) The provisions of this Section 7 shall survive the
Closing.
8. PROPERTY NOT INCLUDED IN SALE.
Notwithstanding anything to the contrary contained herein, it is
expressly agreed by the parties hereto that any fixtures, furniture,
furnishings, equipment or other personal property (including, without
limitation, trade fixtures in, on, around or affixed to the Building) owned or
leased by any tenant, leasing agent, contractor, or employee at the Building
(collectively, "Excluded Personalty"), shall not be included in the Property to
be sold to Purchaser hereunder.
9. COVENANTS OF SELLER.
(a) During the period from the expiration of the Due Diligence
Period until the Closing Date, Seller shall:
(i) subject to subsections (b)(i) and (ii) below, be
permitted to enter into any agreements with respect to all or any portion of the
Property
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provided that (A) such agreements expire by their terms on or prior to the
Closing Date or, (B) in the case of Contracts, may be terminated by the owner of
the Property without penalty upon not more than thirty (30) days' (or less)
prior notice;
(ii) maintain in full force and effect the insurance
policies currently in effect with respect to the Premises; and
(iii) operate and manage the Premises in a manner
consistent with current practice.
(b) During the period from the expiration of the Due Diligence
Period until the Closing Date, Seller shall not, except as permitted under
Section 9(a) above, without Purchaser's prior approval:
(i) terminate, amend, renew or modify any existing
Lease, or enter into any new Lease for space at the Premises, other than the
termination of any Lease as a result of the tenant's default thereunder;
(ii) amend or modify (other than non-material amendments
or modifications) or renew any of the Contracts; or
(iii) enter into any new Contracts.
(c) Notwithstanding anything to the contrary contained herein,
during the period from the date hereof until the expiration of the Due Diligence
Period, Seller shall be permitted to use, operate, manage and lease the
Property, and take any other actions with respect thereto, as Seller shall
determine in its sole discretion. Upon Purchaser's request, Seller shall advise
Purchaser of any Leases or Contracts which are entered into, amended, renewed,
modified or terminated during the period from the date hereof through the
expiration of the Due Diligence Period.
(d) Whenever in Section 9(b) hereof Seller is required to
obtain Purchaser's approval with respect to any transaction described therein,
Purchaser shall, within five (5) business days after receipt of Seller's request
therefor, which request shall be accompanied by a description of the material
terms of the proposed transaction (which shall include the identification of the
parties involved), notify Seller of its approval or disapproval of same and, if
Purchaser fails to notify Seller of its disapproval within said five (5)
business day period, Purchaser shall be deemed to have disapproved same.
10. ASSIGNMENTS BY SELLER AND ASSUMPTIONS
BY PURCHASER; SECURITY DEPOSITS; EMPLOYEES.
(a) Subject to Section 9(b), on the Closing Date, Seller
agrees to assign to Purchaser, without recourse, representation or warranty
(except as expressly set
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forth in this Agreement), all of Seller's right, title and interest in, and
Purchaser agrees to assume Seller's obligations accruing on and after the
Closing Date under, the documents described in clauses (i), (ii) and (iii)
below:
(i) the leases, licenses and other occupancy agreements
demising space at the Premises, together with all amendments and modifications
thereof and supplements relating thereto (collectively, "Leases") which are then
in effect (together with any security deposited by the tenants thereunder);
(ii) the service, maintenance, supply and other
agreements relating to the operation of the Premises, together with all
modifications and amendments thereof and supplements relating thereto
(collectively, "Contracts") which are then in effect;
(iii) the transferable permits and licenses, if any,
relating to the Property and the other intangible Personalty.
(b) Prior to the Closing, Seller shall have the right (i) to
apply any security deposits held under Leases in respect of defaults by tenants
under the applicable Leases and (ii) to return the security deposit of any
tenant thereunder who is entitled to the return of such deposit pursuant to the
terms of its Lease. At the Closing, Seller shall transfer or cause to be
transferred to Purchaser the security deposits then held by Seller and not
applied to defaults or returned to tenants as above provided. To the extent that
any such security deposit to be so transferred which is comprised of a letter of
credit shall not be transferable as of the Closing, Seller and Purchaser shall
cooperate with each other following the Closing so as to transfer the same to
Purchaser or to obtain a replacement letter of credit with respect thereto in
favor of Purchaser and, in either case, Purchaser shall upon receipt thereof
assume Seller's obligations with respect to such security deposit pursuant to an
assumption agreement reasonably acceptable to Seller and Purchaser. Until any
such letter of credit shall be transferred or replaced, Seller shall hold the
same for the benefit of Purchaser and shall draw upon the same and deliver the
proceeds to Purchaser or return the same to the applicable tenant, in each case
upon Purchaser's written request, provided that Purchaser shall indemnify and
hold harmless Seller from any and all loss, cost, damage, liability or expense
(including, without limitation, reasonable attorneys' fees, court costs and
disbursements) incurred by Seller as a result of any such actions taken by
Seller at Purchaser's request. The provisions of this Section 10(b) shall
survive the Closing.
(c) Purchaser agrees that, effective as of the Closing Date,
all employees at the Building set forth on Schedule C who are union employees
shall be offered the same employment by Purchaser (or by the property manager to
be engaged by Purchaser) under their then current employment contracts or
agreements, including any collective bargaining agreements. Purchaser
acknowledges that if, at any time, Purchaser
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terminates any of such union employees or if it terminates Clean Rite LLC or
Triumph Security Corp., or requires those companies to reduce their employees at
the Premises from those listed on Schedule C and, as a result, any of the union
employees engaged by such companies are terminated, certain termination benefits
may be payable with respect to such terminated employees. Purchaser agrees that
it shall be liable for the payment of all such termination benefits and hereby
agrees to indemnify and hold harmless Seller and the other Seller Related
Parties from and against any loss, cost, damage, liability or expense
(including, without limitations, reasonable attorneys' fees, court costs and
disbursements) incurred by Seller or any other Seller Related Party arising from
or by reason of Purchaser's failure to pay such termination benefits as and when
due and payable. The provisions of this Section 10(c) shall survive the Closing.
11. CONDITION OF THE PROPERTY; REPRESENTATIONS.
(a) Purchaser expressly acknowledges that, except as expressly
set forth in this Agreement, neither Seller, nor any person acting on behalf of
Seller, nor any person or entity which prepared or provided any of the materials
reviewed by Purchaser in conducting its due diligence, nor any direct or
indirect officer, director, partner, shareholder, employee, agent,
representative, accountant, advisor, attorney, principal, affiliate, consultant,
contractor, successor or assign of any of the foregoing parties (Seller, and all
of the other parties described in the preceding portions of this sentence (other
than Purchaser), shall be referred to herein collectively as the "Exculpated
Parties") has made any oral or written representations or warranties, whether
expressed or implied, by operation of law or otherwise, with respect to the
Property, the zoning and other laws, regulations and rules applicable thereto or
the compliance by the Property therewith, the revenues and expenses generated by
or associated with the Property, or otherwise relating to the Property or the
transactions contemplated herein. Purchaser further acknowledges that, all
materials which have been provided by any of the Exculpated Parties have been
provided without any warranty or representation, expressed or implied as to
their content, suitability for any purpose, accuracy, truthfulness or
completeness and Purchaser shall not have any recourse against Seller or any of
the other Exculpated Parties in the event of any errors therein or omissions
therefrom. Purchaser is acquiring the Property based solely on its own
independent investigation and inspection of the Property and not in reliance on
any information provided by Seller, or any of the other Exculpated Parties,
except for the representations expressly set forth herein.
(b) Purchaser acknowledges and agrees that it is purchasing
the Property "AS IS" and "WITH ALL FAULTS", based upon the condition of the
Property as of the date of this Agreement, reasonable wear and tear and, subject
to the provisions of Sections 12 and 13 of this Agreement, loss by condemnation
or fire or other casualty excepted. Purchaser acknowledges and agrees that its
obligations under this Agreement shall not be subject to any financing
contingency or other contingencies or satisfaction of
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conditions and Purchaser shall have no right to terminate this Agreement or
receive a return of the Deposit (or the accrued interest thereon) except as
expressly provided for in Sections 3(d), 6(b), 12(a)(ii), 13(a)(ii) and 20(b)
hereof.
(c) Seller hereby represents and warrants to Purchaser as of
the date hereof as follows (each a "Representation"):
(i) Attached hereto as Schedule D is a true, correct and
complete list of the Leases in effect as of the date hereof.
(ii) Attached hereto as Schedule E is a true, correct
and complete list of the Contracts in effect as of the date hereof.
(iii) Attached hereto as Schedule F is a true, correct
and complete list of the security deposits currently held by Seller under the
Leases in effect as of the date hereof.
(iv) Attached hereto as Schedule G is a tenant arrearage
schedule which, as to arrearages accruing during Seller's period of ownership
and, to the best of Seller's knowledge, as to all other arrearages, was true,
correct and complete in all material respects as of the date set forth thereon.
(v) Except for the matters set forth on Schedule H,
there is no action, suit, litigation, hearing or administrative proceeding
pending against Seller, or, to Seller's knowledge, threatened with respect to
all or any portion of the Premises.
(vi) There are no condemnation or eminent domain
proceedings pending, or to Seller's knowledge, threatened against the Premises.
(vii) Except for the notices of violation set forth on
Schedule I, Seller has not received any written notice from any governmental
authority claiming that the Premises is in violation of any applicable laws.
(viii) Except as set forth on Schedule J, there are no
employment, union or other similar agreements to which Seller is a party and
relating to the Premises (the agreements set forth on Schedule J being referred
to, collectively, as the "Employment Agreements").
(ix) Schedule C annexed hereto is a list of all
employees presently employed by Seller or Seller's property manager at the
Premises and, based solely upon information provided by Seller's cleaning
contractor and security contractor, a list of all employees presently employed
by such contractors at the Premises.
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<PAGE> 24
(x) Seller (A) is a duly organized and validly existing
limited liability company in good standing under the laws of New York, and (B)
has all requisite power and authority, and has obtained any necessary consents
required, to enter into and carry out the transactions contemplated by this
Agreement.
(xi) Seller has not entered into any agreements with any
of the tenants under the Leases granting to a tenant any right of first refusal,
right of first offer or option to purchase the Premises.
(xii) Attached hereto as Schedule K is a description of
the insurance currently maintained by Seller with respect to the Premises.
(xiii) Seller has not received a notice of termination
from Waterhouse Securities with respect to its right to terminate its Lease.
Any and all uses of the phrase, "to the best of the Seller's knowledge" or other
references to Seller's knowledge in this Agreement shall mean the actual,
present, conscious knowledge of Steven C. Witkoff and Jeffrey A. Goldberger (the
"Seller Knowledge Individuals") as to a fact at the time given without
investigation or inquiry. Without limiting the foregoing, Purchaser acknowledges
that the Seller Knowledge Individuals have not performed and are not obligated
to perform any investigation or review of any files or other information in the
possession of Seller, or to make any inquiry of any persons, or to take any
other actions in connection with the representations and warranties of Seller
set forth in this Agreement. Neither the actual, present, conscious knowledge of
any other individual or entity, nor the constructive knowledge of the Seller
Knowledge Individuals or of any other individual or entity, shall be imputed to
the Seller Knowledge Individuals.
The representations and warranties of Seller contained in this
Section 11(c) shall survive the Closing for six (6) months following the Closing
Date, except for 11(c)(x) which shall survive for the applicable statute of
limitations period. Each such representation and warranty, except for 11(c)(x)
as aforesaid, shall automatically be null and void and of no further force and
effect on the day which is six (6) months following the Closing Date unless,
prior to such day, Purchaser shall have commenced a legal proceeding against
Seller alleging that Seller shall be in breach of such representation or
warranty and that Purchaser shall have suffered actual damages as a result
thereof (a "Proceeding"). If Purchaser shall have timely commenced a Proceeding
and a court of competent jurisdiction shall, pursuant to a final, non-appealable
order in connection with such Proceeding, determine that (1) Seller was in
breach of any of the applicable representation or warranty as of the date of
this Agreement and (2) Purchaser suffered actual damages (the "Damages") by
reason of such breach and (3) Purchaser did not have actual knowledge or
constructive knowledge of such breach on or prior to the Closing Date then,
Purchaser shall be entitled to receive an amount equal to the Damages;
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provided that, in no event shall Purchaser be entitled to receive, in connection
with any and all breaches of the representations and warranties of Seller
hereunder, an amount in excess of the net sales proceeds received by Seller from
Purchaser at the Closing (the "Proceeds"). Any such Damages shall be refunded
from such net sales proceeds within ten (10) business days following the entry
of such final, non-appealable order and delivery of a copy thereof to Seller.
Purchaser acknowledges and agrees that, in the event that Seller shall be in
breach of any of the Representations, Purchaser shall have no recourse to the
property or other assets of Seller or any of the other Exculpated Parties
(excluding the Proceeds), and Purchaser's sole remedy, in such event, shall be
to receive a refund from the Proceeds in the amount described above.
(d) The representations and warranties of Seller set forth in
Section 11(c) are subject to the limitation that, subject to Section 9(b),
Seller does not represent or warrant that any particular Lease or Contract will
be in force or effect as of the Closing or that the tenants or contractors
thereunder.
(e) The provisions of Sections 11(a), (b), and (d) shall
survive the Closing but such survival shall be limited, in the case of the
representations and warranties set forth in Section 11(c), to the extent set
forth therein.
(f) Purchaser hereby represents and warrants to Seller as of
the date hereof that Purchaser (A) is a duly organized and validly existing
limited partnership in good standing under the laws of Delaware and New York and
(B) has all requisite power and authority, and has obtained any necessary
consents required, to enter into and carry out the transactions contemplated by
this Agreement. The provision of this clause (f) shall survive the Closing for
the applicable statute of limitations period.
12. DAMAGE AND DESTRUCTION.
(a) If all or any part of the Building is damaged by fire or
other casualty occurring following the date hereof and prior to the Closing
Date, whether or not such damage affects a material part of the Building, then:
(i) if the estimated cost of repair or restoration is
less than or equal to $5,300,000 and if the estimated time to complete such
repair or restoration is twelve (12) months or less, neither party shall have
the right to terminate this Agreement and the parties shall nonetheless
consummate this transaction in accordance with this Agreement, without any
abatement of the Purchase Price or any liability or obligation on the part of
Seller by reason of said destruction or damage. In such event, Seller shall
assign to Purchaser and Purchaser shall have the right to make a claim for and
to retain any rent insurance proceeds applicable to the period from and after
the Closing Date and any casualty insurance proceeds received under the
insurance policies in effect with respect to the Premises on account of said
physical damage or destruction. Purchaser
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shall receive a credit from the cash due at Closing for the amount of the
deductible on such casualty insurance policy.
(ii) if the estimated cost of repair or restoration
exceeds $5,300,000 or if the estimated time to complete such repair or
restoration exceeds twelve (12) months, Purchaser shall have the option,
exercisable within ten (10) business days after receipt of notice of the
occurrence of such fire or other casualty, time being of the essence, either (x)
to terminate this Agreement by delivering notice thereof to Seller, whereupon
the Deposit (together with any interest accrued thereon) shall be returned to
Purchaser and this Agreement shall be deemed canceled and of no further force or
effect, and neither party shall have any further rights or liabilities against
or to the other except for such provisions which are expressly provided in this
Agreement to survive the termination hereof or (y) to waive unconditionally its
right to terminate this Agreement by delivering notice thereof to Seller (in
form reasonably satisfactory to Seller). If a fire or other casualty described
in this clause (ii) shall occur and Purchaser shall not deliver notice under
either (x) or (y) above within such 10-business day period, then Purchaser shall
be deemed to have elected to terminate this Agreement. If a fire or other
casualty described in this clause (ii) shall occur and Purchaser timely delivers
a notice under (y) above, then Purchaser and Seller shall consummate the
transactions hereunder in accordance with this Agreement without any abatement
of the Purchase Price or any liability or obligation on the part of Seller by
reason of said destruction or damage and, in such event, Seller shall assign to
Purchaser and Purchaser shall have the right to make a claim for and to retain
any rent insurance proceeds applicable to the period from and after the Closing
Date and any casualty insurance proceeds received under the insurance policies
in effect with respect to the Premises on account of said physical damage or
destruction and Purchaser shall receive a credit from the cash due at Closing
for the amount of the deductible on such casualty insurance policy.
(b) The estimated cost to repair and/or restore and the
estimated time to complete contemplated in subsection (a) above shall be
established by estimates obtained by Seller from independent contractors,
subject to Purchaser's review and reasonable approval of the same and the
provisions of Section 12(c) below.
(c) The provisions of this Section 12 supersede the provisions
of Section 5-1311 of the General Obligations Law of the State of New York. Any
disputes under this Section 12 as to the cost of repair or restoration or the
time for completion of such repair or restoration shall be resolved by expedited
arbitration before a single arbitrator acceptable to both Seller and Purchaser
in their reasonable judgment in accordance with the rules of the American
Arbitration Association; provided that if Seller and Purchaser fail to agree on
an arbitrator within five days after a dispute arises, then either party may
request the Real Estate Board of New York, Inc., to designate an arbitrator.
Such arbitrator shall be an independent architect or engineer having at least
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ten (10) years of experience in the construction of office buildings in
Manhattan. The determination of the arbitrator shall be conclusive and binding
upon the parties. The costs and expenses of such Arbitrator shall be borne
equally by Seller and Purchaser.
13. CONDEMNATION.
(a) If, prior to the Closing Date, any part of the Premises is
taken (other than a temporary taking), or if Seller shall receive an official
notice from any governmental authority having eminent domain power over the
Premises of its intention to take, by eminent domain proceeding, any part of the
Premises (a "Taking"), then:
(i) if such Taking involves less than or equal to ten
percent (10%) of the rentable area of the Building as determined by an
independent architect chosen by Seller (subject to Purchaser's review and
reasonable approval of such determination and the provisions of Section 13(b)
below), and does not materially and adversely affect access to the Premises,
neither party shall have any right to terminate this Agreement, and the parties
shall nonetheless consummate this transaction in accordance with this Agreement,
without any abatement of the Purchase Price or any liability or obligation on
the part of Seller by reason of such Taking; provided, however, that Seller
shall, on the Closing Date, (i) assign and remit to Purchaser, and Purchaser
shall be entitled to receive and keep, the net proceeds of any award or other
proceeds of such Taking which may have been collected by Seller as a result of
such Taking less the reasonable expenses incurred by Seller in connection with
such Taking, or (ii) if no award or other proceeds shall have been collected,
deliver to Purchaser an assignment of Seller's right to any such award or other
proceeds which may be payable to Seller as a result of such Taking and Purchaser
shall reimburse Seller for the reasonable expenses incurred by Seller in
connection with such Taking.
(ii) if such Taking involves more than ten percent (10%)
of the rentable area of the Building as determined by an independent architect
chosen by Seller (subject to Purchaser's review and reasonable approval of such
determination and the provisions of Section 13(b) below), Purchaser shall have
the option, exercisable within ten (10) business days after receipt of notice of
such Taking, time being of the essence, either (x) to terminate this Agreement
by delivering notice thereof to Seller, whereupon the Deposit (together with any
interest earned thereon) shall be returned to Purchaser and this Agreement shall
be deemed canceled and of no further force or effect, and neither party shall
have any further rights or liabilities against or to the other except pursuant
to the provisions of this Agreement which are expressly provided to survive the
termination hereof or (y) to waive unconditionally its right to terminate this
Agreement by delivering notice thereof to Seller (in form reasonably
satisfactory to Seller). If a Taking described in this clause (ii) shall occur
and Purchaser shall not deliver notice under either (x) or (y) above within such
10-business day period, then Purchaser shall be
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deemed to have elected to terminate this Agreement. If a Taking described in
this clause (ii) shall occur and Purchaser timely delivers a notice under (y)
above, then Purchaser and Seller shall consummate the transactions hereunder in
accordance with this Agreement without any abatement of the Purchase Price or
any liability or obligation on the part of Seller by reason of said Taking;
provided, however, that Seller shall, on the Closing Date, (i) assign and remit
to Purchaser, and Purchaser shall be entitled to receive and keep, the net
proceeds of any award or other proceeds of such Taking which may have been
collected by Seller as a result of such Taking less the reasonable expenses
incurred by Seller in connection with such Taking, or (ii) if no award or other
proceeds shall have been collected, deliver to Purchaser an assignment of
Seller's right to any such award or other proceeds which may be payable to
Seller as a result of such Taking and Purchaser shall reimburse Seller for the
reasonable expenses incurred by Seller in connection with such Taking.
(b) The provisions of this Section 13 supersede the provisions
of Section 5-1311 of the General Obligations Law of the State of New York. Any
disputes under this Section 13 as to whether the Taking involves more than ten
percent (10%) of the rentable area of the Building shall be resolved by
expedited arbitration before a single arbitrator acceptable to both Seller and
Purchaser in their reasonable judgment in accordance with the rules of the
American Arbitration Association; provided that if Seller and Purchaser fail to
agree on an arbitrator within five days after a dispute arises, then either
party may request the Real Estate Board of New York, Inc. designate an
arbitrator. Such arbitrator shall be an independent architect having at least
ten (10) years of experience in the construction of office buildings in
Manhattan. The costs and expenses of such Arbitrator shall be borne equally by
Seller and Purchaser.
14. BROKERS AND ADVISORS.
(a) Purchaser represents and warrants to Seller that it has
not dealt or negotiated with, or engaged on its own behalf or for its benefit,
any broker, finder, consultant, advisor, or professional in the capacity of a
broker or finder (each a "Broker") in connection with this Agreement or the
transactions contemplated hereby. Purchaser hereby agrees to indemnify, defend
and hold Seller and the other Seller Related Parties harmless from and against
any and all claims, demands, causes of action, losses, costs and expenses
(including reasonable attorneys' fees, court costs and disbursements) arising
from any claim for commission, fees or other compensation or reimbursement for
expenses made by any Broker engaged by or claiming to have dealt with Purchaser
in connection with this Agreement or the transactions contemplated hereby.
(b) Seller represents and warrants to Purchaser that it has
not dealt or negotiated with, or engaged on its own behalf or for its benefit,
any Broker in connection with this Agreement or the transactions contemplated
hereby. Seller hereby
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agrees to indemnify, defend and hold Purchaser and its direct and indirect
shareholders, officers, directors, partners, principals, members, employees,
agents, contractors and any successors or assigns of the foregoing, harmless
from and against any and all claims, demands, causes of action, losses, costs
and expenses (including reasonable attorneys' fees, court costs and
disbursements) arising from any claim for commission, fees or other compensation
or reimbursement for expenses made by any Broker engaged by or claiming to have
dealt with Seller in connection with this Agreement or the transactions
contemplated hereby.
(c) The provisions of this Section 14 shall survive the
termination of this Agreement or the Closing.
15. TAX REDUCTION PROCEEDINGS.
Seller may file and/or prosecute an application for the reduction of
the assessed valuation of the Premises or any portion thereof for real estate
taxes for the New York City fiscal year July 1, 1997 to June 30, 1998 (the
"97/98 Tax Year"). Seller shall have the right to withdraw, settle or otherwise
compromise any protest or reduction proceeding affecting real estate taxes
assessed against the Premises (i) for any fiscal period prior to the 97/98 Tax
Year without the prior consent of Purchaser and (ii) for the 97/98 Tax Year
provided Purchaser shall have consented with respect thereto, which consent
shall not be unreasonably withheld or delayed. The amount of any tax refunds
(net of attorneys' fees and other costs of obtaining such tax refunds and
subject to the immediately preceding sentence) with respect to any portion of
the Premises for the tax year in which the Apportionment Date occurs shall be
apportioned between Seller and Purchaser as of the Apportionment Date. To the
extent that any tenant shall, in accordance with the terms of its Lease, be
entitled to receive a portion of any tax refunds which Seller or Purchaser is
entitled to receive hereunder, then such party shall be obligated to pay such
portion thereof to such tenant in accordance with its Lease. If, in lieu of a
tax refund, a tax credit is received with respect to any portion of the Premises
for the tax year in which the Apportionment Date occurs, then (x) within thirty
(30) days after receipt by Seller or Purchaser, as the case may be, of evidence
of the actual amount of such tax credit (net of attorneys' fees and other costs
of obtaining such tax credit), the tax credit apportionment shall be readjusted
between Seller and Purchaser, and (y) upon realization by Purchaser of a tax
savings on account of such credit, Purchaser shall pay to Seller an amount equal
to the savings realized (as apportioned). All refunds, credits or other benefits
applicable to any fiscal period prior to the 97/98 Tax Year shall belong solely
to Seller (and Purchaser shall have no interest therein) and, if the same shall
be paid to Purchaser or anyone acting on behalf of Purchaser, same shall be paid
to Seller within five (5) days following receipt thereof and, if not timely
paid, with interest thereon from the fifth day following such receipt until paid
to Seller at a rate equal to the prime
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rate of interest announced by Citibank, N.A. from time to time plus three
percent (3%)). The provisions of this Section 15 shall survive the Closing.
16. TRANSFER TAXES AND RECORDING CHARGES.
(a) At the Closing, Seller and Purchaser shall execute,
acknowledge, deliver and file all such returns as may be necessary to comply
with Article 31 of the Tax Law of the State of New York and the regulations
applicable thereto, as the same may be amended from time to time (the "RET") and
the New York City Real Property Transfer Tax (Admin. Code Article 21) and the
regulations applicable thereto, as the same may be amended from time to time
(the "RPT"). On the Closing Date, Seller shall pay to the appropriate party the
amounts payable under the RET and RPT, if any.
(b) Notwithstanding anything to the contrary contained herein,
upon written request of Seller at least two (2) business days prior to the
Closing Date, Purchaser shall bring to the Closing separate certified or bank
checks in the amount of the taxes due with respect to the RET and the RPT, if
any, which amount shall be credited against the Purchase Price payable on the
Closing Date.
(c) Except as set forth in Section 16(a) above, Purchaser
shall be liable for the payment of all fees (other than fees payable to Seller's
attorneys and to other persons retained by Seller), expenses, recording charges
and taxes in connection with the conveyance of the Property to Purchaser
(including, without limitation, the cost of obtaining title insurance, survey
fees, recording fees, and all other title related expenses).
(d) The provisions of this Section 16 shall survive the
Closing.
17. DELIVERIES TO BE MADE ON THE CLOSING DATE.
(a) Seller's Documents and Deliveries: On the Closing Date,
Seller shall deliver or cause to be delivered to Purchaser the following:
(i) A duly executed and acknowledged Bargain and Sale
Deed Without Covenant Against Grantor's Acts in the form attached hereto as
Exhibit 3;
(ii) A duly executed Bill of Sale in the form attached
hereto as Exhibit 4;
(iii) Originals or, if unavailable, copies, of the
Leases and Contracts then in effect to the extent in Seller's possession;
(iv) Letters to all tenants under the Leases in the form
attached hereto as Exhibit 5;
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(v) Originals or, if unavailable, copies, of plans and
specifications, technical manuals and similar materials for the Building to the
extent same are in Seller's possession;
(vi) A duly executed certification as to Seller's
nonforeign status as prescribed in Section 21 hereof, if appropriate, in the
form attached hereto as Exhibit 6;
(vii) The cash security deposits (together with interest
accrued thereon less a 1% administrative fee) and letters of credit held by
Seller as security under the Leases, but only to the extent the same have not
been applied in accordance with the Leases or returned to tenants and relate to
tenants occupying space in the Building on the Closing Date pursuant to Leases
then in effect (the "Transferred Security Deposits");
(viii) Originals or, if unavailable, copies, of all
books and records relating to the Premises and maintained by Seller during
Seller's ownership thereof;
(ix) Originals or, if unavailable, copies, of all
permits, licenses and approvals relating to the ownership, use or operation of
the Premises, to the extent in Seller's possession;
(x) Keys and combinations in Seller's possession
relating to the operation of the Premises; and
(xi) Executed tenant estoppel certificates from the
"Required Tenants" either in the form attached hereto as Exhibit 9 or in the
form such Required Tenant is obligated to deliver under its applicable Lease
(subject to (a) non-material modifications thereof, (b) such tenant making note
of items which constitute Permitted Encumbrances or which Seller otherwise
agrees to discharge, and (c) modifications thereof to conform the same to Leases
or other information delivered to Purchaser or made available for its review).
In lieu of any such estoppel certificate from a Required Tenant, Seller may (but
shall not be obligated, except as set forth in the next sentence, to) deliver a
Seller estoppel certificate which covers the matters such Required Tenant was
obligated to certify to under its applicable Lease and Purchaser agrees to
accept the same; provided, that, Purchaser shall not be obligated to accept a
Seller estoppel certificate in lieu of a tenant estoppel certificate with
respect to the Leases of Waterhouse Securities, MCI, National Westminster Bank,
Credit Suisse or Swiss American Corporation. Notwithstanding the preceding
sentence, if on the Scheduled Closing Date , Seller shall have not received
tenant estoppel certificates from Waterhouse Securities, MCI, National
Westminster Bank, Credit Suisse or Swiss American Corporation (each, a "Major
Tenant"), Seller shall, upon Purchaser's request, deliver a
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Seller estoppel certificate in lieu of any such missing tenant estoppel
certificate with respect to the Leases of any such Major Tenant, which Seller
estoppel certificates shall be limited to events occurring during the period
Seller owned the Premises, certifying (subject to such changes as are necessary
to make the certifications accurate): (1) that the Lease is unmodified except as
set forth therein, and is in full force and effect, (2) the date to which base
rent under the Lease has been paid and (3) that to the best knowledge of Seller,
neither the landlord nor the tenant under the Lease, is in default under the
terms of the Lease. The "Required Tenants" are: (i) tenants which occupy a full
floor at the Premises and (ii) tenants which occupy, in the aggregate, eighty
percent (80%) of the leased space at the Premises (inclusive of the full floor
tenants described in clause (i) above). Any estoppel certificate from Seller
shall by its terms survive for only six (6) months following the Closing Date
and, if at any time after Seller's delivery thereof with respect to a Lease
Purchaser shall receive a tenant estoppel certificate with respect thereto, then
such Seller estoppel certificate shall be deemed null and void and of no further
force or effect. Seller shall prepare and deliver the tenant estoppels to all of
the tenants at the Premises as soon as is reasonably practicable, but, in the
case of Major Tenants, not later than Friday, September 19, 1997 and, in the
case of the other tenants, not later than Wednesday, September 24, 1997. Seller
shall not have the right to deliver a Seller estoppel certificate with respect
to any tenant from whom Seller has received an estoppel certificate prior to the
Closing. Seller shall deliver to Purchaser all tenant estoppel certificates
received by Seller.
Seller shall be deemed to have delivered the items set forth in
clauses (iii), (v), (viii), (ix) and (x) above if the same are left in the
Building management office on the Closing Date.
(b) Purchaser's Documents and Deliveries: On the Closing Date,
Purchaser, shall deliver or cause to be delivered to Seller, payment of the
balance of the Purchase Price payable at the Closing, as adjusted for
apportionments under Section 7, in the manner required under this Agreement.
(c) Jointly Executed Documents: Seller and Purchaser shall, on
the Closing Date, each execute, acknowledge (as appropriate) and exchange the
following documents:
(i) The returns required under the RET, the RPT and any
other tax laws applicable to the transactions contemplated herein;
(ii) An Assignment and Assumption of Leases and
Contracts in the form attached hereto as Exhibit 7;
(iii) A General Assignment and Assumption Agreement in
the form attached hereto as Exhibit 8;
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(iv) the direction letter to Escrow Agent described in
Section 4(c) of the FFHS&J Escrow Agreement; and
(v) Any other affidavit, document or instrument required
to be delivered by Seller or Purchaser pursuant to the terms of this Agreement.
18. CLOSING DATE.
(a) The closing (the "Closing") of the transactions
contemplated hereunder shall occur, and the documents referred to in Section 17
hereof shall be delivered upon tender of the Purchase Price provided for in this
Agreement, at 10:00 a.m. on Friday, October 31, 1997 (such date, or the date
Seller sets for the Closing if Seller shall elect to extend this date pursuant
to Section 6 hereof, is herein referred to as the "Scheduled Closing Date"; the
actual date of the Closing is herein referred to as the "Closing Date"), at the
offices of Sellers' attorneys, Fried, Frank, Harris, Shriver & Jacobson, One New
York Plaza, New York, New York 10004. Time is of the essence as to the
Purchaser's obligation to close the transactions contemplated hereunder on
Friday, October 31, 1997 (or, if Seller shall have extended the Scheduled
Closing Date pursuant to Section 6 so as to occur following Friday, October 31,
1997, on such Scheduled Closing Date so designated by Seller) except if
Purchaser timely and properly exercises the adjournment right described in
Section 18(b) below.
(b) Purchaser shall have the right to adjourn the Scheduled
Closing Date to a date not later than Monday, December 1, 1997, time being of
the essence as to Purchaser's obligation to close the transactions contemplated
hereunder on such date except if Purchaser timely and properly exercises the
adjournment right described in Section 18(c) below. Purchaser's right to adjourn
the Scheduled Closing Date under this clause (b) shall be conditioned upon
Purchaser's delivery to Seller of the following items by not later than 5:00
p.m. on Tuesday, October 28, 1997, time being of the essence: (i) a notice
stating that Purchaser is exercising its right to adjourn the Scheduled Closing
Date pursuant to this Section 18(b) and setting forth the date to which the
Scheduled Closing Date shall be so adjourned (but not later than Monday,
December 1, 1997) and (ii) the amount of Five Hundred Thousand Dollars
($500,000) (the "First Adjournment Deposit") by either (A) an unendorsed bank
check issued by a bank which is a member of the New York Clearinghouse
Association made payable to Escrow Agent or (B) wire transfer of immediately
available funds to the escrow account of Escrow Agent, it being understood,
that, in the case of such wire transfer, such funds must be actually received by
Escrow Agent and in the escrow account (as confirmed by Escrow Agent's bank
where the escrow account is held) by 5:00 p.m. on Tuesday October 28, 1997, in
order to be effective. If Purchaser fails to timely and properly exercise its
right to adjourn the Scheduled Closing Date as aforesaid, such right shall be
deemed waived. If Purchaser properly and timely exercises such adjournment
right, the First Adjournment
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Deposit shall be deemed added to and a part of the Deposit for all purposes and
shall be held subject to the terms hereof and the Escrow Agreement.
(c) If Purchaser shall have timely and properly exercised its
right to adjourn the Scheduled Closing Date under Section 18(b) above, then
Purchaser shall have the right to adjourn the Scheduled Closing Date to a date
not later than Monday, December 29, 1997, time being of the essence as to
Purchaser's obligation to close the transactions contemplated hereunder on such
date. Purchaser's right to adjourn the Scheduled Closing Date under this clause
(c) shall be conditioned upon Purchaser's delivery to Seller of the following
items by not later than 5:00 p.m. on Monday, November 24, 1997, time being of
the essence: (i) a notice stating that Purchaser is exercising its right to
adjourn the Scheduled Closing Date pursuant to this Section 18(c) and setting
forth the date to which the Scheduled Closing Date shall be so adjourned (but
not later than Monday, December 29, 1997) and (ii) the amount of Five Hundred
Thousand Dollars ($500,000) (the "Second Adjournment Deposit") by either (A) an
unendorsed bank check issued by a bank which is a member of the New York
Clearinghouse Association made payable to Escrow Agent or (B) wire transfer of
immediately available funds to the escrow account of Escrow Agent, it being
understood, that, in the case of such wire transfer, such funds must be actually
received by Escrow Agent and in the escrow account (as confirmed by Escrow
Agent's bank where the escrow account is held) by 5:00 p.m. on Monday, November
24, 1997, in order to be effective. If Purchaser fails to timely and properly
exercise its right to adjourn the Scheduled Closing Date as aforesaid, such
right shall be deemed waived. If Purchaser properly and timely exercises such
adjournment right, the Second Adjournment Deposit shall be deemed added to and a
part of the Deposit for all purposes and shall be held subject to the terms
hereof and the Escrow Agreement.
(d) Subject to Purchaser's rights under Sections 18(b) and (c)
hereof, Purchaser shall have the right, provided it complies with the provisions
of this Section 18(d), to reschedule the Scheduled Closing date to a date no
earlier than Monday September 29, 1997 and no later than Friday, October 31,
1997. Purchaser's right to reschedule the Scheduled Closing Date shall be
conditioned upon Purchaser giving Seller notice thereof setting forth the new
Scheduled Closing Date. In the event that Purchaser elects to accelerate the
Scheduled Closing Date, such accelerated Scheduled Closing Date shall not occur
less than five (5) business days following the giving of such notice. In the
event Purchaser has properly accelerated the Scheduled Closing Date, Purchaser
may thereafter extend the then existing Scheduled Closing Date pursuant to the
terms hereof, to a new Scheduled Closing Date which shall not occur less than
two (2) business days following the giving of such notice (and shall not be a
date later than Friday, October 31, 1997, subject to Sections 18(b) and 18(c)
hereof). In the event that Purchaser elects to accelerate the Scheduled Closing
Date (whether or not Purchaser subsequently extends the Scheduled Closing date),
then, Purchaser shall be deemed to have waived all
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conditions to Purchaser's obligations to close the transactions contemplated
hereunder and the other obligations of Seller hereunder to be performed on or
prior to the Closing Date (including, without limitation, removal of any Title
Objections and the requirements of Section 17(a)(xi)), which remain unsatisfied
as of such date (except that Seller shall remain obligated to deliver the
documents described in Section 17(a), other than clause (xi) thereunder and
Seller shall remain obligated to perform its covenants under Section 6(c)).
Purchaser shall reimburse Seller for all reasonable attorneys fees and
disbursements Seller incurs as a result of Purchaser exercising its rights under
this Section 18(d) (such reimbursement to be made at Closing or, if the Closing
shall not occur, on demand). The provisions of the preceding sentence shall
survive the Closing or the termination hereof.
19. NOTICES.
All notices, demands, requests or other communications
(collectively, "Notices") required to be given or which may be given hereunder
shall be in writing and shall be sent by (a) certified or registered mail,
return receipt requested, postage prepaid, or (b) national overnight delivery
service, or (c) facsimile transmission (provided that the original shall be
simultaneously delivered by national overnight delivery service or personal
delivery), or (d) personal delivery, addressed as follows:
(i) If to Seller:
100 Wall LLC
c/o The Witkoff Group, LLC
156 William Street
New York, New York 10038
Attention: Steven C. Witkoff, Esq.
Fax: (212) 964-1464
with a copy to:
GMS Capital, LLC
c/o JAG Capital
156 William Street
New York, New York 10038
Attention: Paul C. Murstein
and Jeffrey A. Goldberger
Fax: (212) 732-3511
and
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Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Ross Z. Silver, Esq.
Fax: (212) 859-4000
(ii) If to Purchaser:
Tower Realty Operating Partnership, L.P.
c/o Tower Realty Trust, Inc.
120 West 45th Street
New York, New York 10036
Attention: Lawrence H. Feldman
Fax: (212) 768-9479
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Bradley A. Kaufman, Esq.
Fax: (212) 856-7802
Any Notice so sent by certified or registered mail, national
overnight delivery service or personal delivery shall be deemed given on the
date of receipt or refusal as indicated on the return receipt, or the receipt of
the national overnight delivery service or personal delivery service. Any Notice
sent by facsimile transmission shall be deemed given when received as confirmed
by the telecopier electronic confirmation receipt. A Notice may be given either
by a party or by such party's attorney. Seller or Purchaser may designate, by
not less than five (5) business days' notice given to the others in accordance
with the terms of this Section 19, additional or substituted parties to whom
Notices should be sent hereunder.
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20. DEFAULT BY PURCHASER OR SELLER.
(a) If (i) Purchaser shall default in the payment of the
Purchase Price or if Purchaser shall default in the performance of any of its
other obligations to be performed on the Closing Date, or (ii) Purchaser shall
default in the performance of any of its obligations to be performed prior to
the Closing Date and, with respect to any default under this clause (ii) only,
such default shall continue for ten (10) days after notice to Purchaser,
Seller's sole remedy by reason thereof shall be to terminate this Agreement and,
upon such termination, Seller shall be entitled to retain the Deposit (and any
interest earned thereon) and to receive immediately the "Purchaser Default
Amount", collectively, as liquidated damages for Purchaser's default hereunder,
it being agreed that the damages by reason of Purchaser's default are difficult,
if not impossible, to ascertain, and thereafter Purchaser and Seller shall have
no further rights or obligations under this Agreement except for those that are
expressly provided in this Agreement to survive the termination hereof.
"Purchaser Default Amount" means an amount equal to One Million Nine Hundred
Thousand Dollars ($1,900,000) plus interest thereon, at the rate of 15% per
annum, from the date due (as described above) to the date paid to Seller.
Purchaser's obligation to pay the Purchaser Default Amount is being guaranteed
by Lawrence Feldman pursuant to a Guaranty dated the date hereof. If Seller
terminates this Agreement pursuant to a right given to it hereunder and
Purchaser takes any action which interferes with Seller's ability to sell,
exchange, transfer, lease, dispose of or finance the Property or take any other
actions with respect thereto (including, without limitation, the filing of any
lis pendens or other form of attachment against the Property) as determined by a
final non-appealable order of a court of competent jurisdiction, then the named
Purchaser (and any assignee of Purchaser's interest hereunder) shall be liable
for all loss, cost, damage, liability or expense (including, without limitation,
reasonable attorneys' fees, court costs and disbursements and consequential
damages) incurred by Seller by reason of such action to contest by Purchaser.
(b) If (x) Seller shall default in any of its obligations to
be performed on the Closing Date or (y) Seller shall default in the performance
of any of its obligations to be performed prior to the Closing Date and, with
respect to any default under this clause (y) only, such default shall continue
for ten (10) days after notice to Seller, Purchaser as its sole remedy by reason
thereof (in lieu of prosecuting an action for damages or proceeding with any
other legal course of conduct, the right to bring such actions or proceedings
being expressly and voluntarily waived by Purchaser, to the extent legally
permissible, following and upon advice of its counsel) shall have the right
subject to the other provisions of this Section 20(b) (i) to seek to obtain
specific performance of Seller's obligations hereunder, provided that any action
for specific performance shall be commenced within sixty (60) days after such
default, and if Purchaser prevails thereunder, Seller shall reimburse Purchaser
for all reasonable legal fees, court costs and all other reasonable costs of
such action or (ii) to receive a return of the Deposit (together
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with any interest earned thereon), it being understood that if Purchaser fails
to commence an action for specific performance within sixty (60) days after such
default, Purchaser's sole remedy shall be to receive a return of the Deposit
(together with any interest earned thereon). Notwithstanding the preceding
portions of this Section 20(b), if Seller shall willfully default in its
obligation to close the transactions hereunder (notwithstanding the satisfaction
of all conditions to Seller's obligation to so close such transactions), then
Purchaser shall have the right to bring an action against Seller (but not
against any other Seller Related Party) seeking to recover the direct (but not
consequential) monetary damages (not to exceed $2,000,000) incurred by Purchaser
as a result thereof provided, that any such action shall be commenced within
sixty (60) days after such default. If, pursuant to a final, nonappealable order
of a court of competent jurisdiction it shall be determined that (1) Seller
shall have willfully defaulted in the obligation to close the transactions
hereunder (notwithstanding the satisfaction of all conditions to Seller's
obligation to so close such transactions) and (2) Purchaser shall have suffered
Damages as a result thereof, then Seller shall be obligated to pay the amount of
such Damages awarded in such order to Purchaser, provided that in no event shall
Seller be obligated to pay or Purchaser be entitled to recover, Damages in
excess of Two Million Dollars ($2,000,000) in the aggregate. If Purchaser fails
to bring an action for Damages within such 60-day period, then its right to
bring such action or receive any such Damages shall be deemed irrevocably
waived. Upon return of the Deposit (together with any interest thereon) as
described in clause (ii) above, this Agreement shall terminate and neither party
hereto shall have any further obligations hereunder except for those that are
expressly provided in this Agreement to survive the termination hereof.
Notwithstanding the foregoing, Purchaser shall have no right to seek specific
performance or Damages if Seller shall be prohibited from performing its
obligations hereunder by reason of any law, regulation, or other legal
requirement applicable to Seller.
(c) The provisions of this Section 20 shall survive the
termination hereof.
21. FIRPTA COMPLIANCE.
Seller shall comply with the provisions of the Foreign Investment in
Real Property Tax Act, Section 1445 of the Internal Revenue Code of 1986 (as
amended), as the same may be amended from time to time, or any successor or
similar law (collectively, "FIRPTA"). Seller acknowledges that Section 1445 of
the Internal Revenue Code provides that a transferee of a United States real
property interest must withhold tax if the transferor is a foreign person. To
inform Purchaser that withholding of tax is not required upon the disposition of
a United States real property interest by Seller, Seller hereby represents and
warrants that Seller is not a foreign person as that term is defined in the
Internal Revenue Code and Income Tax Regulations. On the Closing Date, Seller
shall deliver to Purchaser a certification as to Seller's non-foreign status in
the form attached hereto as Exhibit 4, and shall comply with any temporary or
final regulations
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promulgated with respect thereto and any relevant revenue procedures or other
officially published announcements of the Internal Revenue Service of the U.S.
Department of the Treasury in connection therewith.
22. ENTIRE AGREEMENT.
This Agreement contains all of the terms agreed upon between Seller
and Purchaser with respect to the subject matter hereof, and all prior
agreements, understandings, representations and statements, oral or written,
between Seller and Purchaser are merged into this Agreement. The provisions of
this Section 22 shall survive the Closing or the termination hereof.
23. AMENDMENTS.
This Agreement may not be changed, modified or terminated, except by
an instrument executed by Seller and Purchaser. The provisions of this Section
23 shall survive the Closing or the termination hereof.
24. WAIVER.
No waiver by either party of any failure or refusal by the other
party to comply with its obligations shall be deemed a waiver of any other or
subsequent failure or refusal to so comply. The provisions of this Section 24
shall survive the Closing or the termination hereof.
25. PARTIAL INVALIDITY.
If any term or provision of this Agreement or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such term
or provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement shall be valid and shall be enforced to the fullest
extent permitted by law. The provisions of this Section 25 shall survive the
Closing or the termination hereof.
26. SECTION HEADINGS.
The headings of the various sections of this Agreement have been
inserted only for the purposes of convenience, and are not part of this
Agreement and shall not be deemed in any manner to modify, explain, expand or
restrict any of the provisions of this Agreement. The provisions of this Section
26 shall survive the Closing or the termination hereof.
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27. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New
York without giving effect to conflict of laws principles thereof. The
provisions of this Section 27 shall survive the Closing or the termination
hereof.
28. PARTIES; ASSIGNMENT AND RECORDING.
(a) This Agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon Seller and
Purchaser and their respective successors and permitted assigns; provided that
none of the representations or warranties made by Seller hereunder shall inure
to the benefit of any person or entity that may, after the Closing Date, succeed
to Purchaser's interest in the Property.
(b) Purchaser may not assign or otherwise transfer this
Agreement or any of its rights or obligations hereunder or any of the direct or
indirect ownership interests in Purchaser, without first obtaining Seller's
consent thereto; provided that the Purchaser named herein shall have the
one-time right to assign this Agreement to either (x) a real estate investment
trust formed by Lawrence Feldman which owns, or simultaneously with the
consummation of such assignment is acquiring, all or substantially all of the
office properties owned directly or indirectly by Lawrence Feldman or the
Purchaser named herein (a "Feldman REIT") or (y) an entity in which at least
seventy five percent (75%) of the beneficial interests are owned by a Feldman
REIT or (z) a "Controlled Affiliate" (as defined below). "Controlled Affiliate"
means any entity (i) "controlled by" Lawrence Feldman and (ii) the majority of
the beneficial interests in which are owned, directly or indirectly, by Lawrence
Feldman or any parent, spouse, child, grandchild or sibling of Lawrence Feldman
or any trust the beneficiary(ies) of which are any of the foregoing individuals,
in each case as of the date of the assignment and the Closing Date. "Controlled
by" means the power and authority to direct the business and affairs of the
assignee by reason of the ownership of a majority of the beneficial interests in
such assignee, by contract or otherwise. Any such assignment shall be
conditioned upon Purchaser delivering to Seller an executed original of the
assignment and assumption agreement wherein the assignee assumes all of the
obligations of the Purchaser named herein and proof reasonably satisfactory to
Seller that the assignee constitutes a "Controlled Affiliate." An assignment or
transfer of this Agreement shall not relieve the Purchaser named herein of any
of its obligations hereunder which accrued prior to the date of such assignment.
The Purchaser named herein shall be liable for all obligations of the Purchaser
under Section 3(c) which accrue either prior to or subsequent to the date of
such assignment.
(c) Neither this Agreement nor any memorandum hereof may be
recorded without first obtaining Seller's consent thereto.
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(d) The provisions of Section 28(a) and 28(c) shall survive
the Closing or the termination hereof. The provisions of Section 28(b) shall
survive the termination hereof.
29. CONFIDENTIALITY AND PRESS RELEASES.
(a) Purchaser acknowledges and agrees that it shall be bound
by all of the terms and conditions of that certain Confidentiality Agreement
between Purchaser and Seller dated as of the date hereof. Between the date
hereof through and including the Closing Date and except as otherwise expressly
provided in clause (b) below, Purchaser and Seller shall not (and shall use
reasonable efforts to cause Purchaser's and Seller's respective agents,
employees, attorneys and advisors including, without limitation, financial
institutions to not) disclose, make known, divulge, disseminate or communicate
the Purchase Price or any of the terms of this Agreement or this transaction or
any agreement, document or understanding pertinent to the instant transaction
without the consent of the other party, except (i) as required by law
(including, without limitation, any laws prescribing the information which must
be disclosed in connection with the initial public offering (including, without
limitation, information required to be disclosed in any prospectus) by a Feldman
REIT), (ii) to Purchaser's or Seller's employees and advisors involved in the
transaction, (iii) to Purchaser's prospective lenders or prospective investors
or (iv) to Seller's lender or investors.
(b) Prior to the Closing Date, Purchaser and Seller shall
confer and agree on a press release to be issued jointly by Purchaser and Seller
disclosing the transaction and the appropriate time for making such release.
Neither Purchaser nor Seller shall issue any press releases (or other public
statements) with respect to the transaction contemplated in this Agreement
without approval of the other party.
(c) The provisions of Section 29(a) shall survive the
termination of this Agreement and the provisions of Section 29(b) shall survive
the termination hereof or the Closing.
30. FURTHER ASSURANCES.
Seller and Purchaser will do, execute, acknowledge and deliver all
and every such further acts, deeds, conveyances, assignments, notices, transfers
and assurances as may be reasonably required by the other party, for the better
assuring, conveying, assigning, transferring and confirming unto Purchaser the
Property and for carrying out the intentions or facilitating the consummation of
this Agreement. The provisions of this Section 30 shall survive the Closing.
-37-
<PAGE> 42
31. THIRD PARTY BENEFICIARY.
This Agreement is an agreement solely for the benefit of Seller and
Purchaser (and their permitted successors and/or assigns). No other person,
party or entity shall have any rights hereunder nor shall any other person,
party or entity be entitled to rely upon the terms, covenants and provisions
contained herein. The provisions of this Section 31 shall survive the Closing or
the termination hereof.
32. JURISDICTION AND SERVICE OF PROCESS.
The parties hereto agree to submit to personal jurisdiction in the
State of New York in any action or proceeding arising out of this Agreement and,
in furtherance of such agreement, the parties hereby agree and consent that
without limiting other methods of obtaining jurisdiction, personal jurisdiction
over the parties in any such action or proceeding may be obtained within or
without the jurisdiction of any court located in New York and that any process
or notice of motion or other application to any such court in connection with
any such action or proceeding may be served upon the parties by registered or
certified mail to or by personal service at the last known address of the
parties, whether such address be within or without the jurisdiction of any such
court. The provisions of this Section 32 shall survive the Closing or the
termination hereof.
33. WAIVER OF TRIAL BY JURY.
SELLER AND PURCHASER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING
IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING TO THIS AGREEMENT. THE
PROVISIONS OF THIS SECTION 33 SHALL SURVIVE THE CLOSING OR THE TERMINATION
HEREOF.
34. MISCELLANEOUS.
(a) Whenever in this Agreement it is provided that Purchaser's
successors and/or transferees and/or assignees shall have any rights or
obligations, such phrase shall be deemed to include all designees of Purchaser
as well as all of the transferees, successors and assigns of Purchaser and such
designees.
(b) This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and together constitute one and the
same instrument.
(c) Any consent or approval to be given hereunder (whether by
Seller or Purchaser) shall not be effective unless the same shall be given in
advance of the taking of the action for which consent or approval is requested
and shall be in writing.
-38-
<PAGE> 43
Except as otherwise expressly provided herein, any consent or approval requested
of Seller or Purchaser may be withheld by Seller or Purchaser in its sole and
absolute discretion.
(d) The provisions of this Section 34 shall survive the
Closing or the termination hereof.
35. REIT COOPERATION
Purchaser has advised Seller that Purchaser desires to
effectuate the Closing and the consummation of the intended initial public
offering of common stock on the New York Stock Exchange by Tower Realty Trust,
Inc. (the "IPO") simultaneously. In this regard, Purchaser and Seller shall
reasonably cooperate with each other to close the transactions hereunder in an
escrow style closing pursuant to an escrow agreement (in form and substance
reasonably acceptable to Seller and Purchaser) among Seller, Purchaser and
Commonwealth Land Title Insurance Company ("Commonwealth"). Pursuant to such
escrow agreement, at least one (1) business day prior to the Closing Date,
Seller and Purchaser shall place in escrow with Commonwealth, as escrow agent,
all of the documents and deliveries required to be executed and/or delivered by
the parties pursuant to Article 17 hereof , provided, however, that Seller shall
not be obligated to deposit in escrow any of the following: (a) the documents
described in clauses (iii), (v) (viii), (ix) or (x) of Section 17(a), (b) the
Transferred Security Deposits, or (c) any assignment of the existing mortgage on
the Premises held by Lehman Brothers Holdings Inc. All of the escrowed documents
shall, on the Closing Date, be released to the parties entitled to receive the
same (as provided in such escrow agreement) upon Seller's confirmation in
writing that it shall have received the sums described in Section 4(c) hereof.
Seller shall request that Lehman Brothers deposit the documents assigning the
existing mortgage referenced in (c) above in escrow with Commonwealth one (1)
business day prior to the Closing Date to be held in accordance with such escrow
agreement and Seller shall use its good faith efforts to have Lehman Brothers
agree to the same, it being understood that Lehman Brothers is under no
obligation to do so and Seller shall not incur any liability if Lehman Brothers
is unwilling to do so.
-39-
<PAGE> 44
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement
to be executed the day and year first above written.
SELLER:
100 WALL LLC
By: Century Wall L.L.C, its managing member
By: /s/ Steven Witkoff
------------------------------------
Name:
Title:
PURCHASER:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., general partner
By: /s/ Lawrence Feldman
------------------------------------
Lawrence Feldman
President
-40-
<PAGE> 45
SCHEDULE A
Description of the Land
(See Attached)
Schedule A-1
<PAGE> 46
SCHEDULE B
Easements, Conditions, Restrictions and Encumbrances
(See Attached)
Schedule B-1
<PAGE> 47
SCHEDULE C
List of Employees
(See Attached)
Schedule C-1
<PAGE> 48
SCHEDULE D
List of Leases
(See Attached)
Schedule D-1
<PAGE> 49
SCHEDULE E
List of Contracts
(See Attached)
Schedule E-1
<PAGE> 50
SCHEDULE F
List of Security Deposits
Tenant Security Deposit
- ------ ----------------
Doha Bank $30,454.83
Wall Street Discount $11,775.77
Metropolitan Fiber Systems $793.34
New World Coffee $10,200.00
Total Cash Deposits $53,223.94
Kokusai America, Inc. (Letter of Credit) $14,150.00
Kinko's (delivery of Letter of Credit pending) $66,249.99
Total Letter of Credit Deposits $80,399.99
Total Security Deposits $133,623.93
Schedule F-1
<PAGE> 51
SCHEDULE G
Arrearage Schedule
(See Attached)
Schedule G-1
<PAGE> 52
SCHEDULE H
Litigation
NONE
Schedule H-1
<PAGE> 53
SCHEDULE I
Violations
No. 110981ll550
No. 013089ll5C30057
No. 90-0490
No. 89-0563
No. 89-0617
No. D33634
No. D59979
No. 10003546
No. 10304446
Schedule I-1
<PAGE> 54
SCHEDULE J
Employment Agreements
Engineer Agreement between 100 Wall LLC, assignee of Realty Advisory Board on
Labor Relations, Inc. and Local 94-94A-94B International Union of Operating
Engineers AFL-CIO. Effective January 1, 1995 to December 31, 1997.
Commercial Building Agreement between Local 32B-32J Service Employees
International Union, AFL-CIO and 100 Wall LLC. Effective June 1, 1997 to
December 31, 1998.
Exhibit 1-1
<PAGE> 55
SCHEDULE K
Existing Insurance
(See Attached)
Exhibit 1-1
<PAGE> 56
EXHIBIT 1
Due Diligence Acceptance Notice
Tower Realty Operating Partnership, L.P.
c/o Tower Equities
120 West 45th Street
New York, New York 10036
September __, 1997
100 Wall LLC
c/o The Witkoff Group LLC
156 William Street
New York, New York 10038
Re: Purchase and Sale Agreement, dated as of September 11,
1997, between 100 Wall LLC and Tower Realty Operating
Partnership L.P. (the "Agreement')
Ladies and Gentlemen:
Reference is hereby made to the Agreement (all capitalized terms
used, but not defined herein shall have the meanings set forth in the
Agreement). Pursuant to Section 3(d) of the Agreement, the undersigned hereby
notifies you that it elects to proceed with the transaction contemplated by the
Agreement following the expiration of the Due Diligence period. The undersigned
hereby unconditionally and irrevocably waives its right to have the Agreement
terminate pursuant to said Section 3(d). This notice shall constitute a Due
Diligence Acceptance Notice for all purposes under the Agreement.
Very truly yours,
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: __________________________
Name:
Title:
Exhibit 1-1
<PAGE> 57
EXHIBIT 2
Wire Instructions
Citibank
120 Broadway
New York, New York 10043
ABA #021000089
Attention: Yvonne Hoskins
Private Banking Division
For the Account of:
Fried, Frank, Harris, Shriver & Jacobson
(16469.10 - 100 Wall)
Account No. 37029464
Exhibit 1-1
<PAGE> 58
EXHIBIT 3
DEED
(See Attached)
Exhibit 3-1
<PAGE> 59
EXHIBIT 4
BILL OF SALE
100 WALL LLC, a New York limited liability company, having an office
c/o The Witkoff Group, LLC, 156 William Street, New York, New York 10038
("Seller"), in consideration of Ten Dollars ($10.00) and other good and valuable
consideration paid to Seller by _______________________, a ___________________,
having an address at ________________________________, ("Purchaser"), the
receipt and sufficiency of which are hereby acknowledged, hereby sells, conveys,
assigns, transfers, delivers and sets over to Purchaser all fixtures, furniture,
furnishings, equipment, machinery, inventory, appliances and other articles of
tangible personal property owned by Seller and which are located at or are used
or usable in connection with the real property located at 100 Wall Street, New
York, New York.
TO HAVE AND TO HOLD unto Purchaser and its successors and assigns to
its and their own use and benefit forever.
This Bill of Sale is made by Seller without recourse and without any
expressed or implied representation or warranty whatsoever.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be
executed as of this _____ day of __, 1997.
100 WALL LLC
By: Century Wall L.L.C.
By: ________________________
Name:
Title:
Exhibit 4-1
<PAGE> 60
EXHIBIT 5
NOTICE TO TENANTS
100 WALL LLC
c/o the Witkoff Group LLC
156 William Street
New York, New York 10038
___________, 1997
TO:
ALL TENANTS OF 100 WALL STREET
NEW YORK, NEW YORK
Re: 100 Wall Street, New York, New York
Dear Tenant:
This is to notify you that, today, the referenced property has been
sold by 100 Wall LLC ("Seller") to ___________________ ("Purchaser"). As of the
date hereof, Seller's interest in your lease has been assigned to Purchaser and
Purchaser has assumed the obligations as landlord under your lease which accrue
from and after the date hereof.
You are hereby authorized and directed to make all future rent
payments to ____________________________________________________________________
______________________________________________________________________________.
Any future inquiries regarding your lease should be directed to
___________________________ at the aforementioned address.
Very truly yours,
100 WALL LLC
By: Century Wall L.L.C.
By:
--------------------------------
Name:
Title:
Exhibit 5-1
<PAGE> 61
EXHIBIT 6
FIRPTA AFFIDAVIT
Section 1445 of the Internal Revenue Code provides that a transferee
of a U.S. real property interest must withhold tax if the transferor is a
foreign person. To inform the transferee that withholding of tax is not required
upon the disposition of a U.S. real property interest by 100 Wall LLC, the
undersigned hereby certifies the following on behalf of 100 Wall LLC:
1. 100 Wall LLC is not a foreign corporation, foreign
partnership, foreign trust, or foreign estate (as such terms are defined in
the Internal Revenue Code and Income Tax Regulations).
2. 100 Wall LLC's U.S. employer identification number is
- -------------.
3. 100 Wall LLC's office is:
c/o The Witkoff Group LLC
156 William Street
New York, New York 10038
100 Wall LLC understands that this certification may be disclosed to
the Internal Revenue Service by the transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have authority to sign this document on
behalf of 100 Wall LLC.
100 WALL LLC
By: Century Wall L.L.C.
By: ____________________________
Name:
Title:
______________, 1997
Exhibit 6-1
<PAGE> 62
EXHIBIT 7
ASSIGNMENT AND ASSUMPTION OF LEASES AND CONTRACTS
100 WALL LLC, a New York limited liability company, having an office
c/o The Witkoff Group LLC, 156 William Street, New York, New York 10038
("Assignor"), in consideration of Ten ($10.00) Dollars and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, hereby assigns to ___________________, a
__________________________________ having an address at c/o
_______________________________________________ ("Assignee"), (1) all right,
title and interest of Assignor as lessor under all the leases, license
agreements and other occupancy agreements (collectively, the "Leases") in effect
for space at the real property located at 100 Wall Street, New York, New York
(the "Premises") and listed on Schedule A, and (2) all right, title and interest
of Assignor under all of the service, maintenance, supply and other agreements
(collectively, the "Contracts") in effect relating to the operation of the
Premises and listed on Schedule B.
Assignee hereby expressly assumes (x) all of the obligations imposed
upon the lessor under the Leases which accrue from and after the date hereof
(including, without limitation, the lessor's obligation to return any
Transferred Security Deposits (as defined in that certain Purchase and Sale
Agreement between Assignor and [Assignee] dated September 11, 1997 (the
"Purchase Agreement")) and (y) all of the obligations imposed upon the owner of
the Premises under the Contracts which accrue from and after the date hereof.
Without limiting Assignee's obligations hereunder or under the Purchase
Agreement, Assignee expressly acknowledges, and agrees to perform, its
obligation to pay "Tenant Inducement Costs" (as defined in the Purchase
Agreement) and leasing commissions in accordance with the terms of Section 7(h)
of the Purchase Agreement.
Subject to Article 7 of the Purchase Agreement, Assignor and
Assignee each agrees to indemnify the other from any and all loss, cost, damage,
liability or expense (including, without limitation, reasonable attorneys' fees,
court costs and disbursements) which may be imposed on the other by reason of
any failure by the indemnifying party to perform any of the obligations on the
part of the landlord or owner of the Premises, as applicable, under the Leases
or the Contracts which accrued during the period the indemnifying party is or
was the owner of the Premises.
Assignee acknowledges that, simultaneously with the execution
hereof, Assignee has received $_________ from Assignor and an assignment of the
letters of credit set forth on Schedule C attached hereto in respect of the
Transferred Security Deposits.
Exhibit 7-1
<PAGE> 63
This Assignment and Assumption of Leases and Contracts is made by
Assignor without recourse and without any express or implied representation or
warranty whatsoever except to the extent expressly provided in the Purchase
Agreement.
This Assignment and Assumption of Leases and Contracts inures to the
benefit of the parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF, Assignor and Assignee have caused this
Assignment and Assumption of Leases and Contracts to be executed as of this
_____ day of , 1997.
ASSIGNOR:
100 WALL LLC
By: Century Wall L.L.C.
By: _________________________
Name:
Title:
ASSIGNEE:
[_______________________________]
By: _________________________
Name:
Title:
Exhibit 7-2
<PAGE> 64
SCHEDULE A
Leases
Schedule A-1
<PAGE> 65
SCHEDULE B
Contracts
Schedule B-1
<PAGE> 66
SCHEDULE C
Letters of Credit
Schedule C-1
<PAGE> 67
EXHIBIT 8
GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS GENERAL ASSIGNMENT AND ASSUMPTION AGREEMENT, made and entered
into this ____ day of , 1997, between 100 WALL LLC, a New York limited liability
company, having an address c/o The Witkoff Group LLC, 156 William Street, New
York, New York 10038 ("Assignor") and _____________________, a
_________________________ having an address at c/o
_______________________ ("Assignee").
W I T N E S S E T H:
Assignor for ten dollars ($10.00), and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
hereby assigns to Assignee all of Assignor's right, title and interest in, to
and under (i) all books, records, and files owned by Assignor and relating to
the occupancy, use or operation of the real property located at 100 Wall Street,
New York, New York (the "Premises"), (ii) all transferable licenses, approvals,
certificates and permits held by Assignor and exclusively relating to the
occupancy, use or operation of the Premises, and (iii) all other items of
intangible personal property owned by Assignor and exclusively relating to the
occupancy, use or operation of the Premises (the items set forth in clauses (i)
through (iii) above are hereinafter referred to collectively as the "Property
Matters");
TO HAVE AND TO HOLD unto Assignee and its successors and assigns to
its and their own use and benefit forever.
Assignee hereby expressly assumes the obligations of Assignor in
respect of the Property Matters accruing from and after the date hereof.
Assignor and Assignee each agrees to indemnify the other from any
and all loss, cost, damage, liability or expense (including, without limitation,
reasonable attorneys' fees, court costs and disbursements) which may be imposed
on the other by reason of any failure by the indemnifying party to perform any
of the obligations on the part of the owner of the Premises under the Property
Matters which accrued during the period the indemnifying party is or was the
owner of the Premises.
This Agreement is made by Assignor without recourse and without any
expressed or implied representation or warranty whatsoever.
This Agreement inures to the benefit of the parties hereto and their
respective successors and assigns.
Exhibit 9-1
<PAGE> 68
IN WITNESS WHEREOF, Assignor and Assignee have executed this General
Assignment and Assumption Agreement as of the date first above written.
ASSIGNOR:
100 WALL LLC
By: Century Wall, L.L.C.
By: _________________________
Name:
Title:
ASSIGNEE:
[_______________________________]
By: _________________________
Name:
Title:
Exhibit 9-2
<PAGE> 69
EXHIBIT 9
TENANT ESTOPPEL CERTIFICATE
______________, 1997
- ----------------------
c/o Feldman Equities
120 West 45th Street
24th Floor
New York, New York 10036
- -and-
100 Wall LLC
c/o The Witkoff Group, LLC
156 William Street
10th Floor
New York, New York 10038
Re: 100 Wall Street, New York, New York ("Building")
Gentlemen:
The undersigned, as the Tenant, has been advised that __________
(the "Purchaser"), is negotiating with 100 Wall LLC ("Landlord") to acquire the
Building. In connection therewith, each of Landlord and Purchaser has required
this certificate.
Where no information has been inserted on any blank hereof, the
blank shall be deemed to read "NONE".
With the knowledge and understanding that Landlord and Purchaser
will be relying on the statements contained herein, the Tenant hereby certifies
as follows:
1. Tenant presently leased the space known as Suite see Exhibit
"A" within the Building (the "Leased Premises") and the Leased
Premises are the only premises leased by Tenant within the
Building.
Exhibit 9-1
<PAGE> 70
2. The documents constituting Tenant's lease, together with
all amendments, modifications, assignments, subleases,
renewals, extensions and other agreements relating to such
lease (collectively, the "Lease"; definitional terms are
used herein as defined in the Lease unless otherwise
specifically stated herein) are listed on Exhibit "A",
attached hereto and incorporated herein by this reference.
The Lease constitutes the entire agreement between Landlord
and Tenant with respect to the Leased Premises and is valid
and is presently in full force and effect. Except as
listed on Exhibit A, no other agreement or representation,
oral or written, has been made regarding the Leased
Premises or the Building and the Lease has not been
modified, cancelled, pledged, mortgaged, assigned,
subleased, extended, renewed or amended. Tenant has not
exercised any termination option, if any, which exists
under the Lease.
3. There are no guaranties or sureties with respect to the Lease
other than as identified on the attached Exhibit "A" and each
such guaranty or surety is in full force and effect and has
been modified, amended, cancelled or assigned.
4. The Rental Commencement Date of the Lease is see Exhibit
"A" and the Expiration Date of the Lease is see Exhibit
"A".
5. Rent and other charges required under the Lease has
commenced to accrue. Fixed rent has been paid through
_____________ and additional rent has been paid through
_____.
6. A security deposit in the amount set forth on Exhibit A has
been paid by Tenant to Landlord with respect to the Leased
Premises.
7. No Rent or other charges payable under the Lease have paid
more than thirty (30) days in advance of its due date other
than:
8. Tenant has accepted the Leased Premises (including all
improvements required by the Lease) as being in full
compliance with the Lease and is in full occupancy and
possession thereof. All tenant improvement work has been
completed and all required contributions by the Landlord to
the Tenant on account of such work, if any, have been received
by the Tenant, except as follows:
Exhibit 9-2
<PAGE> 71
9. There are no defaults under the Lease by Landlord or Tenant
nor has any event occurred which, by the giving of notice of
passage of time, or both, would constitute an event of default
by either Landlord or Tenant thereunder.
10. There are no disputes, defenses or counterclaims to the full
enforcement of the Lease by Landlord. Landlord has made no
rent concessions to Tenant, there are no construction
allowances which have not been paid to Tenant, and there are
no other sums currently owed to Tenant by Landlord, except as
follows:
11. Tenant is not entitled to any offsets, abatements, concessions
or recaptures against rent or any other charges whatsoever
under the Lease, except as expressly provided in the Lease.
12. The notice for the Tenant is as follows (if a new address is
not inserted in this paragraph 13, the address of the Tenant
is as set forth in the Lease):
13. Tenant has not been granted any purchase option or right of
first offer or first refusal with respect tot he acquisition
of the Building Tenant has not been granted any expansion
option or any other option for additional space except as
expressly provided in the Lease.
This Estoppel Certificate is being provided by the undersigned, as
Tenant, to Landlord and to Purchaser and the Tenant agrees that the information
and representations contained herein may be relied upon by Landlord and
Purchaser and/or any of their respective present or future partners, members,
shareholders or offer affiliated, the present and future mortgagees of the
Building and any prospective purchasers of the Building or any interest therein;
and all such persons shall be entitled to rely on and to have the benefit of the
assurances to matters set forth in this certification.
The person executing this certification on behalf of the undersigned
is duly authorized to execute this certification on behalf of the undersigned,
and this certification is and shall be binding on the undersigned, its
successors and assigns.
Dated: ____________
[NAME OF TENANT]
By: _____________________________
Title:
Exhibit 9-3
<PAGE> 72
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed the day and year first above written.
SELLER:
100 WALL LLC
By: Century Wall L.L.C, its managing member
By: /s/ [Illegible]
-----------------------------
Name:
Title:
PURCHASER:
TOWER REALTY OPERATING PARTNERSHIP,
L.P.
By: Tower Realty Trust, the general partner
By: /s/ Lawrence Feldman
-----------------------------
Lawrence Feldman
President
-40-
<PAGE> 73
SCHEDULE A
Description of the Land
(See Attached)
Schedule A-1
<PAGE> 74
ALL THAT CERTAIN plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the Borough of
Manhattan, City, County and State of New York, bounded and described as
follows:-
PARCEL I
BEGINNING at the corner formed by the intersection of the Northerly side of Wall
Street and the Westerly side of Front Street;
THENCE Northerly and along the said Westerly side of Front Street 196 feet
6-1/2inches to the corner formed by the intersection of the Westerly side of
Front Street with the Southerly side of Pine Street;
THENCE Westerly along the said Southerly side of Pine Street 113 feet 3-3/8
inches to the corner formed by the intersection of the Southerly side of Pine
Street with the Easterly side of Water Street;
THENCE Southerly along the said Easterly side of Water Street 195 feet 0-5/8
inches to the corner formed by the intersection of the said Easterly side of
Water Street with the Northerly side of Wall Street;
THENCE Easterly along the Northerly side of Wall Street 117 feet 3 inches to
the point or place of BEGINNING.
Be the said several distances and dimensions more or less.
PARCEL II
BEGINNING at the corner formed by the intersection of the Easterly side of Water
Street with the Southerly side of Pine Street as these streets are shown on a
map dated April 6, 1970 and approved by the Board of Estimate on July 23, 1970,
Calendar #8;
RUNNING THENCE Northerly along the Northerly prolongation of said Easterly side
of Water Street a distance of 12.18 feet to the center line of Pine Street;
continued.........
<PAGE> 75
(continued - page two)
THENCE Easterly along said center line of Pine Street, forming an interior angle
98 degrees 31 minutes 58 seconds with the last mentioned course, a distance of
112.25 feet to the southerly prolongation of the Westerly side of Front Street
as shown on a map approved by the Board of Estimate on March 12. 1970, Calendar
#37;
THENCE Southerly along said southerly prolongation of Front Street, forming an
interior angle of 80 degrees 40 minutes 42 seconds with the last mentioned
course a distance of 12.33 feet to the Southerly side of Pine Street;
THENCE Westerly along said Southerly side of Pine Street, forming an interior
angle of 99 degrees 15 minutes 37 seconds with the last mentioned course, a
distance of 112.06 feet to the point or place of BEGINNING.
<PAGE> 76
SCHEDULE B
Easements, Conditions, Restrictions and Encumbrances
(See Attached)
Schedule B-1
<PAGE> 77
SCHEDULE B
Policy No.: 4197-00138
This policy does not insure against loss or damages (and the Company will not
pay costs, attorney's fees or expenses) which arise by reason of:
1. a. Metal sculpture encroaches on premises adjoining on the north.
b. Concrete plaza appears to be used in common with premises adjoining on
the north.
c. Present concrete platform, concrete wall and planted area along
easterly line are not located and may encroach on Front Street.
d. Projections over Front Street by security camera up to 1 foot 6 inches.
As shown on survey made by Earl B. Lovell - S.P. Belcher, Inc. dated
10/16/69 and last redated 3/18/97 by Earl B. Lovell - S.P. Belcher, Inc.
2. Memo of lease dated 12/24/70 recorded 1/26/71 in Reel 194 Page 1048 made
by Sylvan Lawrence Company Seymour Cohn d/b/a Sylvan Lawrence Company,
Arthur H. Bienenstock and 100 Wall Street Associates (lessor) and Orient
Overseas Building Corp. (lessee). (Affects Parcel II only)
3. Joint Operating Agreement made between Sylvan Lawrence and Seymour Cohn
d/b/a Sylvan Lawrence Company -and- Orient Overseas Building Corp. and
Arthur H. Bienenstock, Sylvan Lawrence and Seymour Cohn dated 12/24/70
recorded 1/26/71 in Reel 194 Page 1080. (Affects Parcel II only)
4. Sidewalk Easement made by Arthur H. Bienenstock dated 7/8/70 recorded
1/6/71 in Reel 192 Page 1898. Policy insures that the improvements
currently erected on the premises do not encroach upon said easement area.
5. Distinctive Sidewalk Improvement Maintenance Agreement dated 11/14/90
recorded 2/28/91 in Reel 1765 Page 1742. Policy insures that there are no
liens or pending assessments payable to the city of New York under said
Agreement.
6. Possible private and public easements within the bed of former Pine Street
for the purposes of access, the supplying of water, telephone service,
electricity and gas, and for the installing, maintaining and replacing of
cables, sewers, conduits, pipes and mains. (Affects only Parcel II)
7. Policy excepts any loss or damage or diminution of any award to the
insured by reason of the provisions contained in a deed given by the City
of New York recorded in Record Liber 97 Cp. 396 on 8/31/66, which limits
the award to $1.00 for taking of a portion of the premises lying in the
bed of any street, avenue, parkway, expressway, etc. as shown on the "then
present City Map."
8. Lease between Associate Maritime Industries, Inc., as landlord and Orient
Overseas Associates, as tenant, dated May 22, 1970, a memo of which was
recorded on May 27, 1970 in Reel 174 Page 949, which affects only the
leasehold on Parcel II by virtue of Terms, Covenants, Conditions and
Agreements contained in Agreement between Orient Overseas Building Corp.
and Orient Overseas Associates dated 1/15/71 and recorded 1/26/71 in Reel
194 Page
-Schedule B-
<PAGE> 78
SCHEDULE B (Continued)
Policy No.: 4197-00138
1123.
9. Rights of tenants or persons in possession as shown on the annexed
schedule, as tenants only.
15. MORTGAGES 1 AND 2 AFFECT THE LEASEHOLD MEMORANZED BY MEMORANDUM OF LEASE
RECORDED IN REEL 194 PAGE 1048:
MORTGAGE #1 made Associated Maritime Industries, Inc. -to- First National
City Bank dated 12/31/69, recorded 1/6/70 in Reel 161 Page 1845 to secure
the sum of $1,900,000.00 and interest.
(Mortgage tax paid: $142.50)
ASSIGNMENT OF MORTGAGE
MORTGAGE 1 was assigned by First National City Bank -to- United States
Steel & Carnegie Pension Fund Inc. by assignment dated 5/13/70, recorded
5/27/70, in Reel 174 Page 989.
MORTGAGE #2 made by Associated Maritime Industries, Inc. -to- United
States Steel and Carnegie Pension Fund, Inc. dated 5/21/70, recorded
5/27/70 in Reel 174 Page 959 to secure the sum of $6,100,000.00 and
interest.
(Mortgage tax paid: $45,750.00)
This mortgage and mortgage 1 are consolidated to form a single lien of
$8,000,000.00 and interest and spread to cover lots 17 and other premises
not
2
-Schedule B (Continued)-
<PAGE> 79
SCHEDULE B (Continued)
Policy No.: 4197-00138
made a part hereof
SUPPLEMENTAL AGREEMENT made between Orient Overseas Building Corp. -and-
United States Steel and Carnegie Pension Fund, Inc. dated 1/15/71 recorded
1/28/71 in Reel 194 Page 1787.
(Affects Parcel II only.)
3
-Schedule B (Continued)-
<PAGE> 80
SCHEDULE C
List of Employees
(See Attached)
Schedule C-1
<PAGE> 81
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
100 WALL STREET
EMPLOYEES AND SALARIES
- -------------------------------------------------------------------------------------------------------------
1997 1997
NAME/ ANNUAL HOURLY EMPLOYEE UNION
EMPLOYER POSITION SALARY RATE BENEFITS AFFILIATION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
THE WITKOFF
GROUP Nancy Martinez 65,000.00 31.25 Standard Witkoff Benefits Non-Union
Building Manager
Charles Fernandez 35,000.00 16.827 Standard Witkoff Benefits Non-Union
Property Accountant
Mark Piccarrillo 23,400.00 11.25 Standard Witkoff Group Non-Union
Security/Administrative
Rich Gama 55,952.00 26.90 Central Pension Fund Local 94
Chief Engineer
Cliff Jacobsen 43,789.54 21.05 Central Pension Fund Local 94
Operating Engineer
Andrew Scozzari 43,789.54 21.05 Central Pension Fund Local 94
Operating Engineer
Wil1iam Zembricki 43,789.54 21.05 Central Pension Fund Local 94
Operating Engineer
Daniel O'Neill 34,091.20 16.39 Central Pension Fund Local 94
Engineer's Assistant
Peter Mellillo 34,091.20 16.39 Central Pension Fund Local 94
Engineer's Assistant
Charlie Corio 31,387.20 15.09 Standard Union Benefits Local 32B-32J
Freight Car Operator
CLEAN RITE
MAINTENANCE
Day Staff Bajram Causevic 38,640.00 18.5769 Standard Union Benefits Local 32B-32J
Day Porter
Ali Duraki 38,640.00 18.5769 Standard Union Benefits Local 32B-32J
Day Porter
Maria Zindami 31,408.00 15.10 Standard Union Benefits Local 32B-32J
Day Matron
Joseph Hailey 33,488.00 16.10 Standard Union Benefits Local 32B-32J
Day Porter (Swiss American)
Night Staff Carlota Leon 31,408.00 15.10 Standard Union Benefits Local 32B-32J
Night Cleaner
Danica Ljuljic 31,408.00 15.10 Standard Union Benefits Local 32B-32J
Night Cleaner
</TABLE>
<PAGE> 82
EMPLOYEES AND SALARIES
PAGE 2.
<TABLE>
<CAPTION>
1997 1997
NAME/ ANNUAL HOURLY EMPLOYEE UNION
EMPLOYER POSITION SALARY RATE BENEFITS AFFILIATION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Steve Gozner 33,488.00 16.10 Standard Union Benefits Local 32B-32J
Night Porter
Drandi Leshi 31,408.00 15.10 Standard Union Benefits Local 32B-32J
Night Cleaner
Surka Markovic 20,800.00 10.00 None Non-Union
Night Cleaner
Miriam Mederos 31,408.00 15.10 Standard Union Benefits Local 32B-32J
Night Cleaner
Gorbea Myonghui 31,408.00 15.10 Standard Union Benefits Local 32B-32J
Night Cleaner
Halina Piszko 33,208.00 16.00 Standard Union Benefits Local 32B-32J
Night Fore-Lady
Nora Santos 31,408.00 15.10 Standard Union Benefits Local 32B-32J
Night Cleaner
Mrika Skrelja 31,408.00 15.10 Standard Union Benefits Local 32B-32J
Night Cleaner
Barnabas Somogyi 38,688.00 18.60 Standard Union Benefits Local 32B-32J
Night Fore-Man
Manuel Tagle 33,488.00 16.10 Standard Union Benefits Local 32B-32J
Night Cleaner
Panlinne Moreau 31,408.00 15.10 Standard Union Benefits Local 32B-32J
Night Cleaner
Regina Wozniak 31,408.00 15.10 Standard Union Benefits Local 32B-32J
Night Cleaner
TRIUMPH
SECURITY: Ronald Jarvis 15,600.00 7.50 Standard Union Benefits Allied Int'l
Security Officer Union
Deonarine Persaud 6,656.00 8.00 Standard Union Benefits Allied Int'l
Security Officer (Part-Time 2 days/week) Union
Naresh Persaud 24,710.40 11.88 Standard Union Benefits Allied Int'l
Fire Safety Director Union
Samuel Waring 12,896.00 7.75 Standard Union Benefits Allied Int'l
Security Officer (Part-Time 4 days/week) Union
</TABLE>
<PAGE> 83
EMPLOYEES AND SALARIES
PAGE 3.
<TABLE>
<CAPTION>
1997 1997
NAME/ ANNUAL HOURLY EMPLOYEE UNION
EMPLOYER POSITION SALARY RATE BENEFITS AFFILIATION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Calvin Hill 15,600.00 7.50 Standard Union Benefits Allied Int'l
Security Officer Union
TRIUMPH*
CLEANING N/A 57,480.75 N/A Standard Union Benefits Local #2
Window
Washing Union
</TABLE>
* Sub-Contracted to Skyline Pro Corporation. The Annual Salary reflects
payments made by Triumph to the Sub-Contractor which are then billed to
Witkoff.
TOTAL ANNUAL PAYROLL 1,0927,753.37
<PAGE> 84
SCHEDULE D
List of Leases
(See Attached)
Schedule D-1
<PAGE> 85
Schedule "D"
Leases
<TABLE>
<CAPTION>
Tenant Suite Agreements
------ ----- ----------
<S> <C> <C>
Orient Overseas Building Corp. Grnd Lease dated 12/24/70
Letter dated 1/15/71
Letter dated 9/6/84
Letter dated 7/2/85
Letter dated 9/3/85
Credit Suisse P Bsmt. P Grnd E 2nd Lease dated 8/26/87
E 3rd E 10th E 14th & E 15th
Letter Agreement dated 8/26/87 - Emer Gen
Letter Agreement dated 8/26/87 - Rent waiver
Surr P Grnd 1st Amendment dated 10/31/90
P Bsmt.P Grnd 2nd Amendment dated 1/31/91
Surr P7th take P 8th 3rd Amendment dated 3/16/95
Surr 15th 4th Amendment dated 6/30/96
Swiss American Corp. E. 4th, 5th, 6th & 9th Lease dated 8/26/87
Letter Agreement dated 8/26/87 - Emer Gen
Letter Agreement dated 7/1/93 - Emer Gen
Option Exercise Notice 7/22/88
Letter Agreement dated 5/31/79 (condensor water)
Natwest Markets Group, Inc. E 17th Lease dated 7/86
E 17th 1st Amendment dated 4/30/96
E 17th 2nd Amendment dated 3/3/97
Kokusai America Incorporated P 19th Lease dated 11/86
P 19th 1st Amendment dated 7/12/92
P 19th 2nd Amendment dated 5/1/97
Doha Bank, LTD. P 19th Lease dated 11/13/92
National Bank of Pakistan P 21st Lease dated 3/9/89
Cushman & Wakefield, Inc. E 25th Lease dated 11/1/84
E 25th 1st Amendment dated 7/22/93
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
Tenant Suite Agreements
------ ----- ----------
<S> <C> <C>
Waterhouse Securities, Inc. E 28th & 29th Lease dated 6/4/92
Letter Agreement dated 6/4/92 - Takeover
Letter Agreement dated 7/17/92 - Bathrooms
1st Amendment dated 2/1/93 - Briwater
E 27th 2nd Amendment dated 3/30/94
Temp P 19th 2nd Amendment dated 3/30/94
Temp P 23rd 2nd Amendment dated 3/30/94
P 19th 3rd Amendment dated 2/27/95
P 21st 4th Amendment dated 10/31/95
P 7th 5th Amendment dated 2/15/96
E 23rd & 24th 6th Amendment dated 5/20/96
& P Bsmt
Letter Agreement dated 7/18/96 - Cert. of Occ. Change
P 7th & P 19th Letter Agreement dated 1/13/97
P 7th Letter Agreement dated 6/26/97
P 19th 7th Amendment dated 8/1/97
Atlantic Mutual Ins. Co. E 26th Lease dated 6/30/94
Metropolitan Fiber Systems Space on Grnd Fl Lease & Licence Agreement dated 12/31/92
Wall Street Discount Corp. P 21st Lease dated 1/87
P 7th 1st Amendment dated 4/1/95
MCI Telecommunications Corp. E 22nd Lease dated 2/96
E 15th 1st Amendment dated 8/20/96
Bank Ekspor Impor P 18th Lease dated 11/93
First Trust of New York E 16th Lease dated 3/11/94
P 20th 1st Amendment dated 12/29/95
Stock Clearing Corp. Phila P 18th Lease dated 9/27/83
1st Amendment dated 10/20/89
2nd Amendment dated 12/21/90
3rd Amendment dated 3/11/94
New World Coffee, Inc. P Grnd & P Bmst Lease dated 5/20/94
MCIMETRO Access
Transmission Service, Inc. Portion Bsmt License Agreement dated 12/13/96
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
Tenant Suite Agreements
------ ----- ----------
<S> <C> <C>
Time Warner Commercial Landlord Agreement dated 1/7/94
Kinko's Part Ground Lease dated 8/1/97
Cellco/Nynex Part Ground Lease dated 8/27/97
(Received facsimile signature page only)
</TABLE>
<PAGE> 88
SCHEDULE E
List of Contracts
(See Attached)
Schedule E-1
<PAGE> 89
100 WALL STREET
CONTRACT LIST
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
VENDOR ADDRESS CITY, STATE ZIP PHONE AMOUNT
<C> <S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
1 AFA Protective Systems 155 Michael Drive Syosset, NY 11791 212/279-5000 2,119.54
- -------------------------------------------------------------------------------------------------------------------------------
2 Barbara Scott 10 East 16th Street New York, NY 10003 212/691-0277 1,450.00
- -------------------------------------------------------------------------------------------------------------------------------
3 Bronze Tone Elliott Metal & Marble 6101 15th Avenue Brooklyn, NY 11219 718/234-7999 811.88
- -------------------------------------------------------------------------------------------------------------------------------
4 Carrier Corporation 521 Fifth Avenue New York, NY 10175 212/309-8060 NC
- -------------------------------------------------------------------------------------------------------------------------------
5 Central Pension Fund 331-337 West 44th Street New York, NY 10036 212/586-7414 8,781.54
- -------------------------------------------------------------------------------------------------------------------------------
6 Clean Rite Maintenance 370 Lexington Avenue New York, NY 10017 212/599-6533 83,333.33
- -------------------------------------------------------------------------------------------------------------------------------
7 Croker Fire Drill Corporation P.O. Box 77 East Islip, NY 11730 516/277-7602 225.00
- -------------------------------------------------------------------------------------------------------------------------------
8 Fire Service, Inc. 39-27 59th Street Woodside, NY 11377 718/899-6100 1,291.66
- -------------------------------------------------------------------------------------------------------------------------------
9 GenServe, Inc. 18-38 45th Street Astoria, NY 11105 718/956-8700 1,620.00
- -------------------------------------------------------------------------------------------------------------------------------
10 Honeywell Inc. 75-20 Astoria Boulevard Jackson Heights, NY 11370 718/533-5994 768.03
- -------------------------------------------------------------------------------------------------------------------------------
11 Lanier Worldwide, Inc. 2150 Parklake Drive Atlanta, GA 30345 800/947-7772 242.21
- -------------------------------------------------------------------------------------------------------------------------------
12 Lucent Technologies 144 East 44th Street New York, NY 10017 800/531-4804 253.26
- -------------------------------------------------------------------------------------------------------------------------------
13 Montgomery Kone Box 429 Moline, IL 61266 212/944-6411 10,175.50
- -------------------------------------------------------------------------------------------------------------------------------
14 Nalco Chemical P.O. Box 640863 Pittsburgh, PA 15264 630/305-1000 1,438.48
- -------------------------------------------------------------------------------------------------------------------------------
15 Pitney Bowes P.O. Box 12070 Albany, NY 12212-2070 800/628-2721 103.92
- -------------------------------------------------------------------------------------------------------------------------------
16 Spider Staging 48-29 31st Place Long Island City, NY 11101 718/349-0700 889.71
- -------------------------------------------------------------------------------------------------------------------------------
17 Sterling Services Company 636 West 43rd Street New York, NY 10036 212/643-8888 135.31
- -------------------------------------------------------------------------------------------------------------------------------
18 Triumph Cleaning 65 East 55th Street New York, NY 10022 212/308-4778 4,790.06
- -------------------------------------------------------------------------------------------------------------------------------
19 Triumph Security Corporation 65 East 55th Street New York, NY 10022 212/308-4778 8,699.60
- -------------------------------------------------------------------------------------------------------------------------------
20 WH Christian & Sons Inc. 22-28 Franklin Street Brooklyn, NY 11222 718/389-7000 189.00
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
VENDOR BILLING SERVICE CONTRACT
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
1 AFA Protective Systems Annual Monitor Fire Command Station x
- -------------------------------------------------------------------------------------------------------------------------------
2 Barbara Scott 3 x/Year Lobby, Security Console and 12th Floor Floral Arrangements x
- -------------------------------------------------------------------------------------------------------------------------------
3 Bronze Tone Elliott Metal & Marble Monthly Metal Maintenance (Limited) x
- -------------------------------------------------------------------------------------------------------------------------------
4 Carrier Corporation N/A Maintain Absorbers (Installed) x
- -------------------------------------------------------------------------------------------------------------------------------
5 Central Pension Fund Monthly Central Pension (Union Dues-Engineers) Costs are approximate x
- -------------------------------------------------------------------------------------------------------------------------------
6 Clean Rite Maintenance Monthly Base Building General Cleaning Oral
- -------------------------------------------------------------------------------------------------------------------------------
7 Croker Fire Drill Corporation Monthly Coordinate Building Fire Drills x
- -------------------------------------------------------------------------------------------------------------------------------
8 Fire Service, Inc. Monthly Clean, service and maintain Building Fire Equipment x
- -------------------------------------------------------------------------------------------------------------------------------
9 GenServe, Inc. Annual Maintenance of Caterpillar Generator x
- -------------------------------------------------------------------------------------------------------------------------------
10 Honeywell Inc. Monthly Automation System Maintenance x
- -------------------------------------------------------------------------------------------------------------------------------
11 Lanier Worldwide, Inc. Monthly Copier Lease x
- -------------------------------------------------------------------------------------------------------------------------------
12 Lucent Technologies Monthly Typewriter and Fax Machine Lease x
- -------------------------------------------------------------------------------------------------------------------------------
13 Montgomery Kone Monthly Elevator Maintenance x
- -------------------------------------------------------------------------------------------------------------------------------
14 Nalco Chemical Monthly Water Treatment x
- -------------------------------------------------------------------------------------------------------------------------------
15 Pitney Bowes Monthly Postage Meter Machine x
- -------------------------------------------------------------------------------------------------------------------------------
16 Spider Staging Monthly Maintenance of Window Washing Rig x
- -------------------------------------------------------------------------------------------------------------------------------
17 Sterling Services Company Quarterly Revolving Door Maintenance x
- -------------------------------------------------------------------------------------------------------------------------------
18 Triumph Cleaning Monthly Lobby Window Cleaning x
- -------------------------------------------------------------------------------------------------------------------------------
19 Triumph Security Corporation Monthly Contract Security Services (168 hours x 11.95/hr.) x
- -------------------------------------------------------------------------------------------------------------------------------
20 WH Christian & Sons Inc. Monthly Uniform Supply & Cleaning x
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1
<PAGE> 90
SCHEDULE G
Arrearage Schedule
(See Attached)
Schedule G-1
<PAGE> 91
8/25/97 THE WITKOFF GROUP, LLC 3:06 pm
User: CHARLES Delinquency / Aging Report (Detailed) Page: 1
Property : 100 WALL, LLC as of 8/31/97
( 100) NEW YORK, NEW YORK 10005
<TABLE>
<CAPTION>
Unit Unit Ref. Deposits Balance 1 - 30 31 - 60 61 - 90 Over 90
Type Number Name Held Due Days Days Days Days
- ---- ------------- --------------------------------------- --------- ---------- -------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CURR 20 METROPOLITAN FIBER S 793.34 387.82 397.42 (9.60)
Chg Description Date
--- ------------------------------- -------
ELE ELECTRIC - FUEL ADJUSTMENT 6/01/97 (8.67)
ELE ELECTRIC - FUEL ADJUSTMENT 6/01/97 (0.93)
ELE ELECTRIC CHARGES 8/01/97 43.25
RNT MONTHLY RENT 8/01/97 354.17
- --------------------------------------------------------------------------------------------------------------------------------
CURR 15B MCImetro ACCESS TRAN 0.00 71.75 (100.75) 172.50
Contact: JUDY MILLER
Phone: (972) 918-1327
Chg Description Date
--- ------------------------------- -------
RNT MONTHLY RENT 6/01/97 172.50
ELE ELECTRIC CHARGES 6/20/97 (100.75)
- --------------------------------------------------------------------------------------------------------------------------------
CURR 200 CREDIT SUISSE FIRST 0.00 33,311.89 33,311.89
Contact: ELLEN MICOOLE
Phone: (212) 325-7153
Chg Description Date
--- ------------------------------- -------
ELE ELECTRIC: 1/31/97 - 2/28/97 5/01/97 1,524.76
ELE ELECTRIC: 7/01/96 - 8/01/96 6/01/97 13,505.65
ELE ELECTRIC: 8/01/96 - 9/02/96 6/01/97 5,753.95
ELE ELECTRIC: 9/02/96 - 10/01/96 6/01/97 4,962.84
ELE ELECTRIC: 10/3/96 - 11/1/96 6/01/97 1,026.80
ELE ELECTRIC: 11/1/96 - 12/2/96 6/01/97 492.71
ELE ELECTRIC: 12/02/96 - 1/02/97 6/01/97 6,045.18
- --------------------------------------------------------------------------------------------------------------------------------
CURR 705 WATERHOUSE SECURITIE 0.00 52,093.56 6,169.75 22,988.56 22,935.25
Chg Description Date
--- ------------------------------- -------
ELE ELECTRIC - FUEL ADJUSTMENT 6/01/97 (53.31)
ELE ELECTRIC CHARGES 6/01/97 2,468.60
RNT MONTHLY RENT 6/01/97 20,519.96
ELE ELECTRIC CHARGES 7/01/97 2,468.60
RNT MONTHLY RENT 7/01/97 20,519.96
ELE ELECTRIC CHARGES 8/01/97 611.42
RNT MONTHLY RENT 8/01/97 5,558.33
- --------------------------------------------------------------------------------------------------------------------------------
CURR 1500 MCI TELECOMMUNICATIO 0.00 1,228.94 1,228.94
Contact: JENNIFER MALONE
Phone: (703) 414-4671
Chg Description Date
--- ------------------------------- -------
</TABLE>
<PAGE> 92
8/25/97 THE WITKOFF GROUP, LLC 3:06 pm
User: CHARLES Delinquency / Aging Report (Detailed) Page: 2
Property : 100 WALL, LLC as of 8/31/97
( 100) NEW YORK, NEW YORK 10005
<TABLE>
<CAPTION>
Unit Unit Ref. Deposits Balance 1 - 30 31 - 60 61 - 90 Over 90
Type Number Name Held Due Days Days Days Days
- ---- ------------- --------------------------------------- --------- ---------- -------- ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CURR 1500 MCI TELECOMMUNICATION (continued)
Chg Description Date
--- ------------------------------- -------
ELE ELECTRIC: 11/01/96 - 12/02/9 6/01/97 5.74
TSP TENANT SERV. (#23179-3/20/97 6/01/97 27.06
TSP TENANT SERV. (#23174-3/20/97 6/01/97 37.39
TSP TENANT SERV. (#23161-3/20/97 6/01/97 1,050.00
TSP TENANT SERV. (#23160-3/20/97 6/01/97 108.25
- --------------------------------------------------------------------------------------------------------------------------------
CURR 1910 WATERHOUSE SECURITIE 0.00 26,874.06 8,958.02 8,958.02 8,958.02
Chg Description Date
--- ------------------------------- -------
ELE ELECTRIC CHARGES 6/01/97 928.48
RNT MONTHLY RENT 6/01/97 8,029.34
ELE ELECTRIC CHARGES 7/01/97 928.48
RNT MONTHLY RENT 7/01/97 8,029.54
ELE ELECTRIC CHARGES 8/01/97 928.48
RNT MONTHLY RENT 8/01/97 8,029.54
- --------------------------------------------------------------------------------------------------------------------------------
CURR 203S WALL STREET TRANSCRI 0.00 132.20 132.20
Chg Description Date
--- ------------------------------- -------
STX SALES TAX #WST001 6/01/97 8.76
TSP RE-KEY CYLINDER+KEYS(24)WST0 6/01/97 123.44
- --------------------------------------------------------------------------------------------------------------------------------
CURR 208S FIRST HANOVER SECURI 0.00 2,207.40 2,207.40
Chg Description Date
--- ------------------------------- -------
CON CONDENSER 8/01/97 744.00
CON CONDENSER (JULY 1997) 8/01/97 744.00
CON CONDENSER (JUNE 1997) 8/01/97 719.40
- --------------------------------------------------------------------------------------------------------------------------------
CURR 209S RSL COMMUNICATIONS 0.00 4.60 4.60
Chg Description Date
--- ------------------------------- -------
TSP KEYS FOR MENS ROOM #RSL05069 7/01/97 4.60
- --------------------------------------------------------------------------------------------------------------------------------
CURR 2140 FIRST OF MICHIGAN CO 0.00 6,520.42 6,520.42
Chg Description Date
--- ------------------------------- -------
ELE ELECTRIC CHARGES 8/01/97 633.23
POW PORTERS WAGE ESC 8/01/97 362.19
</TABLE>
<PAGE> 93
8/25/97 THE WITKOFF GROUP, LLC 3:06 pm
User: CHARLES Delinquency / Aging Report (Detailed) Page: 3
Property : 100 WALL, LLC as of 8/31/97
( 100) NEW YORK, NEW YORK 10005
<TABLE>
<CAPTION>
Unit Unit Ref. Deposits 1 - 30 31 - 60 61 - 90 Over 90
Type Number Name Held Balance Due Days Days Days Days
- ---- -------- ----------------------- --------- ----------- ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CURR 2140 FIRST OF MICHIGAN COR (continued)
Chg Description Date
--- ------------------------------ -------
RNT MONTHLY RENT 8/01/97 5,525.00
- ---------------------------------------------------------------------------------------------------------
CURR 2300 WATERHOUSE SECURITIE 0.00 78,858.13 76,505.75 2,352.38
Chg Description Date
--- ------------------------------ -------
TSP SMOKE DETECTOR BATT. #WS0519 7/01/97 6.90
TSP FREIGHT @ $75HR #WS050697 7/01/97 517.50
TSP FREIGHT @ $75HR #WS050697 7/01/97 40.98
TSP TENANT SERVICES 7/01/97 1,787.00
RNT MONTHLY RENT 8/01/97 72,738.75
STR STORAGE 8/01/97 1,980.00
TSP TENANT SERVICES 8/01/97 1,787.00
- ---------------------------------------------------------------------------------------------------------
CURR 2500 CUSHMAN & WAKEFIELD, 0.00 146.86 35.48 35.48 73.90
Chg Description Date
--- ------------------------------ -------
STX SALES TAX 4/01/97 35.48
RNT MONTHLY RENT 6/01/97 40.42
STX SALES TAX 7/01/97 35.48
STX SALES TAX 8/01/97 35.48
- ---------------------------------------------------------------------------------------------------------
CURR 2701 WATERHOUSE SECURITIE 0.00 36,145.68 36,145.68
Chg Description Date
--- ------------------------------ -------
OPR OPERATING EXPENSE ESC 8/01/97 489.43
RNT MONTHLY RENT 8/01/97 35,656.25
- ---------------------------------------------------------------------------------------------------------
CURR 2800 WATERHOUSE SECURITIE 0.00 54,736.15 34,736.15
Chg Description Date
--- ------------------------------ -------
OPR OPERATING EXPENSE ESC 8/01/97 41.15
RNT MONTHLY RENT 8/01/97 53,027.50
TSP TENANT SERVICES 8/01/97 1,667.50
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 94
8/25/97 THE WITKOFF GROUP, LLC 3:06 pm
User: CHARLES Delinquency / Aging Report (Detailed) Page: 4
Property : 100 WALL, LLC as of 8/31/97
( 100) NEW YORK, NEW YORK 10005
<TABLE>
<CAPTION>
Deposits 1 - 30 31 - 60 61 - 90 Over 90
Held Balance Due Days Days Days Days
------ ----------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
P R 0 P E R T Y T 0 T A L S 793.34 292,719.46 191,676.07 0.00 34,238.29 66,805.10
Chg Description Total
--- --------------------- -----------
OPR OPERATING EXPENSE ESC 530.58 530.58
STR STORAGE 1,980.00 1,980.00
POW PORTERS WAGE ESC 362.19 362.19
CON CONDENSER 2,207.40 2,207.40
STX SALES TAX 115.20 35.48 35.48 44.24
TSP TENANT SERVICES 7,158.12 3,454.50 2,356.98 1,346.64
RNT MONTHLY RENT 238,201.46 180,889.54 28,549.50 28,762.42
ELE ELECTRIC CHARGES 42,164.51 2,216.38 3,296.33 36,651.80
</TABLE>
<PAGE> 95
8/25/97 THE WITKOFF GROUP, LLC 3:05 pm
User: CHARLES Delinquency / Aging Report (Summarized) Page: 1
Property : 100 WALL, LLC as of 8/31/97
( 100) NEW YORK, NEW YORK 10005
<TABLE>
<CAPTION>
Unit Unit Ref. Deposits 1 - 30 31 - 60 61 - 90 Over 90
Type Number Name Held Balance Due Days Days Days Days
- ---- ------ -------------------- ------ ----------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CURR 20 METROPOLITAN FIBER S 793.34 387.82 397.42 (9.60)
CURR 15B MCImetro ACCESS TRAN 0.00 71.75 (100.75) 172.50
CURR 200 CREDIT SUISSE FIRST 0.00 33,311.89 33,311.99
CURR 705 WATERHOUSE SECURITIE 0.00 52,093.56 6,169.75 22,988.56 22,935.25
CURR 1500 MCI TELECOMMUNICATIO 0.00 1,228.94 1,228.94
CURR 1910 WATERHOUSE SECURITIE 0.00 26,874.06 8,958.02 8,958.02 8,958.02
CURR 203S WALL STREET TRANSCRI 0.00 132.20 132.20
CURR 208S FIRST HANOVER SECURI 0.00 2,207.40 2,207.40
CURR 209S RSL COMMUNICATIONS 0.00 4.60 4.60
CURR 2140 FIRST OF MICHIGAN CO 0.00 6,520.42 6,520.42
CURR 2300 WATERHOUSE SECURITIE 0.00 78,858.13 76,505.75 2,352.38
CURR 2500 CUSHMAN & WAKEFIELD, 0.00 146.86 35.48 35.48 75.90
CURR 2701 WATERHOUSE SECURITIE 0.00 36,145.68 36,145.68
CURR 2800 WATERHOUSE SECURITIE 0.00 54,736.15 54,736.15
</TABLE>
<PAGE> 96
8/25/97 THE WITKOFF GROUP, LLC 3:05 pm
User: CHARLES Delinquency / Aging Report (Summarized) Page: 2
Property : 100 WALL, LLC as of 8/31/97
( 100) NEW YORK, NEW YORK 10005
<TABLE>
<CAPTION>
Deposits 1 - 30 31 - 60 61 - 90 Over 90
Held Balance Due Days Days Days Days
------ ----------- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
P R 0 P E R T Y T 0 T A L S 793.34 292,719.46 191,676.07 0.00 34,238.29 66,805.10
</TABLE>
<PAGE> 97
SCHEDULE K
Existing Insurance
(See Attached)
Exhibit 1-1
<PAGE> 98
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD CERTIFICATE OF LIABILITY INSURANCE [ILLEGIBLE] DATE (MM/DD/YY)
[ILLEGIBLE] 09/02/97
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION
ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
The Trayner Group Ltd. HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR
701 Westchester Avenue ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
White Plains NY 10604
------------------------------------------------------
COMPANIES AFFORDING COVERAGE
------------------------------------------------------
Sarah-Anne Trayner
[ILLEGIBLE] 914-683-0909 [ILLEGIBLE] COMPANY
A Royal Indemnity Company
- -----------------------------------------------------------------------------------------------
INSURED
COMPANY
100 Wall LLC B Empire Insurance Group
c/o The Witkoff Group LLC ------------------------------------------------------
Mr. Kenneth Cohan COMPANY
156 William Street C Hartford Steam Boiler
New York, NY 10038 ------------------------------------------------------
COMPANY
D TIG INSURANCE COMPANY OF NY
- ------------------------------------------------------------------------------------------------------------------------------------
COVERAGES
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED
NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION
OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY
PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS,
EXCLUSIONS AND CONDITIONS OF SUCH POLICIES, LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- ------------------------------------------------------------------------------------------------------------------------------------
CO POLICY EFFECTIVE POLICY EXPIRATION
LTR TYPE OF INSURANCE POLICY NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) LIMITS
- ------------------------------------------------------------------------------------------------------------------------------------
GENERAL LIABILITY GENERAL AGGREGATE $2,000,000
B |X| COMMERCIAL GENERAL LIABILITY CL 532099 09/27/96 09/27/97 PRODUCTS-COMP/OP AGG $1,000,000
|_||_| CLAIMS MADE |X| OCCUR PERSONAL & ADV INJURY $1,000,000
|_| OWNER'S & CONTRACTOR'S PROT EACH OCCURRENCE $1,000,000
|_| FIRE DAMAGE ( ANY USE THIS) $50,000
|_|____________________________ MED EXP ( ANY ONE PERSON )$NONE
|_|
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMOBILE LIABILITY
|_| ANY AUTO ATL 442362 09/27/96 09/27/97 COMBINED SINGLE LIMIT $1,000,000
|_| ALL OWNED AUTOS BODILY INJURY ( PER PERSON ) $
|_| SCHEDULED AUTOS BODILY INJURY ( PER PERSON ) $
A |X| HIRED AUTOS PROPERTY DAMAGE $
A |X| NON-OWNED AUTOS
|_|______________________________
|_|
- ------------------------------------------------------------------------------------------------------------------------------------
[ILLEGIBLE] LIABILTY AUTO ONLY, [ILLEGIBLE] ACCIDENT $
|_| ANY AUTO OTHER THAN AUTO ONLY
|_|______________________________ EACH ACCIDENT $
|_| AGGREGATE $
- ------------------------------------------------------------------------------------------------------------------------------------
EXCESS LIABILITY EACH OCCURRENCE $100,000,000
D |X| UMBRELLA FORM UNASSIGNED 08/31/97 06/20/98 AGGREGRATE $100,000,000
|X| OTHER THAN UMBRELLA FORM [ILLEGIBLE] $10,000
- ------------------------------------------------------------------------------------------------------------------------------------
WORKER'S COMPENSATION AND
EMPLOYER'S LIABILITY WC STATUTORY LIMITS| |OTHER $
THE PROPRIETOR/ [ILLEGIBLE] EACH ACCIDENT $
PARTNERS, EXECUTIVE |_| INCL [ILLEGIBLE] POLICY LIMIT $
OFFICERS [ILLEGIBLE] |_| EXCL [ILLEGIBLE] DISEASE- [ILLEGIBLE] EMPLOYER $
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER
A REPLACEMENT COST 33,700,000 Agreed AMOUNT 09/27/96 09/27/97 EARTHQUAKE 50,000,000
C BOILER & MACHINERY 100,000,000 Per OCcurrance 09/27/96 09/27/97 [ILLEGIBLE] 25,000
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF [ILLEGIBLE]
Co. [ILLEGIBLE] First Community Insurance Company
Flood Insurance, Building, [ILLEGIBLE] $ 500,000, Deductible $5,000
[ILLEGIBLE] Insured: 100 Wall LLC
100 Wall Street
New York, NY
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATEHOLDER
0000000
[ILLEGIBLE]
____________________________________________________
EVIDENCE OF INSURANCE AUTHORIZED [ILLEGIBLE]
SARAH-ANNA [ILLEGIBLE]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 99
EXHIBIT 3
DEED
(See Attached)
Exhibit 3-1
<PAGE> 100
T 689
Standard N.Y.B.T.U. Form 4001
Bargain & Sale deed, without covenant against grantor's acts -- Ind. or Corp.
JULIUS BLUMBERG, INC., LAW BLANK PUBLISHERS
CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT--THIS INSTRUMENT SHOULD BE
USED BY LAWYERS ONLY.
THIS INDENTURE, made the day of , nineteen hundred and
BETWEEN
party of the first part, and
party of the second part,
WITNESSETH, that the party of the first part, in consideration of ten dollars
and other valuable consideration paid by the party of the second part, does
hereby grant and release unto the party of the second part, the heirs or
successors and assigns of the party of the second part forever,
ALL that certain plot, piece or parcel of land, with the buildings and
improvements thereon erected, situate, lying and being in the
TOGETHER with all right, title and interest, if any, of the party of the first
part in and to any streets and roads abutting the above described premises to
the center lines thereof; TOGETHER with the appurtenances and all the estate and
rights of the party of the first part in and to said premises; TO HAVE AND TO
HOLD the premises herein granted unto the party of the second part, the heirs or
successors and assigns of the party of the second part forever.
AND the party of the first part, in compliance with Section 13 of the Lien Law,
covenants that the party of the first part will receive the consideration for
this conveyance and will hold the right to receive such consideration as a trust
fund to be applied first for the purpose of paying the cost of the improvement
and will apply the same first to the payment of the cost of the improvement
before using any part of the total of the same for any other purpose. The word
"party" shall be construed as if it read "parties" whenever the sense of this
indenture so requires.
IN WITNESS WHEREOF, the party of the first part has duly executed this deed the
day and year first above written.
IN PRESENCE OF:
<PAGE> 101
STATE OF NEW YORK, COUNTY OF ss:
On the day of 19 , before me personally came
to me known to be the individual described in and who executed the foregoing
instrument, and acknowledged that executed the same.
STATE OF NEW YORK, COUNTY OF ss:
On the day of 19 , before me personally came to
me known, who, being by me duly sworn, did depose and say that he resides at
No. ; that he is the of
, the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation,
and that he signed h name thereto by like order.
- --------------------------------------------------------------------------------
STATE OF NEW YORK, COUNTY OF ss:
On the day of 19 , before me personally came
to me known to be the individual described in and who executed the foregoing
instrument, and acknowledged that executed the same.
STATE OF NEW YORK, COUNTY OF ss:
On the day of 19 , before me personally came
the subscribing witness
to the foregoing instrument, with whom I am personally acquainted, who, being by
me duly sworn, did depose and say that he resides at No.
; that he knows
to
be the individual described in and who executed the foregoing instrument; that
he, said subscribing witness, was present and saw execute the
same; and that he, said witness, at the same time subscribed h name as
witness thereto.
Bargain and Sale Deed
WITHOUT COVENANT AGAINST GRANTOR'S ACTS
TITLE NO.
=======================================
TO
SECTION
BLOCK
LOT
COUNTY OR TOWN
RETURN BY MAIL TO:
-------------------------------------
Zip No.
-------------------------------------
- --------------------------------------------------------------------------------
Reserve this space for use of Recording Office.
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.64
PURCHASE AND SALE AGREEMENT
This Purchase and Sale Agreement (the "Agreement") is made and entered
into this 25th day of July, 1997 by and among RSH ASSOCIATES, a New York general
partnership ("RSH"), JOEL WIENER ("Wiener") and LAWRENCE H.
FELDMAN ("L. Feldman").
R E C I T A L S
WHEREAS, RSH is the owner and holder of a certain limited partnership
interest in Tower 45 Associates Limited Partnership, a New York limited
partnership ("Tower 45 LP") (together with all claims and interests of RSH,
Wiener and/or any Wiener Entity (as defined below) against or in L. Feldman or
any of the Feldman Entities (as defined below), the "LP Interest") and is the
owner and holder of security interests and liens (collectively, the "LP Lien",
provided, however, the LP Lien shall not include, in any event, any lien of RSH
(not otherwise hypothecated by RSH) on proceeds of any sale of interests or
settlement in the Bankruptcy Case (as defined below)) on and against interests
in Tower 45 and certain other limited partnership interests, as set forth on
Exhibit A hereto (the LP Interest and the LP Lien, the "RSH Interests");
WHEREAS, L. Feldman desires to purchase the LP Interest and cause a
release of the LP Lien (but not the claim which the LP Lien secures); and
WHEREAS, RSH has threatened to assert and/or has asserted various
claims or causes of action; and
WHEREAS, L. Feldman and the persons, firms and entities listed on
Exhibit B hereto (the "Feldman Released Parties") have consistently denied, and
continue to deny, that any of the "Claims" (as defined below) have any merit
whatsoever; and
WHEREAS, L. Feldman and some of the Feldman Entities and affiliates
have been working on a proposed transaction pursuant to which Tower Realty
Trust, Inc. (the "Tower REIT"), a real estate investment trust, which is one of
the Feldman Entities, intends to conclude an initial public offering of its
shares.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
A G R E E M E N T
1. Consideration by L. Feldman. L. Feldman agrees that L. Feldman
shall, if this Agreement has not yet been terminated, pay or, with respect to
the payment set forth in Section 1(b) below, shall, upon satisfaction of the
provisions of Section 2 hereof, cause the Tower REIT to pay to RSH the following
consideration on the following dates:
(a) the sum of $350,000 (at RSH's election, by federal funds
wire transfer to an account designated by RSH in writing or by delivery of New
York Clearinghouse bank check payable to the order of RSH) not later that the
earliest to occur of (i) five (5) days after the date (the "First Payment Date")
of entry by the United States Bankruptcy Court for the Eastern District of New
York (the "Bankruptcy Court") of an order in Case No. 897-80388-478 (the
"Bankruptcy Case"), which shall have become a "Final Order" (as defined in the
"Stipulation" (as defined below)), approving the terms of the Stipulation, a
copy of which is attached hereto as Exhibit C (or a stipulation or arrangement
substantially similar thereto or in lieu thereof) (in either case, the
"Stipulation"), (ii) five (5) days after the payment of any funds to the Trustee
in the
<PAGE> 2
Bankruptcy Case (the "Trustee") on or after July 1, 1997 pursuant to paragraph 1
of the Stipulation, and (iii) the "Second Payment Date" (as defined below); and
(b) the sum of $3,650,000 (at RSH's election, by federal funds
wire transfer to an account designated by RSH in writing or by delivery of New
York Clearinghouse bank check payable to the order of RSH) and, for no
additional consideration, one share of stock in the Tower REIT (provided such
stock is of the same type and quality as the shares sold in the Tower REIT
Transaction, other than that it is unregistered and may not be sold or disposed
of for two (2) years), on the date (the "Second Payment Date") which is the
earliest to occur of (i) whether currently contemplated by L. Feldman or any
entity (now or heretofore) controlled by L. Feldman (such entities, collectively
with L. Feldman, the "Feldman Entities") or not, the closing of the public
offering for the "Tower REIT Transaction" (as defined below) or the formation of
any real estate investment trust ("REIT") or entity, whether or not designed to
be a REIT, in which any of the following occurs (each, a "Trigger Deal"): other
than with respect to an entity formed, structured or restructured in connection
with any pre-public offering formation transactions with respect to the Tower
REIT, L. Feldman becomes an officer, director, employee of or consultant for
such REIT or other entity, or L. Feldman receives stock, operating partnership
units and/or interests in such REIT or other entity (and/or rights with respect
to any of the foregoing); (ii) any of the following occurs regarding Tower 45
LP: any material amount of its assets is assigned, conveyed or transferred
(other than in connection with any pre-public offering formation transactions
with respect to the Tower REIT), any material amount of its debt is paid (other
than amounts currently due and payable, as and when due and payable) or any
agreements with respect to such debt are modified (except for agreements to be
entered into in accordance with testimony of L. Feldman in Bankruptcy Court on
May 12-13, 1997) and/or rights therein acquired by L. Feldman or any Feldman
Entity; and/or (iii) the closing of any transactions (other than those in
connection with any pre-public offering formation transactions with respect to
the Tower REIT) involving properties which have aggregate square footage which
constitutes at least fifty percent (50%) of the aggregate square footage of the
properties (the "REIT Properties") listed on page ____ of the May 9, 1996 draft
registration statement on Form S-11 for Tower Realty Trust, Inc. (the "May 9
S-11"). For purposes hereof, the "Tower REIT Transaction" is the transaction
described in the May 9 S-11, and any variant thereof, whether public or private,
involving a REIT whose capital (debt and/or equity) is raised for one or more of
the Feldman Entities. Notwithstanding the foregoing, in no event shall a Tower
REIT Transaction include (x) a debt financing provided by Morgan Stanley Asset
Management, Inc. ("MSAM") or any advisory clients of MSAM, the proceeds of which
are used to fund the organizational and other necessary costs associated with
the formation and offering of the Tower REIT, (y) the exercise of, or the
closing of any transaction relating to, an existing buy/sell agreement between
existing partners in the property partnerships that own the Tower REIT
properties or (z) the transactions that have occurred prior to April 2, 1997.
Together with the payment specified above, L. Feldman and the Feldman Released
Parties shall, for no additional consideration and upon delivery of the
documents to be received from RSH pursuant to Section 2, execute and deliver the
release annexed hereto as Exhibit D.
2. Transfer of the RSH Interests. In further consideration for and upon
the Second Payment Date, as defined herein, if this Agreement has not then been
terminated, RSH shall, for no additional consideration and upon payment to RSH
of all sums provided in Section 1 hereof and delivery of the release and other
items contemplated hereby, execute and deliver the documents annexed hereto as
Exhibits E, F and G.
3. Commitments by RSH and Wiener. In consideration of L. Feldman's
promise herein and the execution and delivery of the guaranty of payments under
this Agreement (the "Guaranty") by the Guarantor (as defined in the Guaranty),
RSH and Wiener hereby undertake, prior to the termination of this Agreement but
only as long as the Feldman Entities materially
2
<PAGE> 3
comply with all the terms hereof and no Feldman Entity commences any action
against RSH, Wiener and/or any entity controlled by RSH or Wiener (collectively,
the "RSH/Wiener Entities"), the following commitments: from and after the date
hereof, no RSH/Wiener Entity shall:
(a) sue, or cause any other person or entity to sue, L.
Feldman or any entity known by RSH or Wiener to be a Feldman Entity with respect
to the LP Interest or the LP Lien or any other matter (but the foregoing shall
in no way limit the rights, claims, judgments and/or obligations secured by the
LP Lien (or actions by RSH or Wiener with respect thereto) in connection with
the Bankruptcy Case for any matter occurring prior to the date hereof relating
to the RSH Interests other than against the such Feldman Entities), or threaten
in writing any of the Feldman Entities with respect to the foregoing, provided
that, with respect to and/or in the Bankruptcy Case, RSH may prosecute claims,
assert any of its rights, defend any adversary proceeding and seek proceeds with
respect to the claims, judgments and/or obligations secured by the LP Lien; and
(b) acquire or cause to be acquired any ownership interest in
any REIT and/or any claim against or interest in any Feldman Entity (other than
claims already owned that relate to the Bankruptcy Case and as otherwise
provided in Section 11 hereof) and use such interest or claim in any action to
challenge or prevent the closing of the Tower REIT; and
(c) take any action to challenge or prevent the closing of the
REIT; and
(d) challenge or invalidate or attempt to invalidate this
Agreement or any of the terms and provisions hereof; and
(e) file an objection to the Stipulation or directly cause any
other party in interest to object to the Stipulation.
(f) on the Second Payment Date, enter into a Lockup Agreement
substantially in the form (including the handwritten change and provided that
RSH, Wiener and/or any RSH/Wiener Entity shall not be subject to any additional
obligation, cost or liability) attached hereto as Exhibit H.
L. Feldman expressly acknowledges and agrees that the foregoing commitments
shall not survive the closing of a Trigger Deal (unless $4 million in the
aggregate has been paid to RSH and the release has been delivered pursuant to
Section 1 hereof) and that, in the event of any violation of any of the
provisions of Section 3 hereof, the only remedy is to bring an action for
damages, and further agrees that any such violation shall not give him any right
to forestall or fail to make payments (or perform) pursuant to Section 1 hereof
when otherwise due or required.
4. Covenants of the Feldman Entities. In consideration of RSH's
promises, commitments and agreements hereunder, L. Feldman, on behalf of himself
and all Feldman Entities, covenants and agrees, prior to the termination of this
Agreement but only as long as the RSH/Wiener Entities materially comply with all
the terms hereof and no RSH/Wiener Entity commences any action against any
Feldman Entity, that they:
(a) shall provide to RSH (as set forth in Section 12), upon
filing with the Securities and Exchange Commission, each draft of the S-11
relating to the Tower REIT; and
(b) shall not challenge or invalidate or attempt to invalidate
this Agreement or to any of the terms and provisions hereof; and
(c) agree that from the date hereof and until 30 days
following the Termination Date (as defined below), each statute of limitations
otherwise applicable to the RSH Interests or
3
<PAGE> 4
to any claims or causes of action relating to Tower 45 LP against Tower 45 LP
and/or one or more of its current and former general partners and/or persons or
entities controlling or controlled by one or more of such general partners (any
"Claim") shall be tolled to the extent that such statute of limitations might
apply to any such Claim; and
(d) agrees not to assert any failure by RSH, Wiener or any
RSH/Wiener Entity to proceed with any Claim as a defense with respect to any
Claim; and
(e) shall give notice (in addition to any notice required by
law) to RSH within three (3) business days after the termination or modification
of the Stipulation (with a copy of any such termination or modification); and
(f) shall, on (and dated on) the date when any payment is made
to RSH hereunder, deliver a solvency certificate (the "Solvency Certificate")
from L. Feldman and the chief financial officer of the Tower REIT, respectively,
which provides that each of L. Feldman and Tower REIT is solvent immediately
prior to, upon and immediately after such payment.
5. Representations And Warranties of RSH and Wiener. As a material
inducement to the Feldman Entities in causing them to enter into this Agreement,
RSH and Wiener, to the best of Wiener's knowledge, hereby make the following
representations and warranties:
(a) RSH is the sole owner of the RSH Interests; and
(b) the RSH Interests and RSH's Claims are owned by RSH free
and clear of any and all liens, claims, encumbrances, hypothecations and
pledges; and
(c) the execution and delivery of this Agreement by RSH and
the binding of the RSH/Wiener Entities contemplated hereby has been duly
authorized by all necessary entity action, and it is not necessary for any
person other than the RSH signatory to this Agreement to execute this Agreement,
consent to it or approve it; and
(d) RSH is not in default under any agreement or understanding
which in any way prevents the consummation of the transactions contemplated in
this Agreement; and
(e) Wiener is under no personal or other disability in
entering into this Agreement; and
(f) Wiener has the ability to direct the management and
affairs of RSH and to bind RSH without the consent of any other individual or
entity;and
(g) There is no current hypothecation of the RSH Interests;
and
(h) The aggregate net worth of all partners of RSH is at least
$5,000,000.
6. Representations and Warranties by the Feldman Entities. As a
material inducement to RSH and Wiener in causing it and him to enter into this
Agreement, L. Feldman hereby makes the following representations and warranties:
(a) L. Feldman is under no personal or other disability in
entering into this agreement; and
(b) no Feldman Entity is in default under any agreement or
understanding which in any way prevents or would likely prevent, prior to the
Second Payment Date, the consummation of the transactions contemplated in this
Agreement; and
4
<PAGE> 5
(c) the execution and delivery of this Agreement and the
binding of the Feldman Entities contemplated hereby has been authorized by all
necessary entity action and it is not necessary for any other person other than
L. Feldman to execute this Agreement, consent to it or approve it; and
(d) each of L. Feldman and the Tower REIT is solvent on the
date hereof and shall be solvent continuously through that day which is one
business day after the date when the last payment required to be made to RSH
hereunder is made.
7. Preservation of RSH's Economic Interest In Distributions From The
Bankruptcy Case. Notwithstanding anything herein or otherwise to the contrary,
even if the Agreement is terminated, nothing herein shall release, waive,
diminish or otherwise interfere with, and neither L. Feldman nor any of the
Feldman Entities shall object to the allowance of, RSH's claim in the Bankruptcy
Case and L. Feldman and the Feldman Entities shall cooperate with RSH, at no
cost, expense or obligation to the Feldman Entities, to have its claim allowed
in full and to have its claim allowed as a secured claim to the extent of the
value of the security granted to RSH which includes, inter alia, that portion of
the proceeds realized from the May 13, 1997 sale by the Trustee to the sale of
Edward Feldman's Class A Limited Partnership interests in Tower 45 LP, Edward
Feldman's direct or indirect interests in Tower 45 Ventures Limited Partnership
and Edward Feldman's direct or indirect interests in Dana II Associates Limited
Partnership.
8. Further Assurances. Each of L. Feldman, RSH and Wiener hereby agrees
to execute and deliver (at no cost, expense or obligation to the deliverer) such
other and further documents or instruments as are necessary to effectuate the
transactions contemplated by this Agreement; provided that for any request made
of RSH or Wiener by L. Feldman pursuant to this Section 8, L. Feldman shall be
solely responsible for the payment of reasonable attorneys' fees and for all
other costs and expenses of RSH and Wiener, and neither RSH nor Wiener shall be
obligated to advance any amounts whatsoever to cover such fees, costs or
expenses.
9. Termination.
(a) Subject to the provisions of Section 9(c) hereof, RSH
shall have the right to terminate this Agreement by giving written notice to L.
Feldman on or after any of the following (the date specified in such notice, the
"Termination Date"):
(i) at any time on or after October 31, 1997, if (1)
$350,000 has not been received by RSH from L. Feldman or Tower REIT pursuant to
Section 1(a) hereof or this Section 9(a)(i), at L. Feldman's election, or (2) a
Solvency Certificate therefor is not delivered therewith within two (2) business
days of a request therefor; or
(ii) at any time on or after December 15, 1997, upon
the election of RSH or Wiener, if (1) $4 million in the aggregate has not been
received by RSH from L. Feldman or Tower REIT pursuant to Section 1 hereof or
this Section 9(a)(ii), at L. Feldman's election, or (2) a Solvency Certificate
therefor is not delivered therewith within two (2) business days of a request
therefor; or
(iii) if L. Feldman fails to deliver to RSH any
documentation required to be delivered pursuant to Section 4 hereof within three
(3) business days of delivery of a request therefor in accordance with the
notice provisions hereof requesting such documentation; or
(iv) if any payment to be made hereunder is not made
in full when required to be made; or
5
<PAGE> 6
(v) the Stipulation (as attached hereto) is
terminated or materially and adversely in any respect to RSH or Wiener modified
(or a Final Order with respect thereto does not exist by December 15, 1997).
(b) Subject to the provisions of Section 9(c) hereof, the
Feldman Entities shall have the right to terminate this Agreement by giving
written notice to RSH and Wiener at any time after January 15, 1998, if both of
the following are true: (i) a Trigger Deal has not occurred and (ii) all
payments, if any, required to be made to RSH hereunder have been made when
required. In the event of a termination in accordance with the prior sentence,
no further payment shall be due RSH hereunder.
(c) In the event of the termination of this Agreement, if less
than all of the payments described in Section 1 hereof shall have been made
hereunder, RSH and Wiener reserve all of their rights and remedies, and RSH
shall be entitled to retain any payments made pursuant hereto.
10. Limitation of Liability. In addition to any other limitation set
forth herein:
(a) On the Second Payment Date, (i) provided that all
deliveries by RSH and Wiener required by this Agreement have been made as and
when required, the Feldman Released Parties, without any further action, shall
be irrevocably deemed to have released RSH, Wiener and each RSH/Wiener Entity
from all disputes, claims, causes of action, and liabilities under this
Agreement or otherwise and (ii) provided that all payments and deliveries by L.
Feldman and/or Tower REIT required by this Agreement have been made as and when
required, all RSH/Wiener Entities, without any further action, shall be
irrevocably deemed to have released L. Feldman and each Feldman Released Party
from all disputed, claims, causes of action, and liabilities under this
Agreement or otherwise.
(b) All Feldman Entities acknowledge and agree that, provided
that the representation made in Section 5(f) hereof is not shown to be false,
the past and present partners of RSH (other than Wiener, as provided herein)
shall be subject to no personal liability in connection with this Agreement or
any claims, actions or disputes relating to this Agreement or Tower 45 LP, and
release all past and present partners of RSH (other than Wiener, as provided
above) from any liability which may be asserted hereunder.
11. Reservation of Rights. All rights and/or remedies (including,
without limitation, the foreclosure or obtaining of an interest in any Feldman
Entity) of RSH, Wiener and the RSH/Wiener Entities against any person or entity
that is not a Feldman Entity or a Feldman Released Party are hereby reserved in
full.
12. Miscellaneous.
(a) The terms and provisions of this Agreement shall be
binding in all respects upon the signatories hereto, and each of their
respective successors and assigns (and, upon the death of any natural person,
his heirs), and shall inure to the benefit of the Feldman Entities, RSH and
Wiener, and each of their permitted successors and assigns. Neither RSH nor
Wiener may assign its or his rights or obligations under this Agreement without
L. Feldman's prior written consent, except that Wiener may assign his rights but
not his obligations under this Agreement to any of his immediate family members
(that is, his spouse or any of his parents, children or siblings) without such
consent. L. Feldman may not assign any of his rights or obligations under this
Agreement without RSH's prior written consent, except that L. Feldman may,
without such consent, assign his rights and/or obligations to a nominee or
designee, but only immediately prior to and in conjunction with the actual
occurrence of a Trigger Deal in which all payments required
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<PAGE> 7
to be made under this Agreement are made as and when required and not later than
such assignment.
(b) Any notice to be given to any of the parties hereto shall
be delivered in writing at the addresses listed below, either (i) hand delivered
or (ii) sent by Federal Express or another nationally recognized courier
service, and effective upon receipt:
If to RSH and/or Wiener:
RSH Associates
c/o Wiener Realtors
1500 Broadway, Suite 900
New York, New York 10036
With a copy delivered simultaneously to:
Andrew H. Levy, Esq.
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
and
Robert L. Weigel, Esq.
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
If to L. Feldman:
Lawrence H. Feldman
120 West 45th Street
New York, New York 10022
With a copy delivered simultaneously to:
William J. McSherry, Jr., Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
and
Madlyn Gleich Primoff, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
(c) This Agreement constitutes the entirety of the parties'
understandings with respect to the subject matter hereof and all prior
discussions, drafts and correspondence relating to the subject matter hereof are
hereby merged into and superseded by this Agreement.
(d) This Agreement may be amended, modified, or changed only
by an instrument executed by all of the parties hereto.
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(e) This Agreement may be executed in telecopied or original
counterparts, each of which shall for all purposes by deemed an original.
(f) Each of the parties hereto shall be responsible for paying
its own legal fees incurred in connection with the negotiation and execution of
this Agreement. If any litigation shall be commenced concerning or with respect
to this Agreement, the prevailing party in such litigation shall be entitled to
recover the professional fees, costs and expenses of its attorneys and other
professionals retained or engaged in connection with such litigation from the
losing party.
(g) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
(h) Each of the parties hereto consents to jurisdiction in any
court in New York County.
(i) Each of the parties hereto irrevocably and unconditionally
waives any and all rights to trial by jury in any action, suit or counterclaim
arising under or relating to this Agreement.
(j) Time is of the essence with respect to this Agreement and
all actions to be taken hereunder by L. Feldman, any Feldman Entity, RSH,
Wiener, or any RSH/Wiener Entity.
(k) All Exhibit or Section references are to Exhibits to, or
Sections of, this Agreement, unless otherwise specified, and all Exhibits hereto
are incorporated herein by this reference as if set forth herein in their
entirety. All headings in this Agreement have been inserted solely for purposes
of convenience and are of no legal force of effect.
(l) All payments made pursuant to Section 1 shall be allocated
in the following ratios: LP Lien - 100,000; LP Interest - 3,000,000; releases
delivered hereunder by RSH and Wiener - 900,000; provided, however, that the
foregoing allocation shall not preclude L. Feldman, the Tower REIT and/or Tower
Realty Operating Partnership, L.P., from making a different allocation of
consideration outside the Bankruptcy Case.
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<PAGE> 9
(m) Each payment specified in Sections 1(a) and 1(b) hereof
shall be non-refundable under all circumstances once paid (but the
non-refundable quality shall not preclude claims by the Feldman Entities to the
extent that, and only to the extent that, Wiener and/or RSH default hereunder
and an action is commenced against an RSH/Wiener Entity (and notice given to
Wiener and RSH hereunder) prior to the Second Payment Date).
IN WITNESS WHEREOF, the parties hereto hereby executed this Agreement
as of the date first above written.
/s/ Lawrence H. Feldman
------------------------------------------
LAWRENCE H. FELDMAN
RSH ASSOCIATES, a New York general
partnership
By: /s/ Joel Wiener
--------------------------------------
General Partner
/s/ Joel Wiener
------------------------------------------
JOEL WIENER
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<PAGE> 1
Exhibit 10.65
CORPORATE-PARTNERS, L.L.C.
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 31st day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and Carmela
Carrano (the "GRANTOR").
RECITALS:
A. The Grantor owns a membership interest in Corporate-Partners,
L.L.C., an Arizona limited liability company (the "LLC").
B. The Operating Partnership desires to acquire through a contribution
to capital from the Grantor, and the Grantor desires to grant to the Operating
Partnership, an option to acquire, on the terms and conditions set forth herein,
all interests owned by the Grantor in the LLC as set forth on Schedule A
attached hereto and any other direct or indirect interests the Grantor may have,
whether now owned or hereinafter acquired, in the LLC, or in the properties
owned by the LLC (collectively, the "INTERESTS").
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to acquire through a
contribution to the capital of the Operating Partnership all the Grantor's
right, title and interest in the Interests, including but not limited to, the
Interests set forth on Schedule A attached hereto, on the terms and conditions
set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership during
the 10 business day period commencing on the first business day following the
removal of each such prohibition, stay, order, injunction, action, proceeding or
similar limitation in effect at that time. Subject to the foregoing, if the
Operating Partnership does not exercise the Option by the Option Termination
Date, such Option shall be deemed terminated and shall be of no further force or
effect and the Grantor shall have no further obligations hereunder.
<PAGE> 2
1.3 Acquisition Consideration. The consideration (the "ACQUISITION
CONSIDERATION") to be received by the Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an amount of cash
equal to $177,000.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise
of the Option, the Grantor shall, in accordance with Section 2.2 hereof,
transfer, assign, and convey to the Operating Partnership and the Operating
Partnership shall accept as a contribution to its capital from the Grantor, all
right, title and interest in and to the Interests, free and clear of all
Encumbrances (as defined in Section 3.1(a)), in exchange for the Acquisition
Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in the
Option Notice at the offices of Battle Fowler LLP, 75 East 55th Street,
New York, New York, or at the offices of the attorneys for the lead
underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute and
deliver all closing documents (the "CLOSING DOCUMENTS") required by the
Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP as
escrow agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the Company
is sufficient, as determined by the Operating Partnership in its reasonable
discretion, to enable the Operating Partnership (i) to acquire all the
Interests, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO (the "REGISTRATION STATEMENT"), as the same shall be in
effect on the day of the Offerings Closing.
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to the
Escrow Agent or its designee the Acquisition Consideration delivered in
immediately available funds by check or wire transfer, and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
has otherwise breached this Agreement, or
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(ii) in the event that all authorizations, consents or approvals
of any governmental or administrative agency or authority or any third
party necessary in order to consummate the contribution of the
Interests, or there exists an order or judgment enjoining, restraining
or prohibiting, or assessing substantial damages in respect of such
consummation, or there shall be any action or proceeding instituted or
threatened in writing to enjoin, restrain, prohibit or assess
substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the contribution
of all of the Interests, notify the Escrow Agent of such election and
direct the Escrow Agent to return the Grantor's Closing Documents to
the Grantor, or
(y) in all other cases, equitably adjust the delivery with respect
to the Grantor pursuant to clause (c)(i) above to reflect the portion
of the Grantor's Interests with respect to which the purchase is
actually being made, which adjustment shall be determined in the
Operating Partnership's reasonable discretion, and shall in all events
be binding upon the Grantor.
(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter remain in effect
and the Operating Partnership may thereafter exercise the Option again at any
time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be
in the form attached hereto as Exhibit A attached hereto and shall contain a
warranty of title that the Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and warranties
and the satisfaction of all covenants contained in Article III hereof,
or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent
that the Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
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(i) the Grantor is a corporation, limited partnership, general
partnership, limited liability company or trust duly organized, validly
existing and in good standing under the laws of the state of its
organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of
this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the Grantor's
charter and/or bylaws, partnership agreement, operating agreement
and articles of organization or declaration of trust, as
applicable, or, to the knowledge of such counsel, any indenture,
deed of trust, mortgage, loan or credit agreement or other
material agreement or instrument to which the Grantor is a party
or by which it or its assets or properties are bound or affected,
except for such breach or violation as the Operating Partnership
has represented and warranted will be waived or cured, or
discharged or repaid prior to or contemporaneously with the
Closing;
(B) to the knowledge of such counsel, constitute a violation
or any order, judgment or decree to which the Grantor is a party
or by which it or any of its assets or properties are bound or
affected; or
(C) to the knowledge of such counsel, result in the creation
of any lien, charge or encumbrance upon any of the Grantor's
assets or properties, except for Permitted Pledges (as defined in
Section 3.1(a)); and
(iii) all applicable corporate, partnership, limited liability
company or trust action necessary for the Grantor to execute and deliver this
Agreement and the Closing Documents and to perform the transactions contemplated
hereby and thereby has been taken and that the same have been validly executed
and delivered and are the valid and binding obligations of the Grantor
enforceable against it in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Interests to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
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2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated by this Agreement, including instruments or documents
deemed necessary or desirable by the Operating Partnership to effect and
evidence the purchase of the Grantor's Interests by the Operating Partnership in
accordance with the terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity financing
of any real property owned by the LLC (any such pledge, a "PERMITTED PLEDGE")),
voting agreement, option, charge, security interest, mortgage, deed of trust,
encumbrance, right of assignment, purchase right or other rights of any nature
whatsoever (each, an "ENCUMBRANCE"), and has full power and authority to convey
free and clear of any Encumbrances, its Interests and, upon delivery of an
Assignment by the Grantor conveying its Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Interests as
herein provided, the Operating Partnership will acquire good and valid title
thereto, free and clear of any Encumbrance, except Encumbrances created in favor
of the Operating Partnership by the transactions contemplated hereby.
(b) Each of the Grantor's Interests representing an interest in the
LLC has been validly issued and the Grantor has funded (or will fund before the
same is past due) all capital contributions and advances to the LLC in which
such Interest represents an interest that are required to be funded or advanced
prior to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with
respect to any of the Interests except, in the case of any Interest constituting
an interest in the LLC, as set forth in the operating agreement of the LLC.
(d) The Grantor has no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto
(the"Other Partnerships and Properties") except for the Interests identified on
Schedule A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
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(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantor may assume that the consents and waivers of
rights set forth in Section 6.9 hereof have been given by all members of the
LLC, partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such) in which
the Grantor's Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal, state,
local or other laws applicable to the Grantor or require the Grantor to
obtain any approval, consent or waiver of, or make any filing with, any
person or authority (governmental or otherwise) that has not been
obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which
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the property of the Grantor is bound or affected, or result in the
creation of any Encumbrance on any of the property or assets of any LLC
in which any Interest of the Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all members of the LLC, partners
in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representation as of the
date hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of its Interests, which in any such case
would impair the Grantor's ability to enter into and perform all of its
obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all members of the LLC, partners
in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that
it will not enter into, any agreement, arrangement or understanding with any
person or entity which will result in the obligation of the Operating
Partnership to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.6 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
3.7 Use of Acquisition Consideration. The Grantor covenants to apply
all of the proceeds received as Acquisition Consideration to purchase the
Company's stock, either directly from the Company (or the underwriter
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in the form of issuer directed stock) upon consummation of the IPO or in the
public market promptly following consummation of the IPO.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement and
(ii) to perform the transactions contemplated hereby and
thereby.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal, state,
local or other laws applicable to the Operating Partnership or require
the Operating Partnership to obtain any approval, consent or waiver of,
or make any filing with, any person or authority (governmental or
otherwise) that has not been obtained or made and which does not remain
in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
8
<PAGE> 9
ARTICLE V: POWER OF ATTORNEY
5.1 Grant of Power of Attorney. (a) The Grantor does hereby
irrevocably appoint Lawrence H. Feldman, Robert Cox and the Operating
Partnership, and each of them individually, with full power of substitution
(each such person or the Operating Partnership or any such successor of any of
them acting in his, her or its capacity as attorney-in-fact pursuant hereto, an
"ATTORNEY-IN-FACT"), as the true and lawful attorney-in-fact and agent of the
Grantor, to act in the name, place and stead of the Grantor:
(i) To take for the Grantor all steps deemed necessary or
advisable by the Operating Partnership in connection with the
Offerings, including without limitation
(A) filing a registration statement and amendments
thereto (the "Registration Statement") under the Securities Act
which describes the benefit to be received by the Grantor in
connection with the formation of the Company and the offering of
the Company's Common Stock,
(B) distributing a preliminary prospectus and prospectus
regarding the offering of the Company's Common Stock
(respectively, the "PRELIMINARY PROSPECTUS" and "PROSPECTUS")
which contain such information as is deemed necessary or
desirable to lawfully effect the IPO, and preliminary and final
offering memoranda regarding the offering of the Company's
Common Stock in the concurrent private placement, which contain
such information as is deemed necessary or desirable to effect
the concurrent private placement, and
(C) to take such other steps as the Attorney-in-Fact may
deem necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the
sale of the Grantor's Interests to the Operating Partnership, and any
consents contemplated by Section 6.9 hereof) and, in general, to do all
things and to take all actions which the Attorney-in-Fact in its sole
discretion may consider necessary or proper in connection with or to
carry out the transactions contemplated by this Agreement and the
Closing Documents as fully as could the Grantor if personally present
and acting.
(b) (i) The Power of Attorney granted by the Grantor pursuant to
this Article V and all authority conferred hereby is granted and
conferred subject to and in consideration of the interest of the
Operating Partnership and the Company and is for the purpose of
completing the transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantor granted hereby and all
authority conferred hereby is coupled with an interest and therefore
shall be irrevocable and shall not be terminated by any act of the
Grantor or by operation of law, whether by the death, disability,
incapacity, dissolution or liquidation of the Grantor or by the
occurrence of any other event or events (including without limitation
the termination of any trust or estate for which the Grantor is acting
as a fiduciary or fiduciaries), and if, after the execution hereof, the
Grantor shall die or become disabled or incapacitated or is dissolved
or liquidated, or if any other such event or events shall occur before
the completion of the transactions contemplated by this Agreement, each
Attorney-in-Fact shall nevertheless be authorized and directed to
complete all such transactions as if such death, disability,
incapacity, dissolution, liquidation or other event or events had not
occurred and regardless of notice thereof.
(c) The Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
9
<PAGE> 10
(d) The Grantor acknowledges that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transactions contemplated by this
Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantor hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
Prospectus or any Preliminary Prospectus, nor for any aspect of either Offering,
and it shall not be liable for any error of judgment or for any act done or
omitted or for any mistake of fact or law except for its own gross negligence or
bad faith.
(c) The Grantor agrees to indemnify each Attorney-in-Fact for and to
hold each Attorney-in-Fact harmless against any loss, claim, damage or liability
incurred or in part arising out of or in connection with its acting as
Attorney-in-Fact under the Power of Attorney created by the Grantor hereby, as
well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantor agrees that each Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership
and/or the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.3 Ratification; Third Party Reliance. The Grantor does hereby ratify
and confirm all that any Attorney-in- Fact shall lawfully do or cause to be done
by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement shall not be amended without notice to or the
consent of any Grantor for the purpose of adding additional Grantors as parties
hereto or deleting Grantors as parties hereto and conforming Schedules A and B
in connection with such additions or deletions. No waiver of any provisions of
this Agreement shall be valid unless in writing and signed by the party against
whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that
10
<PAGE> 11
this Agreement may not be assigned (except by operation of law) by the Operating
Partnership without the prior written consent of the Grantor, or by the Grantor
without the prior written consent of the Operating Partnership, and any
attempted assignment without such consent shall be void and of no effect;
provided, further, however, that the Operating Partnership may assign all or any
portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or
may be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
11
<PAGE> 12
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which an Interest of the Grantor
represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership
interest in any property,
(ii) the conveyance or agreement to convey by a partner thereof
or by any holder of an indirect interest therein of its direct or
indirect interest in such partnership to the Operating Partnership or
the Company or to another person in connection with the formation of
the Operating Partnership or the Company as described in the
Registration Statement, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
(B) the direct or indirect acquisition by the Operating
Partnership or the Company of any such direct or indirect
interest, or
(C) the transactions described in or contemplated by the
Registration Statement, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
12
<PAGE> 13
(A) any sale or distribution to any person of a direct or
indirect interest in such partnership or an undivided
tenant-in-common interest in the property represented by such
partnership interest,
(B) the entering into of any agreement with any person or
entity that grants to such person or entity the right to
purchase a direct or indirect interest in such partnership, and
(C) the giving of the Consents and Waivers contained in
this Section 6.9 or consents or waivers similar thereto in form
or purpose.
(v) As used herein, the term "CONSENTS" means, with respect to
any such partnership, any consent deemed by the Operating Partnership
to be necessary or desirable under the partnership agreement of such
partnership or any other agreement among all or any of the holders of
interests therein or any other agreement relating thereto or referred
to therein
(A) to permit any and all Conveyance Actions relating to
such partnership or to amend such partnership agreement and/or
other agreements so that no provision thereof prohibit,
restricts, impairs or interferes with any Conveyance Action
(such amendment to include, without limitation, the deletion of
provisions which cause a default under such agreement if
interests therein are transferred for other than cash),
(B) to admit the Operating Partnership (or the Company or
any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) as a substitute limited
partner or general partner of such partnership upon the
Operating Partnership's acquisition of a limited or general
partner interest therein, respectively, and to adopt such
amendment as is necessary or desirable to effect such admission,
(C) to adopt any amendment as may be deemed desirable by
the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the part
of any Grantor hereunder or under the applicable partnership
agreement, and
(D) to continue such partnership following the transfer
of interests therein to the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
a partnership of which an Interest represents a direct or indirect
interest, the waiving of any and all rights that the Grantor may have
with respect to, and (to the extent possible) that any other person may
have with respect to, or that may accrue to the Grantor or other person
upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect interest of
another partner in such partnership (or the Interests
represented by such partnership interest) or to sell the
Grantor's or other person's direct or indirect interest therein
to another partner,
(D) rights to sell the Grantor's or other person's direct
or indirect interest therein at a price other than as provided
herein, or
13
<PAGE> 14
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such
Conveyance Action.
(f) The Grantor by its execution hereof
(i) with respect to each Other Partnership in which an
Interest owned by the Grantor represents a direct or indirect interest
therein, gives such consent as is necessary to cause each partnership,
as applicable, to have authority to transfer all or substantially all
of the assets of such partnership to the Operating Partnership on such
terms and conditions as such Other Partnership and the Operating
Partnership may agree; and
(ii) agrees that the Grantor's Acquisition Consideration may be
reduced to reflect such direct transfer of assets and the consequent
receipt of cash and other consideration directly by such Other
Partnership, provided that the total consideration to be received by
the Grantor either directly hereunder or indirectly through the receipt
of distributions from an Other Partnership shall equal Grantor's
Acquisition Consideration.
(g) (i) The Grantor by its execution hereof gives such consent as
is necessary to cause, with respect to the partnership agreement of
each partnership in which an Interest of the Grantor represents,
directly or indirectly, a limited partner or general partner interest,
an amendment thereto to enable such partnership, to the extent
permissible under applicable law,
(A) to admit the Operating Partnership (or the Company or
any affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) as a substitute limited
partner therein and/or a substitute general partner therein if
the Operating Partnership (or the Company or any affiliate of
the Operating Partnership or the Company in accordance with
Section 6.3 above) by the exercise of the Option acquires a
limited partnership interest or a general partnership interest
in such partnership,
(B) to redeem the interest of any other partner therein
who has not agreed to become a party to this Agreement,
(C) to distribute to all partners thereof, including any
partner who has not agreed to become a party to this Agreement,
OP Units and cash (in such proportions to each partner therein
as the general partner or general partners thereof may
determine, provided that the Grantor receives as a result of all
such distributions and the direct payment of consideration
hereunder, the amount of cash that is in conformity with the
Acquisition Consideration of the Grantor provided for herein),
and thereafter, at the Operating Partnership's option, to
dissolve, and
(D) any such other amendment as the Operating Partnership
may deem desirable,
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of any Grantor hereunder or under the applicable
partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of the Grantor execute
such consents, amendments or other instruments as it deems necessary or
desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement
14
<PAGE> 15
to any person other than counsel or advisors to the Grantor who agree to keep
such terms confidential and any lender holding a lien on any Interests.
(b) The Grantor shall treat all information received from the
Operating Partnership or its counsel or advisors pertaining to the Operating
Partnership or the Company confidential and shall disseminate same only to
counsel to the Grantor who agree to keep such information confidential.
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Grantor set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
15
<PAGE> 16
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
-----------------------------------------
Name: Lawrence H. Feldman
Title: Chief Executive Officer and
President
/s/ Carmela Carrano
-------------------------------------------------
Carmela Carrano
16
<PAGE> 17
Schedule A
Interests
<TABLE>
<CAPTION>
Grantor's Name & Address Description of Interests
- ------------------------ ------------------------
<S> <C>
Carmela Carrano 5.9% Membership Interest in
c/o Feldman Corporate-Partners, L.L.C.
120 West 45th Street
New York, NY 10036
</TABLE>
<PAGE> 18
Schedule B
Form of Acquisition Consideration
$[ ] in Cash
<PAGE> 19
Schedule C
Exceptions to Title
None
<PAGE> 20
Schedule D
Interests in Other Partnerships and Properties (see below)
None
Other Partnerships & Properties
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
15. Maitland Forum Maitland Property Investors, Ltd.
Maitland, Florida
16. 2601 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C>
17. 2603 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
18. 2605 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
19. 5750 Major Blvd. 5750 Associates Limited Partnership
Orlando, Florida
</TABLE>
<PAGE> 22
Exhibit A
Form of Assignment
ASSIGNMENT
In exchange for the consideration set forth in the Option Agreement,
dated July __, 1997, by and between the undersigned and Tower Realty Operating
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"),
the receipt and sufficiency of which is hereby acknowledged, ______________ (the
"Assignor") hereby assigns, transfers and conveys to the Operating Partnership,
his entire right, title and interest in and to all interests directly or
indirectly held by him in Corporate- Partners, L.L.C., an Arizona limited
liability company (the "LLC"), or in the Corporate Center Properties which are
located in Phoenix, Arizona (the "Interests"), including, without limitation,
all rights to receive distributions of money, profits and other assets from or
relating to the LLC, presently existing or hereafter arising or accruing, TO
HAVE AND TO HOLD the same unto the Operating Partnership, its successors and
assigns, forever. The undersigned represents and warrants that he has not
transferred, sold, pledged or hypothecated, or otherwise disposed of or
encumbered, the Interests. The undersigned hereby releases the LLC and its
members (but only in their capacity as members of the LLC and in connection with
the LLC) from any and all liabilities or obligations now or hereafter owing to
the undersigned, arising out of and pursuant to the Operating Agreement of the
LLC. The Operating Partnership hereby assumes all obligations in respect of the
Interests.
Upon the execution and delivery of this Assignment, the undersigned
withdraws from the LLC for all purposes.
Dated: _______________, 1997
__________________________
[GRANTOR]
Accepted and agreed:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By:_____________________________
Lawrence H. Feldman
President
<PAGE> 23
Agreed:
TOWER 45 ASSOCIATES LIMITED PARTNERSHIP
By: TOWER 45, INC., its
general partner
By:___________________________________
Lawrence H. Feldman
President
TOWER 45, INC.
By:____________________________________
Lawrence H. Feldman
President
<PAGE> 24
CARMELA CARRANO
AMENDMENT NO. 1 TO OPTION AGREEMENT
This Amendment No. 1 to the Option Agreement ("AMENDMENT NO. 1"), dated
as of the 18th day of September 1997, is entered into by and between TOWER
REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the
"OPERATING PARTNERSHIP"), and Carmela Carrano (the "GRANTOR").
R E C I T A L S:
WHEREAS, an Option Agreement was entered into as of the 31st day of
July, 1997 by and among the Operating Partnership and the Grantor (the "OPTION
AGREEMENT"); and
WHEREAS, the parties desire to amend certain provisions of the Option
Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Section 1.3 of Article I of the Option Agreement is hereby amended
and restated to read in its entirety, as follows:
"1.3 Acquisition Consideration. The consideration (the
"ACQUISITION CONSIDERATION") to be received by the Grantor in
respect of the contribution of the Grantor's Interests to the
Operating Partnership shall be an amount of cash equal to
$192,816.50; provided, that, if there is a change in (a) the
range of prices for the sale of common stock, par value $.01
per share, of the Company in the IPO (as hereinafter defined)
or (b) the number of OP Units (as such term is defined in the
OP Agreement (as hereinafter defined)) issuable to the
management of the Company, each as set forth in the
preliminary prospectus of the Company, dated September 23,
1997, then the Consideration in respect of the Commercial
Interest shall be modified to an amount determined in good
faith by Lawrence H. Feldman, which determination shall be
binding upon the parties."
2. Schedule B to the Option Agreement is hereby amended and restated
to read in its entirety as set forth in Schedule B annexed hereto.
3. Except as amended hereby, the Option Agreement shall remain in
full force and effect.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 25
[SIGNATURE PAGE TO AMENDMENT NO.1]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Amendment No. 1 to the Option Agreement, or caused this Agreement to be duly
executed on its behalf, as of the date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board,
Chief Executive Officer
and President
/s/ Carmela Carrano
-----------------------------------
Carmela Carrano
2
<PAGE> 26
Schedule B
Not Applicable
<PAGE> 1
Exhibit 10.66
CORPORATE-PARTNERS, L.L.C.
OPTION AGREEMENT
This Option Agreement (the "AGREEMENT"), dated as of the 31st day of
July, 1997, is entered into by and between TOWER REALTY OPERATING PARTNERSHIP,
L.P., a Delaware limited partnership (the "OPERATING PARTNERSHIP"), and Anthony
DiLeonardo (the "GRANTOR").
R E C I T A L S:
A. The Grantor owns a membership interest in Corporate-Partners,
L.L.C., an Arizona limited liability company (the "LLC").
B. The Operating Partnership desires to acquire through a contribution
to capital from the Grantor, and the Grantor desires to grant to the Operating
Partnership, an option to acquire, on the terms and conditions set forth herein,
all interests owned by the Grantor in the LLC as set forth on Schedule A
attached hereto and any other direct or indirect interests the Grantor may have,
whether now owned or hereinafter acquired, in the LLC, or in the properties
owned by the LLC (collectively, the "INTERESTS".)
C. The Operating Partnership desires to acquire the Interests in
connection with (i) the formation of Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), which intends to qualify as a real estate
investment trust and which is the sole general partner and a limited partner of
the Operating Partnership, and (ii) the proposed initial public offering (the
"IPO") and concurrent private placement (collectively, "OFFERINGS") of shares of
the Company's common stock, par value $0.01 per share ("COMMON STOCK").
NOW, THEREFORE, in consideration of ten dollars ($10.00) paid by the
Operating Partnership to the Grantor, these premises, the mutual covenants and
conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Operating
Partnership and Grantor agree as follows:
ARTICLE I: THE OPTION
1.1 Grant of Option. The Grantor hereby irrevocably grants to the
Operating Partnership the right and option (the "OPTION") to acquire through a
contribution to the capital of the Operating Partnership all the Grantor's
right, title and interest in the Interests, including but not limited to, the
Interests set forth on Schedule A attached hereto, on the terms and conditions
set forth herein.
1.2 Term and Exercise of Option. The Option may be exercised by the
Operating Partnership at any time from and after the date hereof through 5:00
p.m. on December 31, 1997 (the "OPTION TERMINATION DATE"); provided, that if on
the Option Termination Date the Operating Partnership or the Grantor is
prohibited by applicable law, or the Operating Partnership or the Grantor is
subject to a stay, order, injunction, or similar limitation or any pending or
threatened action or proceeding to enjoin, restrain, prohibit or assess
substantial damages in respect of the exercise by the Operating Partnership of
the Option, then the Option may be exercised by the Operating Partnership during
the 10 business day period commencing on the first business day following the
removal of each such prohibition, stay, order, injunction, action, proceeding or
similar limitation in effect at that time. Subject to the foregoing, if the
Operating Partnership does not exercise the Option by the Option Termination
Date, such Option shall be deemed terminated and shall be of no further force or
effect and the Grantor shall have no further obligations hereunder.
<PAGE> 2
1.3 Acquisition Consideration. The consideration (the "ACQUISITION
CONSIDERATION") to be received by the Grantor in respect of the contribution of
the Grantor's Interests to the Operating Partnership shall be an amount of cash
equal to $352,500.
ARTICLE II: CLOSING PROCEDURES
2.1 Purchase of Interests. Upon the Operating Partnership's exercise of
the Option, the Grantor shall, in accordance with Section 2.2 hereof, transfer,
assign, and convey to the Operating Partnership and the Operating Partnership
shall accept as a contribution to its capital from the Grantor, all right, title
and interest in and to the Interests, free and clear of all Encumbrances (as
defined in Section 3.1(a)), in exchange for the Acquisition Consideration.
2.2 Closing; Conditions to Obligations. (a) (i) The Operating
Partnership shall exercise the Option by delivering to the Grantor a
notice (the "OPTION NOTICE"), which notice shall state the date (the
"CLOSING DATE") of the closing of the transactions contemplated by
Section 2.1 (the "CLOSING"), which date shall be no less than 10 days
and no more than 30 days following the date of such Option Notice.
(i) The Closing shall be held within the period specified in
the Option Notice at the offices of Battle Fowler LLP, 75 East 55th
Street, New York, New York, or at the offices of the attorneys for the
lead underwriter of the IPO.
(ii) Following delivery of the Option Notice, the Operating
Partnership and the Grantor will at or prior to the Closing execute and
deliver all closing documents (the "CLOSING DOCUMENTS") required by the
Operating Partnership pursuant to Section 2.3 and, pending the Closing,
deposit such Closing Documents in escrow with Battle Fowler, LLP as
escrow agent of the Operating Partnership (the "ESCROW AGENT").
(b) The Closing will occur simultaneously with the closing of the
Offerings (the "OFFERINGS CLOSING"); provided, that the Offerings Closing shall
be deemed to have occurred only if that portion of the net proceeds from the
Offerings which is to be contributed to the Operating Partnership by the Company
is sufficient, as determined by the Operating Partnership in its reasonable
discretion, to enable the Operating Partnership (i) to acquire all the
Interests, and (ii) to apply such portion of the net proceeds to acquire such
other properties or interests, to repay principal, interest and other amounts
due with respect to indebtedness and to meet such other obligations as may be
described in the Registration Statement on Form S-11 prepared and filed in
connection with the IPO (the "REGISTRATION STATEMENT"), as the same shall be in
effect on the day of the Offerings Closing.
(c) The following deliveries shall be made at the Closing:
(i) the Operating Partnership shall cause to be delivered to
the Escrow Agent or its designee the Acquisition Consideration
delivered in immediately available funds by check or wire transfer, and
(ii) upon receipt of the consideration set forth in clause (i)
above and the documents and deliveries required by Section 2.3, the
Escrow Agent will release the Closing Documents to the Operating
Partnership and deliver to the Grantor the Acquisition Consideration.
(d) Notwithstanding any other provision of this Agreement, the
Operating Partnership may, in its sole discretion, elect not to consummate the
contribution of all or any portion of the Interests as follows:
(i) in the event that the Grantor either identifies in its
Assignment as defined in and delivered pursuant to Section 2.3(a) a
breach of or other exception with respect to any of the
representations, warranties or covenants contained in Article III or
has otherwise breached this Agreement, or
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(ii) in the event that all authorizations, consents or
approvals of any governmental or administrative agency or authority or
any third party necessary in order to consummate the contribution of
the Interests, or there exists an order or judgment enjoining,
restraining or prohibiting, or assessing substantial damages in respect
of such consummation, or there shall be any action or proceeding
instituted or threatened in writing to enjoin, restrain, prohibit or
assess substantial damages in respect of such consummation,
then, the Operating Partnership shall, in lieu of the delivery of the
Acquisition Consideration pursuant to clause (c)(i) above, either
(x) in the case of an election not to consummate the
contribution of all of the Interests, notify the Escrow Agent of such
election and direct the Escrow Agent to return the Grantor's Closing
Documents to the Grantor, or
(y) in all other cases, equitably adjust the delivery with
respect to the Grantor pursuant to clause (c)(i) above to reflect the
portion of the Grantor's Interests with respect to which the purchase
is actually being made, which adjustment shall be determined in the
Operating Partnership's reasonable discretion, and shall in all events
be binding upon the Grantor.
(e) Except as the result of a default by the Grantor hereunder, if the
Closing does not occur within 30 days of the date of the Option Notice, then
neither the Operating Partnership nor the Grantor shall have any obligations
under the Closing Documents, the Closing Documents shall be deemed null and void
ab initio and the Operating Partnership will direct the Escrow Agent to destroy
the Closing Documents it holds. This Agreement shall thereafter remain in effect
and the Operating Partnership may thereafter exercise the Option again at any
time before the Option Termination Date.
2.3 Documents to Be Delivered at the Closing. At or prior to the
Closing, the Grantor shall, directly or through the attorney-in-fact appointed
pursuant to Article V hereof, execute, acknowledge where deemed necessary or
desirable by the Operating Partnership, and deliver to the Escrow Agent, in
addition to any other documents mentioned elsewhere herein, the following:
(a) An assignment of the Interests (the "ASSIGNMENT"), which shall be
in the form attached hereto as Exhibit A attached hereto and shall contain a
warranty of title that the Grantor owns the Interests free and clear of all
Encumbrances (as defined in Section 3.1(a)), and shall either
(i) reaffirm the accuracy of all representations and
warranties and the satisfaction of all covenants contained in Article
III hereof, or
(ii) if such reaffirmation cannot be made, identify those
representations, warranties and/or covenants contained in Article III
hereof which the Grantor can no longer make or comply with, represent
that the Grantor has used reasonable efforts to take such actions as
would permit the Grantor to make such representations and warranties
and/or to comply with such covenants, and reaffirm the accuracy of all
other representations and warranties and the satisfaction of all other
covenants contained in Article III hereof.
(b) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, a
certified copy of all necessary or appropriate corporate resolutions or
partnership, limited liability company or trust actions authorizing the
execution, delivery and performance by the Grantor of this Agreement and the
Closing Documents.
(c) If requested by the Operating Partnership in the case where the
Grantor is a corporation, partnership, limited liability company or trust, an
opinion from counsel for the Grantor in form and content reasonably acceptable
to the Operating Partnership substantially to the effect that:
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(i) the Grantor is a corporation, limited partnership,
general partnership, limited liability company or trust duly organized,
validly existing and in good standing under the laws of the state of
its organization and had and has all applicable power and authority to
execute, deliver and perform this Agreement and the Closing Documents;
(ii) the execution, delivery and performance by the Grantor of
this Agreement and the Closing Documents, and the transactions
contemplated hereby and thereby, do not:
(A) constitute a breach or a violation of the
Grantor's charter and/or bylaws, partnership agreement,
operating agreement and articles of organization or
declaration of trust, as applicable, or, to the knowledge of
such counsel, any indenture, deed of trust, mortgage, loan or
credit agreement or other material agreement or instrument to
which the Grantor is a party or by which it or its assets or
properties are bound or affected, except for such breach or
violation as the Operating Partnership has represented and
warranted will be waived or cured, or discharged or repaid
prior to or contemporaneously with the Closing;
(B) to the knowledge of such counsel, constitute a
violation or any order, judgment or decree to which the
Grantor is a party or by which it or any of its assets or
properties are bound or affected; or
(C) to the knowledge of such counsel, result in the
creation of any lien, charge or encumbrance upon any of the
Grantor's assets or properties, except for Permitted Pledges
(as defined in Section 3.1(a)); and
(iii) all applicable corporate, partnership, limited liability
company or trust action necessary for the Grantor to execute and deliver this
Agreement and the Closing Documents and to perform the transactions contemplated
hereby and thereby has been taken and that the same have been validly executed
and delivered and are the valid and binding obligations of the Grantor
enforceable against it in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws affecting creditors' rights and remedies generally.
(d) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
amended, provided, however, that if the Grantor fails to provide such an
affidavit, the Operating Partnership shall be entitled to withhold from the
Acquisition Consideration and pay to the Internal Revenue Service the sums
required to be withheld pursuant to FIRPTA (and the amount so withheld shall be
paid by the Operating Partnership to the Internal Revenue Service, in order for
the Operating Partnership to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986 or successor similar legislation, as the same may
be amended hereafter).
(e) Any other documents, agreements or instruments as the Operating
Partnership shall reasonably request in order to assign, transfer and convey the
Grantor's Interests to the Operating Partnership and to otherwise effect the
transactions contemplated hereby, including filings with any applicable
governmental jurisdiction in which the Operating Partnership is required to file
its partnership documentation.
2.4 Cessation of Offerings. If at any time the Board of Directors of
the Company determines in good faith to abandon the formation of the Company or
the Offerings, the Operating Partnership will so advise the Grantor in writing
and thereupon all parties hereto will be relieved of all obligations under this
Agreement and all Closing Documents (except for obligations arising under
Sections 2.5, 2.6, 3.5, 4.2 and 6.10).
2.5 Closing Costs. The Operating Partnership agrees to pay all of the
closing costs, other than the Grantor's legal fees, arising from the purchase of
the Interests pursuant to the exercise by the Operating Partnership of the
Option.
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2.6 Default. (a) If after having exercised the Option, the Operating
Partnership fails to consummate the transactions contemplated hereby (including
a failure due to the Offerings Closing not having occurred), then the Operating
Partnership will pay to the Grantor the sum of $100.00 as liquidated and agreed
upon damages. The parties acknowledge that it would be difficult, if not
impossible, to ascertain the actual measure of the Grantor's damages in the
event of the Operating Partnership's default and the parties agree that $100.00
is a fair reflection of the Grantor's damages in such event.
(b) If the Grantor defaults with respect to its obligations under this
Agreement, the Operating Partnership shall be entitled to exercise against the
Grantor any and all remedies provided at law or in equity, including but not
limited to, the right of specific performance.
2.7 Further Assurances. The Grantor will, from time to time, execute
and deliver to the Operating Partnership all such other and further instruments
and documents and take or cause to be taken all such other and further action as
the Operating Partnership may reasonably request in order to effect the
transactions contemplated by this Agreement, including instruments or documents
deemed necessary or desirable by the Operating Partnership to effect and
evidence the purchase of the Grantor's Interests by the Operating Partnership in
accordance with the terms of this Agreement.
ARTICLE III:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE GRANTOR
As a material inducement to the Operating Partnership to enter into
this Agreement and to consummate the transactions contemplated hereby, the
Grantor hereby makes to the Operating Partnership each of the representations
and warranties set forth in this Article III, which representations and
warranties (unless otherwise noted) are true as of the date hereof. As a
condition to the Operating Partnership's obligation to purchase the Interests
after the exercise of the Option, such representations and warranties must be
true as of the Closing Date.
3.1 Title to Interests. (a) Except as set forth on Schedule C attached
hereto, the Grantor owns beneficially and of record, free and clear of any
claim, lien, pledge (except for pledges relating to the debt or equity financing
of any real property owned by the LLC (any such pledge, a "PERMITTED PLEDGE")),
voting agreement, option, charge, security interest, mortgage, deed of trust,
encumbrance, right of assignment, purchase right or other rights of any nature
whatsoever (each, an "ENCUMBRANCE"), and has full power and authority to convey
free and clear of any Encumbrances, its Interests and, upon delivery of an
Assignment by the Grantor conveying its Interests and delivery of the
Acquisition Consideration by the Operating Partnership for such Interests as
herein provided, the Operating Partnership will acquire good and valid title
thereto, free and clear of any Encumbrance, except Encumbrances created in favor
of the Operating Partnership by the transactions contemplated hereby.
(b) Each of the Grantor's Interests representing an interest in the LLC
has been validly issued and the Grantor has funded (or will fund before the same
is past due) all capital contributions and advances to the LLC in which such
Interest represents an interest that are required to be funded or advanced prior
to the date hereof and the Closing.
(c) There are no agreements, instruments or understandings with respect
to any of the Interests except, in the case of any Interest constituting an
interest in the LLC, as set forth in the operating agreement of the LLC.
(d) The Grantor has no interest, either direct or indirect, in any of
the partnerships or properties set forth on Schedule D attached hereto
(the"Other Partnerships and Properties") except for the Interests identified on
Schedule A which are the subject of this Agreement, and other interests in the
Other Partnerships and Properties which are the subject of other, similar,
option agreements with the Operating Partnership.
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(e) No Permitted Pledge will be in existence as of the date of the
Closing, and the Grantor shall provide, at the Closing, such documentary
evidence of the release of any Permitted Pledge as the Operating Partnership may
reasonably request.
(f) In making the representations in this Section 3.1 regarding the
absence of Encumbrances, the Grantor may assume that the consents and waivers of
rights set forth in Section 6.9 hereof have been given by all members of the
LLC, partners in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such) in which
the Grantor's Interests represent direct or indirect interests.
3.2 Organization; Authority; No Conflicts. (a) If the Grantor is not a
natural person, it is a corporation, limited partnership, general partnership,
limited liability company or trust duly organized, validly existing and in good
standing under the laws of the state of its organization.
(b) The Grantor has full right, authority, power and capacity:
(i) to execute and deliver this Agreement, each Closing
Document and each other agreement, document and instrument to be
executed and delivered by or on behalf of the Grantor pursuant to this
Agreement;
(ii) to perform the transactions contemplated hereby and
thereby; and
(iii) to transfer, assign, convey and deliver all of the
Interests to the Operating Partnership in accordance with this
Agreement.
(c) All applicable corporate, partnership, limited liability company,
trust or other action necessary for Grantor to execute and deliver this
Agreement, the Closing Documents and each other agreement, document and
instrument executed by or on behalf of the Grantor pursuant to this Agreement,
and to perform the transactions contemplated hereby and thereby, has been taken,
or will be taken prior to the Closing Date.
(d) This Agreement, each Closing Document and each other agreement,
document and instrument executed and delivered by or on behalf of the Grantor
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, the legal, valid and binding obligation of the Grantor, each
enforceable in accordance with its respective terms.
(e) Except for any breaches, violations or defaults which will be
waived or cured, or discharged or repaid prior to or contemporaneously with the
Closing, the execution, delivery and performance of this Agreement, the Closing
Documents and each other agreement, document and instrument to be executed and
delivered by or on behalf of the Grantor:
(i) does not and will not violate the Grantor's charter and/or
bylaws, partnership agreement, operating agreement or declaration of
trust, as applicable;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Grantor or require the
Grantor to obtain any approval, consent or waiver of, or make any
filing with, any person or authority (governmental or otherwise) that
has not been obtained or made and which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement or any other agreement, contract,
instrument, lease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the
Grantor is a party or by which
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the property of the Grantor is bound or affected, or result in the
creation of any Encumbrance on any of the property or assets of any LLC
in which any Interest of the Grantor represents an interest.
(f) In making the representations set forth in this Section 3.2, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all members of the LLC, partners
in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representation as of
the date hereof, any Permitted Pledge has been released.
3.3 Litigation. (a) The Grantor knows of no litigation or proceeding,
whether judicial, administrative or arbitral, pending or overtly threatened,
affecting all or any portion of the Interests or the Grantor's ability to
consummate the transactions contemplated hereby.
(b) The Grantor knows of no outstanding order, writ, injunction or
decree of any court, government, governmental entity or authority or arbitration
against or affecting all or any portion of its Interests, which in any such case
would impair the Grantor's ability to enter into and perform all of its
obligations under this Agreement.
3.4 No Other Agreements. (a) The Grantor has made no agreement with,
and will not enter into any agreement with, and has no obligation (absolute or
contingent) to, any other person or entity to sell, transfer, dispose of or in
any way encumber any of the Interests or restricting in any way the Grantor's
ability to sell the Interests to the Operating Partnership or to enter into any
agreement with respect to the Interests.
(b) In making the representations set forth in this Section 3.4, the
Grantor may assume
(i) that the consents and waivers of rights set forth in
Section 6.9 hereof have been given by all members of the LLC, partners
in partnerships, members of limited liability companies or
beneficiaries of trusts (in each case, only in their capacity as such)
in which the Grantor's Interests represent direct or indirect interests
and
(ii) that, for purposes of making such representations as of
the date hereof, any Permitted Pledge has been released.
3.5 No Brokers. The Grantor has not entered into, and covenants that it
will not enter into, any agreement, arrangement or understanding with any person
or entity which will result in the obligation of the Operating Partnership to
pay any finder's fee, brokerage commission or similar payment in connection with
the transactions contemplated hereby.
3.6 Covenant to Remedy Breaches. The Grantor covenants to use all
reasonable efforts within its control
(a) to prevent the breach of any representation or warranty of the
Grantor hereunder,
(b) to satisfy all covenants of the Grantor hereunder and
(c) to promptly clear any breach of a representation, warranty or
covenant of the Grantor hereunder upon its learning of same.
3.7 Use of Acquisition Consideration. The Grantor covenants to apply
all of the proceeds received as Acquisition Consideration to purchase the
Company's stock, either directly from the Company (or the underwriter
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in the form of issuer directed stock) upon consummation of the IPO or in the
public market promptly following consummation of the IPO.
ARTICLE IV:
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OPERATING PARTNERSHIP
As a material inducement to the Grantor to enter into this Agreement
and to consummate the transactions contemplated hereby, the Operating
Partnership hereby makes to the Grantor each of the representations and
warranties set forth in this Article IV, which representations and warranties
are true as of the date hereof and shall be true as of the date of the Closing.
4.1 Authority. (a) The Operating Partnership is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of Delaware.
(b) The Operating Partnership has full right, authority, power and
capacity:
(i) to execute and deliver this Agreement, each Closing
Document to which it is a party and each other agreement, document and
instrument to be executed and delivered by or on behalf of it pursuant
to this Agreement and
(ii) to perform the transactions contemplated hereby and
thereby.
(c) This Agreement, each Closing Document to which the Operating
Partnership is a party and each agreement, document and instrument executed and
delivered by the Operating Partnership pursuant to this Agreement constitutes,
or when executed and delivered will constitute, the legal, valid and binding
obligation of the Operating Partnership, each enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance of this Agreement, each
Closing Document to which the Operating Partnership is a party and each such
agreement, document and instrument by the Operating Partnership:
(i) does not and will not violate the partnership agreement of
the Operating Partnership;
(ii) does not and will not violate any foreign, federal,
state, local or other laws applicable to the Operating Partnership or
require the Operating Partnership to obtain any approval, consent or
waiver of, or make any filing with, any person or authority
(governmental or otherwise) that has not been obtained or made and
which does not remain in effect; and
(iii) does not and will not result in a breach or a violation
of, constitute a default under, accelerate any obligation under or give
rise to a right of termination of, any indenture, deed of trust,
mortgage, loan or credit agreement, any other material agreement,
contract, instrument, lease, permit or authorization, or any order,
writ, judgment, injunction, decree, determination or arbitration award
to which the Operating Partnership is a party or by which the property
of the Operating Partnership is bound or affected.
4.2 No Brokers. The Operating Partnership has not entered into, and
covenants that it will not enter into, any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
any Grantor to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
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ARTICLE V: POWER OF ATTORNEY
5.1 Grant of Power of Attorney. (a) The Grantor does hereby irrevocably
appoint Lawrence H. Feldman, Robert Cox and the Operating Partnership, and each
of them individually, with full power of substitution (each such person or the
Operating Partnership or any such successor of any of them acting in his, her or
its capacity as attorney-in-fact pursuant hereto, an "ATTORNEY-IN-FACT"), as the
true and lawful attorney-in-fact and agent of the Grantor, to act in the name,
place and stead of the Grantor:
(i) To take for the Grantor all steps deemed necessary or
advisable by the Operating Partnership in connection with the
Offerings, including without limitation
(A) filing a registration statement and amendments
thereto (the "Registration Statement") under the Securities
Act which describes the benefit to be received by the Grantor
in connection with the formation of the Company and the
offering of the Company's Common Stock,
(B) distributing a preliminary prospectus and
prospectus regarding the offering of the Company's Common
Stock (respectively, the "PRELIMINARY PROSPECTUS" and
"PROSPECTUS") which contain such information as is deemed
necessary or desirable to lawfully effect the IPO, and
preliminary and final offering memoranda regarding the
offering of the Company's Common Stock in the concurrent
private placement, which contain such information as is deemed
necessary or desirable to effect the concurrent private
placement, and
(C) to take such other steps as the Attorney-in-Fact
may deem necessary or advisable.
(ii) To make, execute, acknowledge and deliver all such other
contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the Closing Documents, any other documents relating to the
sale of the Grantor's Interests to the Operating Partnership, and any
consents contemplated by Section 6.9 hereof) and, in general, to do all
things and to take all actions which the Attorney-in-Fact in its sole
discretion may consider necessary or proper in connection with or to
carry out the transactions contemplated by this Agreement and the
Closing Documents as fully as could the Grantor if personally present
and acting.
(b) (i) The Power of Attorney granted by the Grantor pursuant to this
Article V and all authority conferred hereby is granted and conferred
subject to and in consideration of the interest of the Operating
Partnership and the Company and is for the purpose of completing the
transactions contemplated by this Agreement.
(ii) The Power of Attorney of the Grantor granted hereby and
all authority conferred hereby is coupled with an interest and
therefore shall be irrevocable and shall not be terminated by any act
of the Grantor or by operation of law, whether by the death,
disability, incapacity, dissolution or liquidation of the Grantor or by
the occurrence of any other event or events (including without
limitation the termination of any trust or estate for which the Grantor
is acting as a fiduciary or fiduciaries), and if, after the execution
hereof, the Grantor shall die or become disabled or incapacitated or is
dissolved or liquidated, or if any other such event or events shall
occur before the completion of the transactions contemplated by this
Agreement, each Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such death,
disability, incapacity, dissolution, liquidation or other event or
events had not occurred and regardless of notice thereof.
(c) The Grantor agrees that, at the request of the Operating
Partnership, it will promptly execute a separate power of attorney on the same
terms set forth in this Article V, such execution to be witnessed and notarized.
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(d) The Grantor acknowledges that Lawrence Feldman, Robert Cox and the
Operating Partnership have, and any successor thereof acting as Attorney-in-Fact
may have, an economic interest in the transactions contemplated by this
Agreement.
5.2 Limitation on Liability. (a) It is understood that each
Attorney-in-Fact assumes no responsibility or liability to any person by virtue
of the Power of Attorney granted by the Grantor hereby.
(b) Each Attorney-in-Fact makes no representations with respect to and
shall have no responsibility for the formation of the Company, the purchase of
the Interests by the Operating Partnership, the Registration Statement, the
Prospectus or any Preliminary Prospectus, nor for any aspect of either Offering,
and it shall not be liable for any error of judgment or for any act done or
omitted or for any mistake of fact or law except for its own gross negligence or
bad faith.
(c) The Grantor agrees to indemnify each Attorney-in-Fact for and to
hold each Attorney-in-Fact harmless against any loss, claim, damage or liability
incurred or in part arising out of or in connection with its acting as
Attorney-in-Fact under the Power of Attorney created by the Grantor hereby, as
well as the cost and expense of investigating and defending against any such
loss, claim, damage or liability, except to the extent such loss, claim, damage
or liability is due to the gross negligence or bad faith of such
Attorney-in-Fact.
(d) The Grantor agrees that each Attorney-in-Fact may consult with
counsel of its own choice (who may be counsel for the Operating Partnership
and/or the Company) and it shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.3 Ratification; Third Party Reliance. The Grantor does hereby ratify
and confirm all that any Attorney-in-Fact shall lawfully do or cause to be done
by virtue of the exercise of the powers granted unto it by the Grantor
hereunder, and the Grantor authorizes the reliance of third parties on this
Power of Attorney and waives its right, if any, as against any such third party
for its reliance hereon.
ARTICLE VI: MISCELLANEOUS
6.1 Amendment and Waiver. Any amendment hereto shall be effective only
against those parties hereto who have acknowledged in writing their consent to
such amendment. This Agreement shall not be amended without notice to or the
consent of any Grantor for the purpose of adding additional Grantors as parties
hereto or deleting Grantors as parties hereto and conforming Schedules A and B
in connection with such additions or deletions. No waiver of any provisions of
this Agreement shall be valid unless in writing and signed by the party against
whom enforcement is sought.
6.2 Entire Agreement; Counterparts; Applicable Law. This Agreement
(a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof,
(b) may be executed in several counterparts, each of which will be
deemed an original and all of which shall constitute one and the same instrument
and
(c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.
6.3 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns; provided,
however, that
10
<PAGE> 11
this Agreement may not be assigned (except by operation of law) by the Operating
Partnership without the prior written consent of the Grantor, or by the Grantor
without the prior written consent of the Operating Partnership, and any
attempted assignment without such consent shall be void and of no effect;
provided, further, however, that the Operating Partnership may assign all or any
portion of this Agreement and the Closing Documents and any agreement
contemplated hereunder or thereunder to the Company or to an affiliate of the
Operating Partnership or the Company without the consent of the Grantor.
6.4 Titles. The titles and captions of the Articles, Sections and
paragraphs of this Agreement are included for convenience of reference only and
shall have no effect on the construction or meaning of this Agreement.
6.5 Third Party Beneficiary. No provision of this Agreement is
intended, nor shall it be interpreted, to provide or create any third party
beneficiary right or any other right of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity, provided, however, that Article V and Sections 6.3 and
6.9 of this Agreement shall be enforceable by and shall inure to the benefit of
the persons described therein.
6.6 Severability. (a) If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto.
(b) The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
the void or unenforceable provision and to execute any amendment, consent or
agreement deemed necessary or desirable by the Operating Partnership to effect
such replacement.
6.7 Equitable Remedies. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the State of New York (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled under this Agreement or otherwise at law
or in equity.
6.8 Notices; Exercise of Option. Any notice or demand which must or may
be given under this Agreement (including the exercise by the Operating
Partnership of the Option) or by law shall, except as otherwise provided, be in
writing and shall be deemed to have been given (i) when physically received by
personal delivery (which shall include the confirmed receipt of a telecopied
facsimile transmission), (ii) three (3) business days after being deposited in
the United States certified or registered mail, return receipt requested,
postage prepaid, or (iii) one (1) business day after being deposited with a
nationally known commercial courier service utilizing its next day delivery
service (such as Federal Express); addressed and delivered or telecopied in the
case of a notice to the Operating Partnership to the following address and
telecopy number:
Tower Realty Operating Partnership, L.P.
c/o Feldman Equities
120 West 45th Street
New York, New York 10036-4003
Attention: Lawrence Feldman
Phone: (212)768-9010
Telecopy: (212)768-9479
11
<PAGE> 12
with a copy to:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Steven L. Lichtenfeld, Esq.
Phone: (212)856-6996
Telecopy: (212)856-7823
and addressed and delivered or telecopied, in the case of a notice to the
Grantor, to the address and telecopy number set forth under the Grantor's name
in Schedule A hereto.
6.9 Waiver of Rights; Consents with Respect to Partnership Interests.
(a) The Grantor acknowledges that the agreements contained herein and the
transactions contemplated hereby and any actions taken in contemplation of the
transactions contemplated hereby (including the declaration of any dividend or
distribution in the form of Interests) may conflict with, and may not have been
contemplated by, the partnership agreement of one or more Other Partnerships in
which one or more of the Interests represent a direct or indirect interest or
another agreement among one or more holders of such Interests or one or more of
the partners of any such partnership.
(b) With respect to each Other Partnership in which the Interests
represents a direct or indirect interest, the Grantor expressly gives all
Consents (as defined below) (and any consent necessary to authorize the proper
parties in interest to give all Consents) and Waivers (as defined below)
necessary or desirable to facilitate any Conveyance Action (as defined below)
relating to such partnership (as such terms are defined below).
(c) The Grantor further agrees that the Grantor will take no action to
enjoin, or seek damages resulting from, any Conveyance Action by any holder of a
direct or indirect interest in a partnership in which an Interest of the Grantor
represents a direct or indirect interest.
(d) The Waivers and Consent contained in this Section 6.9 shall
terminate upon the termination of this Agreement, except as to transactions
completed hereunder prior to termination.
(e) (i) As used herein, the term "CONVEYANCE ACTION" means, with
respect to any Other Partnership having a direct or indirect ownership
interest in any property,
(ii) the conveyance or agreement to convey by a partner
thereof or by any holder of an indirect interest therein of its direct
or indirect interest in such partnership to the Operating Partnership
or the Company or to another person in connection with the formation of
the Operating Partnership or the Company as described in the
Registration Statement, or
(iii) the entering into by any such partner or holder of any
agreement relating to
(A) the formation of the Operating Partnership or the
Company as described in the Registration Statement,
(B) the direct or indirect acquisition by the
Operating Partnership or the Company of any such direct or
indirect interest, or
(C) the transactions described in or contemplated by
the Registration Statement, or
(iv) the taking by any such partner or holder of any action
necessary or desirable to facilitate any of the foregoing, including,
without limitation, the following (provided that the same are taken in
furtherance of the foregoing):
12
<PAGE> 13
(A) any sale or distribution to any person of a
direct or indirect interest in such partnership or an
undivided tenant-in-common interest in the property
represented by such partnership interest,
(B) the entering into of any agreement with any
person or entity that grants to such person or entity the
right to purchase a direct or indirect interest in such
partnership, and
(C) the giving of the Consents and Waivers contained
in this Section 6.9 or consents or waivers similar thereto in
form or purpose.
(v) As used herein, the term "CONSENTS" means, with respect to
any such partnership, any consent deemed by the Operating Partnership
to be necessary or desirable under the partnership agreement of such
partnership or any other agreement among all or any of the holders of
interests therein or any other agreement relating thereto or referred
to therein
(A) to permit any and all Conveyance Actions relating
to such partnership or to amend such partnership agreement
and/or other agreements so that no provision thereof prohibit,
restricts, impairs or interferes with any Conveyance Action
(such amendment to include, without limitation, the deletion
of provisions which cause a default under such agreement if
interests therein are transferred for other than cash),
(B) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner or general partner of such partnership upon
the Operating Partnership's acquisition of a limited or
general partner interest therein, respectively, and to adopt
such amendment as is necessary or desirable to effect such
admission,
(C) to adopt any amendment as may be deemed desirable
by the Operating Partnership, either simultaneously with or
immediately prior to the acquisition of a limited or general
partnership interest therein, provided, however, that such
amendment will not result in any increased liability on the
part of any Grantor hereunder or under the applicable
partnership agreement, and
(D) to continue such partnership following the
transfer of interests therein to the Operating Partnership (or
the Company or any affiliate of the Operating Partnership or
the Company in accordance with Section 6.3 above).
(vi) As used herein, the term "WAIVERS" means, with respect to
a partnership of which an Interest represents a direct or indirect
interest, the waiving of any and all rights that the Grantor may have
with respect to, and (to the extent possible) that any other person may
have with respect to, or that may accrue to the Grantor or other person
upon the occurrence of, a Conveyance Action relating to such
partnership, including, but not limited to, the following rights:
(A) rights of notice,
(B) rights to response periods,
(C) rights to purchase the direct or indirect
interest of another partner in such partnership (or the
Interests represented by such partnership interest) or to sell
the Grantor's or other person's direct or indirect interest
therein to another partner,
(D) rights to sell the Grantor's or other person's
direct or indirect interest therein at a price other than as
provided herein, or
13
<PAGE> 14
(E) rights to prohibit, limit, invalidate, otherwise
restrict or impair any such Conveyance Action or to cause a
termination or dissolution of such partnership because of such
Conveyance Action.
(f) The Grantor by its execution hereof
(i) with respect to each Other Partnership in which an
Interest owned by the Grantor represents a direct or indirect interest
therein, gives such consent as is necessary to cause each partnership,
as applicable, to have authority to transfer all or substantially all
of the assets of such partnership to the Operating Partnership on such
terms and conditions as such Other Partnership and the Operating
Partnership may agree; and
(ii) agrees that the Grantor's Acquisition Consideration may
be reduced to reflect such direct transfer of assets and the consequent
receipt of cash and other consideration directly by such Other
Partnership, provided that the total consideration to be received by
the Grantor either directly hereunder or indirectly through the receipt
of distributions from an Other Partnership shall equal Grantor's
Acquisition Consideration.
(g) (i) The Grantor by its execution hereof gives such consent as
is necessary to cause, with respect to the partnership agreement of
each partnership in which an Interest of the Grantor represents,
directly or indirectly, a limited partner or general partner interest,
an amendment thereto to enable such partnership, to the extent
permissible under applicable law,
(A) to admit the Operating Partnership (or the
Company or any affiliate of the Operating Partnership or the
Company in accordance with Section 6.3 above) as a substitute
limited partner therein and/or a substitute general partner
therein if the Operating Partnership (or the Company or any
affiliate of the Operating Partnership or the Company in
accordance with Section 6.3 above) by the exercise of the
Option acquires a limited partnership interest or a general
partnership interest in such partnership,
(B) to redeem the interest of any other partner
therein who has not agreed to become a party to this
Agreement,
(C) to distribute to all partners thereof, including
any partner who has not agreed to become a party to this
Agreement, OP Units and cash (in such proportions to each
partner therein as the general partner or general partners
thereof may determine, provided that the Grantor receives as a
result of all such distributions and the direct payment of
consideration hereunder, the amount of cash that is in
conformity with the Acquisition Consideration of the Grantor
provided for herein), and thereafter, at the Operating
Partnership's option, to dissolve, and
(D) any such other amendment as the Operating
Partnership may deem desirable,
provided that such amendment occurs simultaneously with or immediately
prior to the acquisition of the applicable partnership interest, and
provided further, that such amendment will not result in any increased
liability on the part of any Grantor hereunder or under the applicable
partnership agreement.
(ii) Each Attorney-in-Fact may on behalf of the Grantor
execute such consents, amendments or other instruments as it deems
necessary or desirable in connection with the foregoing.
6.10 Confidentiality. (a) The Grantor shall treat as strictly
confidential the fact that the Company is contemplating an offering of its
Common Stock until such time as the Company has filed the Registration Statement
with the Securities and Exchange Commission, and shall not communicate at any
time the terms of this Agreement
14
<PAGE> 15
to any person other than counsel or advisors to the Grantor who agree to keep
such terms confidential and any lender holding a lien on any Interests.
(b) The Grantor shall treat all information received from the Operating
Partnership or its counsel or advisors pertaining to the Operating Partnership
or the Company confidential and shall disseminate same only to counsel to the
Grantor who agree to keep such information confidential.
6.11 Computation of Time. Any time period provided for herein which
shall end on a Saturday, Sunday or bank or legal holiday shall extend to 5:00
p.m. of the next full business day. All times are New York City time.
6.12 Survival. It is the express intention and agreement of the parties
hereto that the representations, warranties and covenants of the Grantor set
forth in this Agreement shall survive the consummation of the transactions
contemplated hereby.
6.13 Time of the Essence. Time is of the essence with respect to all
obligations of the Grantor under this Agreement.
15
<PAGE> 16
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
-----------------------------------
Name: Lawrence H. Feldman
Title: Chief Executive Officer and
President
/s/ Anthony DiLeonardo
---------------------------------------
Anthony DiLeonardo
16
<PAGE> 17
Schedule A
Interests
Grantor's Name & Address Description of Interests
- ------------------------ ------------------------
Anthony DiLeonardo 10% Membership Interest in
c/o Feldman Corporate-Partners, L.L.C.
120 West 45th Street
New York, NY 10036
<PAGE> 18
Schedule B
Form of Acquisition Consideration
$[ ] in Cash
<PAGE> 19
Schedule C
Exceptions to Title
None
<PAGE> 20
Schedule D
Interests in Other Partnerships and Properties (see below)
None
Other Partnerships & Properties
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C>
1. 286 Madison Avenue 286 Madison, L.P.
New York, New York
2. 290 Madison Avenue 290 Madison, L.P.
New York, New York
3. 292 Madison Avenue 292 Madison, L.P.
New York, New York
4. 120 Executive Centre Tower Mineola Limited Partnership
Mineola, New York (former owner was CXX Mineola Limited
Partnership)
5. Corporate Center Building 10010-30 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
6. Corporate Center Building 10040 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
7. Corporate Center Building 10050 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
8. Corporate Center Building 10210 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
9. Corporate Center Building 10220 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
10. Corporate Center Building 9630 Corporate Center Associates, Limited Partnership
Phoenix, Arizona
11. 2800 North Central Avenue 2800 Associates, L.P.
Phoenix, Arizona
12. Century Plaza Executive Villas Limited Partnership
Phoenix, Arizona
13. 5151 E. Broadway East Broadway 5151 Limited Partnership
Tucson, Arizona
14. One Orlando Center Magnolia Associates Limited Partnership
Orlando, Florida
15. Maitland Forum Maitland Property Investors, Ltd.
Maitland, Florida
16. 2601 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Property Partnership Owner
-------- -----------------
<S> <C>
17. 2603 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
18. 2605 Maitland Center Parkway Maitland West Associates Limited Partnership
Maitland, Florida
19. 5750 Major Blvd. 5750 Associates Limited Partnership
Orlando, Florida
</TABLE>
<PAGE> 22
Exhibit A
Form of Assignment
ASSIGNMENT
In exchange for the consideration set forth in the Option
Agreement, dated July __, 1997, by and between the undersigned and Tower Realty
Operating Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"), the receipt and sufficiency of which is hereby acknowledged,
______________ (the "Assignor") hereby assigns, transfers and conveys to the
Operating Partnership, his entire right, title and interest in and to all
interests directly or indirectly held by him in Corporate-Partners, L.L.C., an
Arizona limited liability company (the "LLC"), or in the Corporate Center
Properties which are located in Phoenix, Arizona (the "Interests"), including,
without limitation, all rights to receive distributions of money, profits and
other assets from or relating to the LLC, presently existing or hereafter
arising or accruing, TO HAVE AND TO HOLD the same unto the Operating
Partnership, its successors and assigns, forever. The undersigned represents and
warrants that he has not transferred, sold, pledged or hypothecated, or
otherwise disposed of or encumbered, the Interests. The undersigned hereby
releases the LLC and its members (but only in their capacity as members of the
LLC and in connection with the LLC) from any and all liabilities or obligations
now or hereafter owing to the undersigned, arising out of and pursuant to the
Operating Agreement of the LLC. The Operating Partnership hereby assumes all
obligations in respect of the Interests.
Upon the execution and delivery of this Assignment, the
undersigned withdraws from the LLC for all purposes.
Dated: _______________, 1997
____________________________________
[GRANTOR]
Accepted and agreed:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: Tower Realty Trust, Inc., its general
partner
By:_____________________________
Lawrence H. Feldman
President
<PAGE> 23
Agreed:
TOWER 45 ASSOCIATES LIMITED PARTNERSHIP
By: TOWER 45, INC., its
general partner
By:___________________________________
Lawrence H. Feldman
President
TOWER 45, INC.
By:____________________________________
Lawrence H. Feldman
President
<PAGE> 24
ANTHONY DILEONARDO
AMENDMENT NO. 1 TO OPTION AGREEMENT
This Amendment No. 1 to the Option Agreement ("AMENDMENT NO. 1"), dated
as of the 18th day of September, 1997, is entered into by and between TOWER
REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the
"OPERATING PARTNERSHIP"), and Anthony DiLeonardo (the "GRANTOR").
R E C I T A L S:
WHEREAS, an Option Agreement was entered into as of the 31st day of
July, 1997 by and among the Operating Partnership and the Grantor (the "OPTION
AGREEMENT"); and
WHEREAS, the parties desire to amend certain provisions of the Option
Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Section 1.3 of Article I of the Option Agreement is hereby
amended and restated to read in its entirety, as follows:
"1.3 Acquisition Consideration. The consideration (the
"ACQUISITION CONSIDERATION") to be received by the Grantor in
respect of the contribution of the Grantor's Interests to the
Operating Partnership shall be an amount of cash equal to
$385,632.50; provided, that, if there is a change in (a) the
range of prices for the sale of common stock, par value $.01
per share, of the Company in the IPO (as hereinafter defined)
or (b) the number of OP Units (as such term is defined in the
OP Agreement (as hereinafter defined)) issuable to the
management of the Company, each as set forth in the
preliminary prospectus of the Company, dated September 23,
1997, then the Acquisition Consideration in respect of the
Grantor's Interest shall be modified to an amount determined
in good faith by Lawrence H. Feldman, which determination
shall be binding upon the parties."
2. Schedule A to the Option Agreement is hereby amended and restated
to read in its entirety as set forth in Schedule A annexed hereto.
3. Schedule B to the Option Agreement is hereby amended and restated
to read in its entirety as set forth in Schedule B annexed hereto.
4. Except as amended hereby, the Option Agreement shall remain in
full force and effect.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 25
[SIGNATURE PAGE TO AMENDMENT NO.1]
IN WITNESS WHEREOF, each of the parties hereto has executed this
Amendment No. 1 to the Option Agreement, or caused this Agreement to be duly
executed on its behalf, as of the date first written above.
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING
PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC.,
its general partner
By: /s/ Lawrence H. Feldman
----------------------------------
Name: Lawrence H. Feldman
Title: Chairman of the Board,
Chief Executive Officer
and President
/s/ Anthony DiLeonardo
----------------------------------
Anthony DiLeonardo
2
<PAGE> 26
Schedule A
Interests
<TABLE>
<CAPTION>
Grantor's Name & Address Description of Interests
------------------------ ------------------------
<S> <C>
Anthony DiLeonardo 10% Membership Interest in
c/o Feldman Corporate-Partners, L.L.C.
120 West 45th Street
New York, NY 10036
.4375% Membership Interest in
Corporate-Feldman, L.L.C.
.44% Membership Interest in
Terco Partners II, L.L.C.
</TABLE>
<PAGE> 27
Schedule B
Not Applicable
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
State or Other Jurisdiction of
Name of Subsidiary Incorporation or Organization
- --------------------------------- --------------------------------
Tower Realty Operating Partnership, L.P. Delaware
Tower Equities Management, Inc. Delaware
286 Madison, L.P. New York
290 Madison, L.P. New York
292 Madison, L.P. New York
2800 Associates, L.P. Delaware
2800 GP LLC* Delaware
2800 LP LLC* Delaware
5750 Associates, L.P. Delaware
Corporate Center Associates, L.P. Delaware
Corporate Tower Center, GP LLC* Delaware
East Broadway 5151, L.P. Delaware
Magnolia Associates, L.P. Florida
Maitland Associates, Ltd. Florida
Maitland West Associates, L.P. Florida
Mineola UPREIT, LLC Delaware
Tower Madison GP LLC* Delaware
Tower Mineola, L.P. Delaware
Tower Orlando GP LLC* Delaware
Tower QRS No. 1 Corp. Delaware
Tower 45 GP LLC* Delaware
* To be organized in connection with the Formation Transactions prior to
consummation of the Offering.
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amended Registration Statement
on Form S-11 of our reports dated September 15, 1997, on our audit of the
consolidated financial statements of Tower Realty Trust, Inc.; dated April 21,
1997, on our audits of the combined financial statements and financial statement
schedule of Tower Predecessor, dated April 21,1997 on our audits of the combined
statements of revenues and certain operating expenses of DRA Joint Ventures
dated September 15, 1997, on our audit of the statement of revenues and certain
operating expenses of 100 Wall Street. We also consent to the reference to our
firm under the captions "Experts" and "Selected Financial Data."
COOPERS & LYBRAND L.L.P.
Dallas, Texas
Dated: September 22, 1997
<PAGE> 1
Exhibit 23.3
CONSENT
Landauer Associates, Inc. ("Landauer") hereby consents to the use of
its reports regarding the Metropolitan New York, Orlando, Phoenix, and Tucson
economies and office markets and the reference to Landauer and such reports
under the captions "Prospectus Summary," "Property Office Markets and Market
Economies," "The Properties - Submarket and Property Information," and "Experts"
in the Amended Registration Statement on Form S- 11 of Tower Realty Trust, Inc.
LANDAUER ASSOCIATES, INC.
By: /s/ JOHN BRENGELMAN
------------------------
Name: John Brengelman
Title: Managing Director
Dated: September 22, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TOWER PREDECESSOR FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE SIX MONTH PERIOD ENDED JUNE 30, 1997 AND THE FINANCIAL STATEMENTS OF
TOWER REALTY TRUST, INC. FOR THE PERIOD FROM MARCH 27, 1997 (DATE OF INCEPTION)
THROUGH JUNE 30, 1997.
</LEGEND>
<CAPTION> TOWER REALTY
TOWER PREDECESSOR TRUST, INC.
------------------------------------- -----------------
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1996 MAR-27-1997
<PERIOD-END> JUN-30-1997 DEC-31-1996 JUN-30-1997
<CASH> 4,326 4,984 4
<SECURITIES> 0 0 0
<RECEIVABLES> 5,936 5,276 1,182
<ALLOWANCES> 2,500 2,500 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 0 0 0
<PP&E> 170,865 169,619 0
<DEPRECIATION> 43,288 40,555 0
<TOTAL-ASSETS> 170,632 172,987 8,886
<CURRENT-LIABILITIES> 0 0 1,689
<BONDS> 193,381 202,892 7,279
0 0 0
0 0 0
<COMMON> 0 0 1
<OTHER-SE> (58,660) (61,870) 8,886
<TOTAL-LIABILITY-AND-EQUITY> 170,632 172,987 0
<SALES> 0 0 0
<TOTAL-REVENUES> 14,240 28,734 33
<CGS> 0 0 0
<TOTAL-COSTS> 17,601 36,660 0
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 7,028 15,511 176
<INCOME-PRETAX> 0 0 0
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 6,475 0 0
<CHANGES> 0 0 0
<NET-INCOME> 3,182 (7,465) (83)
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
<PAGE> 1
Exhibit 99.3
CONSENT OF DIRECTOR NOMINEE
To Tower Realty Trust, Inc.:
Pursuant to Rule 438 promulgated under the Securities Act of 1933,
as amended, I hereby consent to the references in the Registration Statement of
Tower Realty Trust, Inc. (the "Company") on Form S-11, and amendments thereto,
which indicate that I have accepted a nomination to become a director of the
Company subsequent to the closing of the Company's initial public offering.
/s/ Richard M. Wisely
------------------------------------
Richard M. Wisely
Dated: September 22, 1997
<PAGE> 1
Exhibit 99.4
CONSENT OF DIRECTOR NOMINEE
To Tower Realty Trust, Inc.:
Pursuant to Rule 438 promulgated under the Securities Act of 1933,
as amended, I hereby consent to the references in the Registration Statement of
Tower Realty Trust, Inc. (the "Company") on Form S-11, and amendments thereto,
which indicate that I have accepted a nomination to become a director of the
Company subsequent to the closing of the Company's initial public offering.
/s/ ESKO I. KORHONEN
------------------------------------
Esko I. Korhonen
Dated: September 22, 1997
